While everything showed until yesterday that the parties had found the golden ratio between them, so that the residences up to 150 sq.m. to benefit from 5% VAT instead of 19%, provided that their value will not exceed 350,000 euros, yesterday the scene changed again! During the closed-door session of the Finance Committee, the majority of MPs reportedly agreed to increase the maximum area of eligible houses (and apartments) again, bringing it up to 190 sq.m. That is, within a week the Parliament increased by 40 sq.m. the area of the main residences that will be subject to 5% VAT, deleting the minimum area of 150 sq.m. and putting the 190 sq m ceiling in its place to favor even more home builders, sellers and buyers.
Having as a basis the compromise formula that they had roughly reached the previous week (as described above), the members of the Committee elaborated a new proposal yesterday.
After a proposal by the chairman of the Finance Committee and the deputy chairman of DIKO Christianas Erotokritou, the committee seems to reach the decision that 5% VAT should be imposed up to 190 sq.m. of a residence, with a value of up to €350 thousand.
For residences with a value from €350 thousand to €475 thousand (with a maximum area of 190 sq.m.) 19% VAT will be imposed. That is, up to €350 thousand the VAT will be 5% and for the remaining amount of €175 thousand the VAT rate will be 19%. For homes worth more than €475 thousand, the VAT will be 19% from the first sq.m. and from the first cent.
Again to the EU!
In the next few days the Ministry of Finance is expected to scrutinize for many once in Brussels, to position themselves on the committee's new proposal.
At the same time, the final proposal will also include a review of provisions in relation to the transitional provisions. In particular, a provision will be included according to which all applications to secure planning permission for main residences that have already been approved and are valid and those submitted even within 4 months from the date of entry into force of the new legislation to be voted by the Parliament, will be taxed at the existing rate -relaxer- regime. In addition, an insurance policy will be included, which will determine a time limit on the validity of the urban planning permit. The possibility of setting a three-year time limit for the construction of a residence based on a planning permit is being studied. the area of the residence that will benefit from reduced VAT increases by 15 sq.m. for each child over three, as well as the price of the residence.
The position which seems to be gaining ground in the Finance Committee envisages that the changes that will be made will be included in a joint amendment of the parties, so that the country will be presented with a common line to the European Commission. AKEL MPs, however, had argued to the committee that the changes should come from the Government. As “Φ” is informed, the Ministry of Finance seems to agree with the new changes, however the issue regarding the maximum area of eligible homes remains open.
A few days ago, technocrats of the Ministry of Finance were informed by the head of Taxation of the Directorate-General for Taxation of the European Commission that Brussels agrees with the unification of the criteria, that is, the existence of a common category of apartments and houses. However, as mentioned by the DG of the Ministry of Finance Giorgos Pantelis, the EU considers that the maximum area of 150 sq.m. which until yesterday the Parliament wanted to approve is high, if one takes into account that the average of the sq.m. of the apartments sold in Cyprus are 110 sq.m. And after the report by Mr. Pantelis that there was a reservation for the maximum area of 150 sq.m., the members of the Finance Committee discussed – and seem to have approved – a proposal to increase the maximum area to 190 sq.m.!
“Our law is a model”
The legislation to be adopted in Cyprus is estimated by government and parliamentary sources to be a model and for other EU countries. In the context of yesterday's closed-door discussion, it was mentioned that other member states expect to study the Cypriot legislation, in order to determine their next steps for the reduced VAT for main residence.
The final proposal of the Finance Committee will be taken to the Plenary on June 8. That is, four months after the expiration of the deadline set by the EU for the passage of the bill that was then pending in the Parliament and which has been revised several times until now.