Filenews 2 June 2023 - by Eleftheria Paizanou
Ignoring the recommendations of the Commission and the government, MPs will insist, as everything shows, to vote for what they consider right, in relation to reduced VAT on the purchase or construction of a main residence, in an effort they say not to exclude from reduced taxation a large number of interested buyers.
This is despite the fact that yesterday Brussels sent the Republic a reasoned opinion (the second stage of the infringement procedure, the third being the referral to the Court of Justice of the EU), giving the country an ultimatum to harmonize it with the European VAT Directive, so that the new legislation to be approved by Parliament is consistent with the social purpose that the exceptional granting of reduced VAT should serve for main residence. If the Republic does not comply even this time, in two months the European Commission acquires the right to refer it to the Court of Justice of the European Union, with the visible risk of a fine.
The Ministry of Finance, following the recommendations of the Commission, yesterday morning submitted a 4th revised bill, which will impose 5% VAT on the first 110 sq.m. of a detached house (or apartment) with a value of up to €350,000, provided that the total value of the transaction does not exceed €475,000 and the total buildable area is up to 190 sq.m.
According to information provided by "F", despite the "ravasaki" from the European Commission (EU) and the promotion of the new bill, the majority of parties are studying the submission of an amendment, which will impose 5% VAT on the 130 sq.m. of the house or apartment with a value of €350,000. For houses/apartments with an area of 131 sq.m. up to 190 sq.m. and with a value of up to €475,000 19% VAT will be charged. Namely for the first 130 sq.m. and a value of €350,000 VAT will be 5%, while for the remaining 60 sq.m., up to 190 sq.m., VAT will increase to 19%. Also, for houses and apartments with an area of more than 190 sq.m. and with a value over €475,000 19% VAT will be charged from the first square meter and the first cent.
in-cyprus 1 June
The European Commission has issued a reasoned opinion to Cyprus, urging the country to adhere to the European Union’s Value Added Tax (VAT) regulations on dwellings.
According to an official press release, Cyprus is failing to correctly implement EU VAT rules regarding the purchase or construction of dwellings within its jurisdiction. Notably, Cyprus currently allows for a reduced VAT rate of 5% on the initial 200 m2 of dwellings designated as primary and permanent residences, without imposing any additional limitations, the EU Commission said.
While the VAT Directive (Council Directive 2006/112/EC) permits Member States to apply reduced VAT rates on housing as part of their social policy, the Commission highlights that Cyprus’s legislation extends beyond the intended scope.
The broad application of the reduced rate, without considering factors such as the beneficiary’s income, assets, economic situation, the occupants of the dwelling, or the maximum allowable total area, raises concerns over the measure’s compliance with the VAT Directive, the Commission said.
The issuance of the reasoned opinion marks the second stage in the infringement procedure initiated by the Commission in July 2021, which began with the sending of a formal notice to Cyprus.
The country now has two months to address the shortcomings outlined in the reasoned opinion. Failure to take appropriate action within this timeframe may prompt the Commission to refer the case to the European Court of Justice.
