According to the Association of Land Management and Construction Entrepreneurs, a bill being promoted in Parliament to amend the Value Added Tax Law to introduce a reduced VAT rate of 5% on renting or building a house, that the first reading went wrong and the VAT moves in the wrong direction. side – 140 sq.m. at home instead of the first 200 sq.m. to the main and permanent place of residence (today’s figure).
It is noted that the issue of VAT on real estate affects almost the entire population. The Association of Entrepreneurs for Land Management and Construction explains that this amendment will greatly complicate the conditions for potential property buyers.
1. Completed or under construction houses with an area exceeding 200 sq.m. cannot be sold to recipients of a preferential VAT rate.
2. Revising already designed or licensed homes to match the new data will significantly reduce the amount of product on the market and create pressure to increase prices.
3. From the above, it follows that the additional costs for VAT when buying or building a house with an area of 140 sq.m. and 200 sq.m., i.e. The 19% difference, which is combined with the rise in the cost of building materials, will lead to a further increase in prices, which will make it difficult to obtain new housing, at a time when more and more Cypriots cannot move to this step. Such an “action” primarily affects financially weak citizens.
“As a result, many young or large families will be forced to abandon their plans and limit themselves to buying houses with fewer square meters.Thus, home ownership turns into a privilege for those who can pay additional VAT,” the Association notes.
According to the developers, this decision is at odds with the government’s attempt to attract foreign investors through projects such as the Headquarters program, as it significantly increases the cost of foreign investment in the country, especially when other countries in Europe have much lower VAT taxes, in residential premises.
“At a time like this, when the economy and society are trying to recover by mitigating the losses from the pandemic, we believe this proposal will work in the opposite direction,” the Association of Land Management and Construction Entrepreneurs said.
He concludes that Cyprus really needs incentives that will stimulate economic activity and investment, as well as alleviate the situation of local financially weak citizens who are planning to buy their own home.