Filenews 11 September 2022 - byEleftheria Paizanou
One by one the cases of the main houses and apartments that benefited from the reduced tax rate of 5% during the purchase or construction, the Tax Department will examine to determine if they are actually used for permanent owner-occupied housing, or if they are rented or constitute a holiday home.
On Friday, the relevant Department began a campaign, during which taxmakers will work overtime to examine all cases that received the 5% VAT. According to information from "F", the Tax Department will target the cases of real estate in the free area of Famagusta, the majority of which were bought by Cypriots, paying 5% VAT, as they had declared that they are the main residence.
Specifically, during the inspection of the Department, it will be determined whether the buyers actually use the property as a main residence or as a holiday home. Also, the cases of seaside properties in the district of Paphos, which were bought mainly by Europeans and others, taking advantage of the reduced taxation, will be examined to determine whether they are not used for permanent residence but either for holiday homes or rented.
In addition, under the microscope of the Department will be found the properties (mainly 1-2 bedroom apartments) adjacent to the universities and the buyers declare that it is the main residence of their children and then proceed to rent them at high prices to students. For all three categories, if the Tax Department finds that the buyers have abused the legislation, they will be required to pay the amount of the difference between the amounts of tax resulting from the application of the reduced rate and the standard rate, that is, they will pay an additional 14% VAT, which will be added to the 5% they had already paid. Depending on the findings, the coffers will end up with money that the state lost to non-beneficiary buyers. However, as we were told, in the context of the checks carried out in the past by the competent department, many cases were identified where buyers declared their property as their main residence, but in the process used it as a holiday home or rented it. In fact, these people paid the difference, i.e. 19% VAT, as they had paid for the first 200 sq.m of the property only 5% VAT.
The campaign of the Department of Taxation will continue next year, with the aim of examining almost all cases of real estate that received reduced taxation. In order to pay 5% VAT, someone submits a solemn declaration that the property is used as the main and permanent place of residence and that he does not have any other residence that belongs to him. At the same time, it is stated that in case a buyer ceases to use the residence as a permanent place of residence, before the lapse of 10 years, the amount of the difference will be paid to the Tax Commissioner.
