Despite the fact that millionaire foreign investors who were naturalized Cypriots took advantage of the reduced VAT rate of 5% (instead of 19%) for the purchase of luxury villas, the Ministry of Finance is not considering amending the legislation to allow reduced VAT only for homes up to a predetermined value per square meter.
The reduced tax rate is applied for social purposes for the Cypriot citizens for the first 200 sq.m., regardless of the total area or the total value of the house. The ministry claims that the Commission considers that there is no problem with the Cypriot legal framework that regulates the imposition of reduced VAT on real estate sales.
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Yesterday, the AKEL parliamentary committee discussed a draft law on AKEL, which stipulates that no reduced VAT will be offered for high value homes. In particular, it proposes the introduction of ceilings in the value of housing per square meter, so that the construction, expansion and purchase of housing are subject to a reduced VAT rate. A proposal rejected by the Ministry of Finance, which considers that the legislation is implemented correctly. The representative of the ministry also disagreed with the position expressed a few days ago by the Tax Commissioner Giannis Tsagaris, who had called on the Parliament to set conditions, if he wants the buyers of luxury real estate not to benefit from the reduced VAT, as in the case of foreign investors. naturalized. The ministry spokeswoman also said that if such a thing is implemented, the Tax Department will face great difficulties in checking the data submitted by buyers, as, as she noted, some will declare false data in relation to the value of the property. “There will be great administrative costs if criteria are included which some will take advantage of in a negative way,” he added.
Meanwhile, answering questions from MPs about the audits, he said that within 6 months of the sale, the presentation of electricity bills or utilities is required to determine that the person who benefited from the discount actually lives in the house and this is the only house he acquired with reduced VAT. At the same time, he said, the squares of the house are checked and data are confirmed by a quantity meter and an architect before passing through the land registry. In fact, he stated that in cases where it was found that some people who benefited from reduced VAT because they bought the property as a first home and then rented it, the 5% tax was revoked and 19% VAT was imposed on the buyer. AKEL MPs expressed strong disagreement with the ministry's position, arguing that through the Cypriot naturalization investment program, wealthy investors made use of the reduced rate, resulting in the state losing millions of euros. In fact, the AKEL MPs claimed that before the self-dissolution of the Parliament, the bill will be taken to the Plenary Session and will be put to a vote.