Filenews 9 April 2023 - by Eleftheria Paizanou
The renovations of houses and apartments were not included by the previous government in the notorious bill that partially tightens the law on granting a reduced VAT rate of 5% on the purchase or construction of a primary residence and, as Phileleftheros is informed, they will not be added to the new regulation, despite the ones brought for this purpose by MPs and businessmen.
During the debates that have been taking place in recent months in Parliament on the bill, MPs of various parties demand that renovations or extensions be subject to the reduced tax rate and be regulated through the bill, as today another regulation is applied on this issue, which has some limitations and is not considered satisfactory.
Under the applicable legal framework, renovation and repair services of private residences, for which at least three years have elapsed since the first installation of the owner on the property and which are carried out by professionals registered with the Tax Department (such as plumber, electrician, carpenter, painter and building works), excluding materials that constitute more than 50% of the provision of the service, subject to 5% VAT. The Department of Taxation, in an earlier circular, noted that the value of materials used in the context of the provision of the service must be separated from the value of the service.
It is worth noting that taxable persons who apply the reduced VAT on the renovation of private residences must keep evidence in relation to the use of the residence as private. Under the current legal framework, the separation of services and goods does not apply when the recipient of residential renovation services rents them for tourism purposes.
In this case, the property owner will have to reimburse the VAT for the specific transactions by the reverse charge method and applying the standard VAT rate.
The intentions of the Ministry of Finance
According to information provided by "F", the Ministry of Finance does not wish to link the issue of renovations and repairs with the amendment of the law on 5% VAT on primary residences, because some cases of renovations may be affected.
The ministry does not want a provision to be included in the bill under discussion, which is expected to be revised after Easter, in an effort to get it approved in order for the country to comply with the European Directive on the social purpose of granting reduced VAT for a main residence. As we have been told, today the separation of services and materials in relation to tax treatment is done to prevent any abuses of legislation.
However, the relevant ministry is carrying out tabletop exercises to improve current practice. Among other things, it is considering issuing a circular with improvements so that some services provided are priced differently. As a competent source told us, the priority is to close the issue of the general amendment of the VAT law, so that the country avoids adventures with the European Commission or the Court of Justice of the EU. He also said that when the legislation is amended, then improvements for renovations are expected to be promoted as a separate regulation.
