Filenews 28 March 2023 - by Eleftheria Paizanou
The lies are over about the open front with the European Commission about the reduced VAT rate of 5% on the purchase or construction of a main residence. Brussels has not consented to new changes to the government bill that has been pending for months in Parliament and does not accept the granting of a low rate for larger and more expensive houses and apartments, as the parties are demanding.
They insist on the swift adoption of the bill as it stands, otherwise the next stage of the infringement procedure that is already "running" against the Republic will be activated next month, with the risk that the country will now be referred for fines to the Court of Justice of the EU (CJEU).
Finance Minister Makis Keravnos, speaking yesterday to the Parliamentary Committee on Finance, called on the parties to prioritize this bill and vote for it, otherwise, as he said, the country risks sanctions.
"Why so expensive?"
As we rewrote, on 15 February last the deadline given by the EU to Cyprus to change the legal framework expired and now the state is moving into uncharted waters. The Commission is not even discussing new changes to the pending bill in Parliament. As Mr. Keravnos said, during the meetings he had with European officials and counterparts, he found that they did not change their position. Characteristic was the position of another Minister of Finance in the Eurogroup, who, addressing Mr. Keravnos, asked "why in Cyprus do citizens want to live in villas of 270 sq.m., worth half a million?". Mr. Thunderbolt called on the parties to put themselves in the place of the Europeans. Despite appeals from the finance minister, most parties continue to react strongly to the bill, which will be discussed again in the Finance Committee.
Party changes
Despite the fact that the European Commission has made it clear that it does not consent to changes to the bill, MPs say they will make amendments, as they consider the proposal to be unbalanced for those who wish to buy apartments.
The bill provides for the imposition of 5% VAT on the first 170 sq. m. of houses, with a total area of up to 220 sq. m. and a transaction value of up to €350,000. Also, reduced VAT will be imposed on the first 90 sqm of apartments, with a total area of up to 110 sqm and with a total value of up to €200,000. The EU reportedly agrees that the above restrictions, in order to benefit from VAT of 5% instead of 19%, correspond to the social orientation of the Directive allowing for reduced VAT.
However, according to information from "F", the parties, including the co-rulers, will seek, possibly next Monday, to raise the values of the properties that will benefit. This is because they argue that the economic data on which the Ministry of Finance relied do not reflect the new data in the market, namely the prices and values of 2022. In addition, some parties will seek to have a single reduced VAT, both for houses and apartments.
However, yesterday, in response to questions whether the same policy can be applied to all types of properties, Mr. Keravnos noted that any consolidation of the areas of apartments and houses can lead to a decrease in property values. At the same time, he said that the current values of real estate, which are high, should not be the only given for properties that will enjoy reduced VAT, while he also referred to tax measures that will be implemented in the long term.
