Filenews 25 April 2023 - by Eleftheria Paizanou
Instead of yesterday in Parliament clarifying the landscape in relation to the bill on reduced VAT on the purchase or construction of a main residence, the situation was further complicated. This is because the proposal submitted by DISY before Easter seems to be accepted by the majority of parties.
DISY's proposal, which is the new basis for discussion, provides for the imposition of 5% VAT on properties worth up to €350,000, while when it exceeds this value, 19% VAT will be imposed on those over €350,000. All this at a time when the issue of Cyprus' non-compliance with the European Directive is before the legal services of the European Commission, to then register the case with the Court of Justice of the European Union. The Permanent Secretary of the Ministry of Finance, George Pantelis, made this statement - warning yesterday, during the closed-door session of the House Standing Committee on Finance.
During the session, DISY MPs analyzed their proposal, without excluding the possibility of imposing a maximum amount for a property to be eligible for reduced VAT. In fact, they called on the other parties to cooperate and approve their proposal. The change is likely to be made either through a bill proposal or an amendment to the revised bill.
DISY MP Savia Orfanidou said this regulation will be simple, enforceable and socially fairer. DIKO, DIPA and Ecologists seem to view this regulation positively.
The Ministry of Finance disagreed, saying that with DISY's proposal the measure would be universal (horizontal), so there is a risk that the European authorities will not consent. As "F" is informed, on the government side it was said that in order for the proposal to be approved by the EU, a ceiling should be set on value. The parties are expected to discuss among themselves DISY's proposal, so that it can take its final form, so that it can be approved unanimously.
At 91 sq.m. the average area
Previously, DIKO called on the Ministry of Finance to comment on whether it consents to the increase in residents' values to €400,000, from €385,000 provided for in the revised bill and apartments at €235,000 instead of €220,000. In fact, DIKO asks for the square metres in apartments to be increased, so that 5% VAT will be imposed on the first 100 sq.m., with a total area of up to 120 sq.m. In this regard, the Director General of the Minister of Finance said that based on the data they possess, in 2021 the average area of apartments was 91 sq.m. He also noted that, with the revised bill, 50% of apartments will benefit from reduced VAT.
Party reactions and proposals
At the end of the closed-door session, the chairwoman of the Finance Committee and DIKO MP Christiana Erotokritou said that some other alternative proposals were discussed and within the next few weeks there will be a conclusion. Commenting on DISY's proposal to set a ceiling for reduced VAT of 5% on the basis of the value of the property, Erotokritou said that she does not disagree with this proposal, which is rational and reasonable, but noted that it may not be approved by the European Commission.
EDEK President Marinos Sizopoulos said that the content of the bill as it stands at the moment will lead to social inequalities and possibly serious repercussions on the Cypriot economy. Mr. Sizopoulos said that the Ministry of Finance must negotiate with the European Union on the basis of social criteria that currently exist in Cyprus. MP Alekos Tryfonidis noted that the transition period can be regulated either by six months from the passage of the bill that will end in November, or even by the end of the year.
Goes to six months the transitional
There was a great deal of discussion in the Committee on Finance on the question of transitional provisions. The parties are calling for the period to be increased to six months, as the bill provides that the new regulations will apply to buildings for which a building permit has been obtained from the competent authority, even within four months of the implementation of the law. In addition, planning permits may be included, in order to benefit those who have not yet obtained a building permit. The Director-General of the Ministry of Finance said that the period of 4 months was included in order not to continue to apply the existing framework for a long period. He also suggested that as long as the period is extended, Brussels may disagree.
