Filenews 14 April 2023 - by Chrysanthos Manoli
On the same day (Good Wednesday) that the Government announced its decision to halve the tax exemption on fuel for May and June, citing the need for fiscal discipline and the "stabilization" of prices in international crude oil trade, it sent to Parliament a new amended -looser- bill, which increases the beneficiaries of a reduced VAT rate (5%) for the purchase or construction of a main residence. including more expensive houses and apartments in eligible buildings.
In the case of the reduced tax exemption on fuel, the Government hopes to save around €6 million. However, petrol and diesel will increase by 5.4 cents per litre as of May 2, without taking into account other increases that may result from fluctuations in the international market. In the case of the provisions of the bill for the reduced VAT of 5% (and this without income criteria), the burden on the state treasury obviously concerns much more millions, as it will not apply only for two months.
According to the new bill submitted, the following changes, among other things, in relation to the bill that the Commission had requested to be approved – after lengthy consultations with the Ministry of Finance) until February 15:
-The buildable area is increased from 170 square meters to 200 square metres, which will benefit from VAT of 5%, instead of 19%, provided that the total area of the residence will not exceed 220 square metres. The beneficiary area for apartments remains at 90 sq.m., provided that the total area does not exceed 110 sq.m.
-With the bill pending in Parliament, it benefited houses that, apart from the criteria for area, their value (in the market) does not exceed €350,000. The new bill will benefit homes up to €385,000, without excluding that Parliament may raise it to €400,000, according to some information. The maximum value of apartments that will be charged 5% VAT is increased from €200,000 to €220,000.
- Some changes have also been added to make it easier for people with disabilities to benefit from the measure.
- The new regulations will benefit those developments that already have a building permit issued, as well as those that will obtain a building permit within a period of four months from the entry into force of the law.
The adventure for change
The changes for the reduction of beneficiaries of reduced VAT for primary residences have been demanded, in short, since the summer of 2021, when the European Commission found with a long delay -after the intervention of the Audit Office- that the charge of 5% VAT, instead of 19%, was made to all buyers without exception, with rather rudimentary conditions regarding the total areas of eligible residences and without any social targeting.
The law was being implemented in breach of the relevant EU Directive, which requires that reduced VAT on dwellings must be granted as part of a social policy. That is, by criteria of an economic and other nature. It should be noted that the 5% VAT measure also benefited investors who bought villas and luxury apartments, even in towers under construction, in order to be considered passport beneficiaries. Many of those sales were left on paper and not transferred, according to a report by the Audit Office, but the passports were given.
The pressures that paid off
The previous government submitted under pressure from the EU a bill tightening up the existing law. After some time and after some amendments requested by parties and professionals in land development, the consensus of the EU for its approval by the Parliament was achieved. However, all this time there was intense pressure in Parliament and from Parliament to the Government for a new amendment, in order to increase the beneficiaries (on the side of high incomes), so as not to reduce the sales (or prices) of residential properties on the market. Although the Commission had warned that, if the bill is not passed as it stands by 15/2/23, it will proceed to the next stage of the infringement procedure, which potentially includes referral to the Court of Justice of the EU for the imposition of a fine, one-off and for each day that the violation of the Directive continues.
The follow-up to the Parliamentary Committee on Finance, which will discuss the new changes proposed by the Government.
