Filenews 21 May 2023 - by Eleftheria Paizanou
The Commission's position on the compromise formula reached by the members of the House Standing Committee on Finance in relation to reduced VAT on the purchase or construction of a main residence is expected to be conveyed to Parliament on Monday by the Permanent Secretary of the Ministry of Finance, George Panteli.
According to "F", technocrats of the Ministry of Finance in recent days were in an open line of communication with the competent officials of the European Commission (EU). In fact, the Cypriot side in a teleconference explained the reasons why the parties have differentiated the government proposal, in which they have included two criteria-restrictions, based on which 5% VAT will be imposed.
The Cypriot authorities have assured Europeans that the new legislation to be approved by Parliament will serve the social purpose that the European VAT Directive considers a prerequisite. As is well known, the new proposal of the parties does not separate houses from apartments and is based on both values and area of real estate.
A few days ago, during a discussion in the Parliamentary Committee on Finance, technocrats from the Ministry of Finance had argued that by including the two criteria it would be easier for the EU to accept the new law.
There are estimates that Brussels may view the proposal positively, but it is not excluded that it will also make suggestions on specific points that need to be changed. At the same time, there are concerns that the EU may not take kindly to the non-separation between single-family homes and apartments.
Behind the concerns lies an optimism that the Commission will acquiesce, as the first bill submitted by the Anastasiades Government, in January 2022, provided for the imposition of 5% VAT on the first 140 sq.m. of a house, with a total area of up to 200 sq.m. according to which the average residential area in Cyprus is 141.4 sq.m. The aim of the executive and legislative branches is for the proposal, which will go to plenary on June 8, to limit as much as possible the impact on new property owners, as well as on the construction industry.
The compromise proposal provides for the imposition of 5% VAT on main residences, regardless of whether they are apartments or residences, provided that they have a total area of up to 150 sq.m and a value of up to €350,000. Moreover, for properties with an area of 151 sq.m. up to 200 sq.m. and with a value of up to €475,000, for the first 150 sq.m. and for a price up to €350,000 5% VAT will be charged and for the remaining 50 sq.m. VAT will rise to 19%. Properties with an area of more than 200 sq.m. and a value of more than €475,000 will be charged 19% VAT from the first cent and from the first square metre of the property.
