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What happened in 2016 in Parliament for VAT on homes

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A three-way quarrel has erupted in recent days, between the government and the opposition, over the large expansion -in 2016- of the beneficiaries of the reduced VAT rate (5%) when buying or building a main residence. The controversy erupted in the context of today's effort, made through a bill, for the Republic to avoid fines or other sanctions by the Commission (an infringement procedure is underway), due to the abuse of the European Directive, which has been taking place in recent years. b>

One blames the other for the change in the legislation that took place in 2016 and which violated the relevant Directive, as in Cyprus the reduced VAT of 5% was not granted only for social purposes, but almost everyone benefited, including foreigners. investors, who bought villas of millions within the framework of the Cyprus Investment Program.

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Specifically, from 2011 to November 2016, 5% VAT was imposed on the first 200 square meters (sq.m.) of the main residence, meaning that it had a total area of ​​up to 275 sq.m.

On November 4, 2016 changed the legal framework, through a bill submitted by the president of DISY Averof Neophytou, which was approved by 47 votes (DISY, AKEL, DIKO, EDEK, Solidarity) and was voted against by four MPs, the Ecologists and .

That is, from then until today 5% VAT is imposed on 200 sq.m. of the property, regardless of area.

The minutes of the disputed decision

“Φ” presents the minutes of the disputed plenary session, on November 4, 2016, as well as the two relevant reports of the Parliamentary Committee on Finance.

According to the first report of the Commission, the purpose of the proposal of the Neophytos law, which was discussed in three meetings of the Parliamentary Committee on Finance, was to correct the distortions and weaknesses of the tax framework for the acquisition of housing. In fact, at that time, the bill had been taken once to the Plenary Session, but its discussion was postponed and re-examined in the competent parliamentary committee.

According to the reports of the Finance Committee, the purpose of the draft law was, in particular, to amend the VAT law, so that persons who have benefited from the possibility of buying a main residence with reduced VAT can exercise the right again, regardless of whether the ten-year period has passed. Prohibition period for exercising the right, provided that the specific persons have paid to the Tax Department the difference between the amount of the normal and the reduced tax rate of VAT, as they were valid at the time of delivery or construction of the residence. In addition, through the proposal, the imposition of 5% VAT for the first 200 sq.m. of the house, while for each additional sq.m. of the residence (s.s. without restriction on the area) a normal VAT rate will be imposed. It also provided for the exemption from the obligation to pay the difference between the normal and reduced VAT rate, when a beneficiary ceases to use his residence as a place of residence before the age of ten, in the case of the transfer of residence from a beneficiary to an adult child. It applies only if the child is not eligible for a house with reduced VAT at the time of transfer.

Agreed by the Ministry of Finance

According to the report, Mr. Neophytou, as the rapporteur of the draft law, had stated to the Finance Committee that “the proposed regulations correct the distortions and weaknesses of the current tax framework for the acquisition of housing, which work to the detriment of young couples , creating social injustice, while at the same time strengthening economic activity “.

During the discussion, the committee took into account the budgetary costs that would arise from the arrangements. A spokesman for the finance ministry, who agreed with the bill, said the cost could not be determined in advance. Moreover, the rapporteur of the proposal, according to the report of the Commission, had stated that, although the specific regulations would initially have a negative impact on government revenues, in the future there would be an increase, due to the growth of the economy resulting from the legislation .

During the review of the proposal, according to the supplementary report of the Finance Committee, members of the Committee (mainly AKEL MPs, as shown in the minutes of the Plenary, which are set out below) had expressed reservations that the arrangements would altered the social character of acquiring a main residence with reduced VAT, as the beneficiaries were expanded and persons who may not have needed social support would also benefit.

Reservations were also expressed about the effects on public finances, as well as disagreements over the regulation, as, as they had argued, there is unfavorable discrimination against citizens regarding the right to obtain housing with reduced VAT, due to the non-uniformity in the way of calculating its total area. residence.

Mr. Neophytou had argued that the proposal corrects certain distortions and weaknesses of the legislation, which on the one hand cause social injustice, excluding some citizens from the right to obtain housing with reduced VAT, against other citizens and on the other hand affect public revenues due to the exercise of the right by non-beneficiaries. He had, in fact, noted that the regulations were expected to lead to an increase in & nbsp; public revenue. Mr. Neophytou adopted the proposal for clarification of the way of determining the total area of ​​the houses, stating that it is in line with the aims of the proposal.

