Filenews 23 August 2022 - by Eleftheria Paizanou
Even more exposed is democracy after yesterday's report of the Audit Office on the abuse of reduced VAT on the purchase or construction of a main residence by investors, within the framework of the Cyprus Investment Program.
According to the Audit, in the name of the social policy of the EU directive, 1,298 investors had bought properties worth €1.5 billion, benefiting from the reduced VAT of 5% for the first 200 square metres of the property, resulting in the state losing revenues of €204.3 million!
The losses of public revenues may be greater, as the names of the applicants for a reduced VAT rate, as they are registered in the VAT Registers, are not consistent with the names in the archives of the Civil Registry Department, while the data of the plots in the applications are not consistent with data of the Land Registry.
The "party" set up by some is also shown by the 10 highest value houses sold under the KEP, for which wealthy investors benefited from the reduced VAT. For the 10 properties alone, with a total value of €52.6 million, the state lost revenues of €5m.
The findings complicate the country's position and perhaps the Commission will make use of them, as since last year it has launched an infringement procedure against Cyprus, due to the incorrect implementation of the Directive.
It is not excluded that the Republic will be required to pay with its own resources the difference resulting from the reduced tax rate, i.e. €204 million or part of them. This is also lost revenue for the EU, as a significant part of vat revenue ends up in the EU.
If Cyprus comes before the Court of Justice of the EU - if it does not take care to comply with the Directive as soon as possible - things will be even more difficult. A competent source told "F" that there is currently a wait-and-see attitude on the part of Brussels and their next move is expected in September. The infringement procedure continues to run, with the European authorities awaiting the conclusion of the debates in parliament to amend the relevant legislation. The bill submitted by the Government to limit the beneficiaries of the reduced rate does not seem to pass as it stands from the hurdle of the Parliament, as parties and professional bodies have strong reservations, arguing that the real estate market will be affected and will be burdened, financially, by medium-sized households and young couples. The Ministry of Finance has made it clear that it will not make any new changes to the bill, as the Commission probably does not accept any further derogations.
The bill and other requirements
The bill under discussion provides for the imposition of 5% VAT only on the first 170 sq. m. of residences with a total area of up to 220 sq. m. and with a transaction value of up to € 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 of up to € 200,000. It is also foreseen that the new legislation will apply after 30 November 2022. The previous bill provided for the imposition of a reduced VAT rate of 5% for houses with a maximum area of 140 sq.m. The opponents demand a return to the 2011 regime, which imposed 5% VAT on the 200 sq.m of property, with a total area of up to 275 sq.m., which the EU rejected.
POINT OF VIEW
Atheophobes!
Some have to find a place to hide with what was made public yesterday. The purchase of floor apartment in a tower, worth €14.5 million, from which the state lost €732,000 from the imposition of a reduced VAT of 5%, is it considered social policy, atheophobes? The purchase of another apartment, €5 million, from which public revenues of €360,000 were lost. and many other such cases are consistent with the social nature of the EU Directive? And of course they are inconsistent and constitute a clear abuse. Everyone in the country was aware of the loopholes in the legislation, which some exploited undisturbed. People from certain professional sectors have shown the way to investors to fool the state, having benefited themselves.
