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Next Previous The Commission cut our cough for 5% VAT on real estate HOME • INSIDER • CYPRUS • The Commission cut our cough for 5% VAT on real estate
& nbsp & nbspEleftheria Paizanou & nbsp; & nbsp;
Nor does the Commission want to hear about a return to the 2011 tax regime, in relation to the reduced tax rate of 5% when buying or building a first main residence.
Following the request of the Parliament to attempt the government to overturn the recommendation of the Commission for reduced VAT only in the first 140 square meters of a house that will not exceed 200 sq.m., technocrats of the Ministry of Finance had a teleconference with representatives of the European Commission (EU). who clarified to the Cypriot authorities that they do not consent to the imposition of 5% VAT on the first 200 square meters of the property, with & nbsp; total area up to 275 sq.m. (as was the tax regime in Cyprus from 2011-16). The technocrats in Brussels stressed that the reduced tax rate of the 2011 formula can not be adopted by the EU, because it is not socially targeted and does not comply with the relevant European Directive.
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The attitude of the EU does not seem to be under negotiation, as for a long time the Cypriot authorities misinformed it and indirectly “mocked” it that the reduced tax rate was applied to the first 200 sq.m. real estate, with a total area of 275 sq.m., at a time when in fact other legislation was in force since 2016. Specifically, from 2016 until today, the applicable law provides for the imposition of 5% VAT on the first 200 sq.m. of the property, regardless of area! That is, in January 2021, when the Republic was called to respond to the EU for this tax regime, it informed it that the legislation of 2011 and not that of 2016 was effectively implemented, which is blatantly contrary to the Directive. It should be noted that the reduced VAT of 5% was also used by foreign investors, who bought villas of millions within the framework of the Cyprus Investment Program.
The infringement procedure
During yesterday's debate in the Parliamentary Committee on Finance of the new bill (which is rejected by most parties), which provides for the imposition of 5% VAT on the first 140 sq.m. of the main residence, with a total area of up to 200 sq.m., the General Manager of the Ministry of Finance, George Panteli, clarified that not even in the period between 2011-2016, where the reduced VAT was imposed on 200 sq.m. of the property with an area of up to 275 sq.m., the legislation was not compatible with the European acquis. At the same time, he stated that the representatives of the Commission warned the authorities of the country that the infringement process initiated by the EU against Cyprus last summer is in progress. According to Mr. Pantelis, the EU will formally take a position on the issue after the adoption of relevant legislation by Parliament. The bill was prepared in consultation of the Ministry of Education and Science with the Commission.Mr. Pantelis also informed the MPs that the EU demands that high value real estate (even if their area is within the scope of the new legislation) be excluded from the legislation for reduced VAT, as well as the areas with high real estate value, in order to avoid the possibility of benefiting with reduced VAT luxury apartments or very expensive small houses, which will fall within the eligible area.
Moreover, the EU is not against giving a transitional period to the entry into force of the new law, with the Director General of the Ministry emphasizing that the EU pointed out that it & nbsp; should be of a specific duration and not excessive time. Mr. Pantelis noted that the Ministry of Finance is positive to amend the bill discussed in Parliament and to include in it provisions for a transitional period, as well as for the value per sq.m.
& nbsp; As he said, the bill will include the cost of sale, noting that it is important to include ceilings in the sale price. Regarding the bill under discussion, the EU informed the Ministry of Finance that the average area of houses to be built in Cyprus should be adopted and not the maximum area of houses …
ETEK : Tombstone in the dreams of young people
For his part, ETEK President Konstantinos Konstantis said that the EU was wrong to ignore the construction costs of the main residence and the elements of the Cypriot economy, stressing that young couples should not be sacrificed because in the past abuses of the reduced VAT rate. According to Mr. Konstantis, the bill, as submitted, puts a gravestone in the dreams of young people, as well as knives in Cypriot households, young people and the construction industry. He also said that the average of 140 sq.m. taken into account in the bill does not meet the needs and culture of the Cypriot family, which lacks basic infrastructure. He stated that the effort to expand the sq.m. in properties that will be entitled to reduced VAT should be continued and based on arguments for the specifics of Cyprus, through statistical and social indicators.
The Cyprus Association of Property Owners also expressed concern and disappointment about the absolute positions of the EU, calling on the ministry to proceed with additional consultations with Brussels. On behalf of the Association of Architects it was reported that the 140 sq.m. included in the bill emerged from the population census, noting that now the data transmitted to the EU are different. A representative of the Association of Civil Engineers stated that, despite the EU positions during the previous consultations, it is possible that later it will change its position and in the process accept an increase of sq.m. The Association of Appraisers said that there should be a further study to prove to the EU authorities the area that applies to housing in Cyprus.
Additional information in the EU and new consultation
The General Director of YPOIK George Pantelis (photo) stressed to the deputies that the ministry reached the bill for the reduced VAT at 140 sq.m. of a property. with a total area of up to 200 sq.m., based on data from 2019. At the same time, he said that the Ministry of Finance is collecting additional data in relation to the area and values of real estate today, which will be forwarded to the Commission, he said, to attempt a new consultation. & nbsp; MEPs called on the government to enter into a new round of EU consultations to agree to an increase in the permitted areas. The chairwoman of the Committee and MP of DIKO Christiana Erotokritou stated that the Republic has lost its credibility vis-της-vis the EU. DISY MP Onoufrios Koulas stated that the new data will try to convince the EU. that we were led to the current situation due to abuses of the government, in order to serve friends, groomsmen and in-laws, due to passports. ELAM MP Sotiris Ioannou noted that the ministry should submit new arguments to the EU, in order for the 2011 regulation to return. DIPA MP Alekos Tryfonidis called on the ministry to proceed to new consultations with the EU. Environmentalist Stavros Papadouris stressed that we misinformed the Commission, as a result of which we are led to the current situation.