The dialogues of the Members in the Plenary & nbsp;

The draft text of the bill was then submitted to the Plenary for approval. According to the minutes of the Plenary Session, AKEL had submitted an amendment, which would remain partly the same provision for reduced VAT, ie 5% VAT would be imposed on 200 sq.m. of the property, but it means that it had an area of ​​up to 275 sq.m.

AKEL MP Stefanos Stefanos had stated that AKEL is positive in the first part of the proposal, in relation to the re-use of the right to a reduced tax rate of 5% for the acquisition of a first home. Mr. Stefanou, however, had expressed the party's disagreement with the aspect of the proposal that concerned the targeting. “The proposal of Mr. Averof Neophytos changes the specifications of the targeting, which targeting was done precisely for social reasons. “Let me also remind you of the debate that took place in 2011 in Parliament about this thing, that the reduction of the tax should not benefit everyone, but those who really want to have a humble, conventional home, not them,” he said. Mr. Stefanou.

According to the minutes of the Plenary, Averof Neophytou thanked the parliamentary parties that supported the correction of a social injustice that mainly concerned young couples. Responding to the reservations expressed by AKEL, Mr. Neophytou had stated that the targeting does not change. “Today we have a legislation which stipulates that if the area, which is measured based on the building factor of a house, does not exceed 275 sq.m. and if the auxiliary spaces are 5 sq.m., 5. sq.m. engine room, 7 sq.m. auxiliary space, 36 sq.m. garage, 40 sq.m. open verandas and unlimited sq.m. for support, to be able to build a house, if you are building in Kyperounta or Agros due to heights, the first 200 sq.m. you pay them with 5% and the remaining 166 sq.m., which can be 366 sq.m. “If they are in mountainous areas, you pay them based on 19%”, the President of DISY stressed at the time. In fact, he had added that the Tax Department had been transformed into a second Urban Planning, emphasizing that “in order to be eligible to receive the reduced 5%, you must have enough staff for several weeks, to check if your garage is 36 sq. M. μ. because, if it is 37 sq.m. you are not a beneficiary, if the useful area is 274 sq.m. you are entitled to get reduced, but if it is 276 sq.m. without verandas you are not entitled and you have to pay the first sq.m. 19% ». As he had said, in fact, self-criticism was needed for how the Parliament passed such laws.

The € 13 million apartment, the palaces and the houses in the mountains

The president of EDEK, Marinos Sizopoulos, had mentioned, during the debate in the Plenary, that, in the mountainous areas, a family of five with a house of 280 to 290 sq.m. pays 19% VAT (since the ceiling for the reduction to 5% stopped until then at 275 sq.m.), while on the beach of Limassol for an apartment of 100 sq.m. sold € 3 million 5% paid. “Recently in Limassol a 220 sq.m. apartment was sold for € 13.5 million and the buyer paid 5% VAT”, Mr. Sizopoulos had pointed out.

The then MP of Ecologists, George Perdikis, also intervened in the matter, stating that “the officials officially told us that the value is not an objective criterion either, because the apartment, dear Mr. Sizopoulos, which was sold for € 13 million, with The same logic was not € 13 million but it was much lower, because the values ​​in the purchase and sale documents were falsified, in order to evade taxes “.

The then DIKO MP Angelos Votsis had stated that” since the The first part will be for everyone 5%, everyone will declare – and based on their urban planning permit – what exactly they will build and will pay the VAT accordingly “. & nbsp;

The then MP of Solidarity Michalis Giorgallas had state that, in the future, a model could be found that combines the price of the property with the sq.m., for a fairer distribution of the tax.

Shortly before the amendment AKEL (s.s. for maintaining the then valid ceiling of 275 sq.m.), which finally was rejected, AKEL MP George Loukaidis had noted that “by voting what we will vote, we will get rid of taxes and palaces. This is what will happen. And the palaces of 500 sq.m., luxurious “.

After the vote against the amendment of AKEL, the Plenary approved with a large majority (and with votes of AKEL) the proposal of Mr. Neophytos.

Source: www.philenews.com

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