Filenews 13 December 2023 - by Eleftheria Paizanou
In addition to the changes in force since 1 November to the legal framework for reduced VAT on the purchase or construction of a main residence, there have also been variations in cases where the beneficiary is not obliged to refund VAT when he ceases to use the residence as a permanent place of residence.
The new legislation provides for the imposition of 5% on the first 130 square meters (sqm) of buildable area of the property up to the value of €350,000. In cases where the value is up to €350,000, 5% VAT is charged in proportion to the square meters of the buildable area when it is over 130 sq.m. and up to 190 sq.m. up to €475,000, the reduced VAT rate will be imposed on the value up to €350,000 and in proportion to the sq.m. of the buildable area, when it is over 130 sq.m and up to 190 sq.m. That is, in this case, from the 60 additional sq.m. but also for the additional €125,000 value, VAT will be in the order of 19%.
Clarifications
According to clarifications by the Tax Department, in three cases VAT should not be refunded by the beneficiaries. In particular, if a person has benefited from 5% VAT on the purchase or construction of a new residence and has ceased to use it as a place of residence before the expiry of the ten years, he is not obliged to refund the VAT difference only if he transfers the residence to his adult child, who is a beneficiary and has not benefited from the reduced VAT for the purchase or construction of another residence in the last ten years.
Also, if the child has already benefited from the application of 5% VAT on the purchase or construction of a dwelling which he uses as a place of residence and does not intend to use the dwelling transferred by the parent as his/her place of residence, then the parent must pay the amount of the difference between the amount of VAT resulting from the application of the reduced rate and the standard rate of VAT; as they were in force at the time of purchase or construction of the dwelling, corresponding to the period of time that he has not used the dwelling for the purposes of owner-occupied dwelling.
If the child no longer uses the dwelling for which he benefited from the reduced VAT as a place of residence, but will use the residence transferred to him by his parent, then he must pay the amount of the difference between the amounts of tax resulting from the application of 5% VAT (reduced rate) and 19% VAT (standard rate); as they were in force at the time of purchase or construction of the dwelling, attributable to the period of time that he has not used the dwelling for the purposes of owner-occupied dwelling.
In the event of the death of the beneficiary person, VAT is not refunded. Also, the heir of the deceased's residence does not have to refund VAT to the state on the residence inherited, regardless of whether or not the heir has benefited from 5% VAT in the last ten years.
Abuses
During the implementation of the previous legislation there were many examples of abuse, as 5% was imposed on 200 sq.m., regardless of total area, resulting in many people using the measure without using the residence as a permanent distribution space, but either for a holiday home or for rent, reaping financial benefits. The Tax Department, in an effort to collect the revenue lost, launched a compliance campaign against those who had abused the reduced VAT, resulting in additional taxes.
