Filenews 26 October 2022 - by Eleftheria Paizanos
As distorted as the legislation on reduced VAT on the purchase or construction of a primary residence is, the distortion in its application is equally distorted. Some - mainly foreign investors of the KEP - who benefited from the 5% VAT, leave the villas they bought empty (obviously because they do not live permanently in Cyprus), and claim not to pay the VAT difference, that is, not to pay an additional 14%, as provided for those who do not use the house they bought with reduced VAT for permanent residence.
According to the law, in order to benefit from the reduced VAT, one must reside permanently in the Republic, however, many investors do not use the premises they bought, leave them empty, but refuse to pay the additional VAT, as they did not sell them and did not rent them to someone else. Leaving the houses-apartments empty, they believe that they should not pay the additional 14% of VAT. However, there are also cases of houses that were bought as permanent residences, with reduced VAT, but are rented and their owners have income. Cypriots are also included in this category.
On Monday, in Parliament, Finance Minister Konstantinos Petrides said many who do not want to pay extra VAT choose not to use the properties. He suggested that a perverse system was created because of the legislation passed by the Parliament. He also said that an effort is being made to identify those who rent the properties and have a financial benefit, in order to pay additional VAT.
The Tax Commissioner Sotiris Markides, confirmed that several investors keep the houses empty so as not to pay additional VAT. In the meantime, in 2-3 months the first results of the campaign conducted by the Tax Department in relation to 5% are expected. According to the Superintendent, officers of the department carry out on-the-spot checks on the homes of owners who paid low taxes, pointing out that the campaign will continue in 2023.
