Filenews 1 July 2022 - by Eleftheria Paizanou
No change will, it seems, be made by the Minister of Finance in relation to the three issues raised by the parties and the affected professional sectors for the amended bill concerning the reduced tax rate on the purchase or construction of a main residence. In fact, he warns of the possibility that the Commission will not accept either the new bill (tabled under pressure from the parties) or the new relaxations that some parties want to bring to the text. The possibility is visible, through an urgent letter from the General Secretary of the Ministry of Foreign Affairs to the Ep. Finance, the EU, to judge that the "lax" provisions requested by the majority of the Parliament are incompatible with the social purpose of the European Directive and to proceed with the complaint of the CT to the Court of Justice of the EU.
A year ago, the Republic received a letter of formal notice from the European Union, due to the abusive application of this directive regarding reduced VAT on the acquisition of a main residence. The EU is even warning us with prosecution before the Court of Justice of the EU, because the state grants reduced VAT even to well-to-do citizens or to millionaire foreign investors who buy expensive houses.
In a letter to the parliamentary Finance Committee yesterday, the Ministry of Finance does not appear willing to adopt the changes requested last Monday during the discussion of the bill in the Parliamentary Committee on Finance. Reservations were expressed by MPs and construction professionals about the provisions concerning the separation of houses and apartments when calculating the VAT rate, the imposition by the government of a ceiling on the total value of the property that could benefit from a reduced rate, but also the transitional period granted by the government (end of November), so that the current lax regime rejected by the EU continues to apply.
The new bill - which does not seem to satisfy the majority of the Finance Committee - provides for the imposition of 5% VAT on the first 170 sq. m. of residences, with a total area of up to 220 sq. m. and with a total transaction value not exceeding € 350,000. Also, a reduced VAT of 5% will be imposed for the first 90 sq. m. of apartments, with a total area of up to 110 sq. m. and with a total value that will not exceed € 200,000. There are also transitional provisions so that the new arrangements apply to solemn declarations submitted to the competent authority to ensure reduced VAT after November 30, 2022. Essentially, the revised framework separates the criteria between dwellings and apartments, sets maximum values for dwellings and apartments and introduces a reasonable transitional period.
According to the Ministry of Finance, the bill was based on an analysis of the official statistical data 2019-2021, regarding the housing and apartment markets. As stated in an urgent letter from the Director General of the Ministry of Finance George Pantelis to the Parliamentary Committee on Finance, which was sent after the reservations of MPs last Monday, the data on which the revised bill was based the ministry allow him to argue as to the compliance of the proposed framework with the acquis communautaire, given that the data concern 50% of the local population. At the same time, he notes that it cannot be ruled out that the EU services may consider that the bill is not in line with the EU VAT directive, due to the fact that, as Mr. Pantelis mentions, it covers a large part of the population, which may be judged to go beyond the concept of social policy, since it does not refer only to vulnerable citizens. The Director General of the ministry notes that opinions in the Commission on the maximum values and the length of the transition period are divergent.
Maximum values
In relation to the maximum values, according to Mr. Pantelis, they have been determined on the basis of the official statistical data 2019-2021 and may be adjusted by the Superintendent of Taxation, on the basis of data. "In view of the fact that the bill will be implemented after 2023, these values will be adjusted to the 2022 database, which we will have at our disposal early next year," he adds. Regarding the possibility of granting a further transitional period, according to Mr. Pantelis the amendment of the framework became known last December. He also emphasizes that the bill provides for the transition period to expire in November 2022, i.e. one year after the notification of the Republic's obligation to amend the framework. At the same time, it warns that any further extension of the period may be exploited or even not accepted by the EU.
