The readiness of the executive branch to consider the introduction of a transitional period and a maximum cost criterion at a reduced VAT rate for building a house was announced by Finance Minister Konstantinos Petridis to the Parliamentary Finance Committee, warning that the European Commission risks imposing a fine due to violation of the relevant Directive.
A government bill introduced to bring national legislation in line with the VAT directive and provides for a reduced VAT rate of 5% for houses with a maximum area of 140 square meters (instead of the current 200 square meters), and in case of non-compliance there is an opportunity to appeal to the European Court of Justice .
The committee continued deliberating the issue on Monday in a cross-appeals meeting where Konstantinos Petridis criticized Parliament for the bill voted unanimously in 2016, at the same time he said DIKO MEP Kostas Mavridis condemned the Government for wrong the application of the European VAT Directive, due to which the Commission’s warning letter was initiated.
“You are blaming the executive branch for a piece of legislation that you voted unanimously for and that you condemned in the European Commission, and we come here to collect the uncollected,” he said. At the same time, Mr. Petridis said that there is a risk that the European Commission will demand a refund due to the incorrect application of the VAT directive.“There is a risk that they will demand a refund, and this risk worries us and concerns what we want to respond to relatively quickly and within the social policy that it (the directive) establishes,” YPOIK said.
Regarding the possibility of increasing the square meter limit for the application of the reduced rate, Mr. Petridis said that they would consider it, noting that it was difficult for the Commission to accept, which in its reply cites Eurostat statistics for 2011, based on which the average number of houses per Cyprus amounted to 141 sq.m.
“I came here in a good mood and said a few simple things. “We want to move forward in an atmosphere of consensus, I have been viciously attacked by AKEL and DIKO,” in which, he said, “we shouted whatever we wanted,” said Mr. Petridis, criticizing AKEL for misinforming about the actions, undertaken by Greece and which, he said, were part of the new directive.
Greece has a VAT rate of 24% for houses without social criteria, he said, while Cyprus has the second lowest VAT rate in Europe, 19%, and is one of nine countries applying a low rate under the directive.
In response, committee chairman Cristiana Erotokritou expressed regret because “we cannot agree in the slightest” and wondered if the Commission was in a state of “mistake” after being briefed on the 2011 and not 2016 legislation.
In response, YPOIK stated that the issue was politicized and added that “it was the European Commission that justified it with the Mavridis question, not you (parliament)”.Ms. Erotokritou said that DIKO would not support the bill because it “sacrifices thousands of Cypriot citizens and young couples” and added that DIKO’s efforts are to return to the previous regime of 200 sq.m.
He also emphasized that “if we had come up with the most rational ways and communication with the Commission and the reduced VAT administration in Cyprus, which should have been aimed primarily at Cypriots and young couples, we might not be in this today. a very difficult place.”
Speaking before the committee, DISY Vice Chairman Haris Georgiadis said that until 2020 there were no submissions from the Commission on this issue, and noted that after the end of the Cyprus investment program, the Court of Accounts considers that the adopted law does not comply with the European directive, and on November 11, 2020 Member of the European Parliament DIKO sent a question to the Commission with reference to the position of the Accounts Chamber, and the Commission replied that there was no violation.
He also noted that on April 9, 2021, the Accounts Chamber again complains that we are incompatible with the European directive, and on July 15, 2021, the European Commission sends a letter of non-compliance with the directive.
“To those who express concern today and warn that any correction will cause great distress, please let us know who caused this great distress,” he added, recalling that the bill was passed unanimously.
AKEL MP Christos Christofidis said he could present the minutes of the plenary meeting, saying that a specific AKEL amendment regarding the height of the house was voted down.
AKEL MP Andreas Kafkalias said the government’s handling of the reduced VAT rate for home purchases and construction “is a monument to negligence, inadequacy and expediency.”
The government, he said, is once again dragging Cyprus along, damaging its credibility and holding democracy accountable in a European Commission trial. “Otherwise, the Government and Averof Neofitov speak of the moral superiority of the Government and DISY,” he said.He added that the bill presented by AKEL in 2019 is logical and documented and provides an outlet for the state and society.
Deputy Sotiris Ioannou expressed the political position of the party, according to which the tolerable living of our compatriots in their own house should not be blamed. This, he says, would be disastrous for the goals of the thousands of young couples who want to stay where they are and start a family of their own. At the same time, he said that they did not agree with the bill as it was presented and submitted their proposals to the Minister of Finance so that it would be meaningful and productive.
EDEK MP Elias Miriatnous stated that in 2016 “we all knew what we were voting for” and they had data for specific legislation. At the same time, he said that “we ourselves averted our eyes”, since it was politics that gave impetus to young couples to get their first home, but at the same time the economy was not allowed to recover.
He added that he asked the Minister to consider restoring the legislation to its original form, as it was in 2011, when there was a maximum use of the legislation on 275 sq.m. with 200 sq.m., this is a building area, so you can get 5% VAT. He expressed his hope for improvement of the bill presented during the discussions to be held with the EU.
DIPA-Democratic Forces Cooperation MP Alekos Trifonidis said the party is rejecting the government’s bill because it sees it as disastrous for young couples who want a first home.He added that they are asking the Minister of Finance to negotiate with the Commission itself to apply the transitional provisions to the new legislation that will be passed and return the 200 sqm limit. at reduced VAT with a maximum area of 275 sq.m. He added that the government should come to an agreement, dividing the purchase of either apartments or houses in multi-million dollar towers, since, according to him, what happened is beyond the power of the rest of the Cypriots.
MP from the Movement for Cooperation between Ecologists and Citizens, Stavros Papadouris, said that the 2016 decision was not unanimous and 47 voted in favor, 4 against. He stated that they are preparing an amendment with the other three parties, which they will submit, and it will concern 180 sq.m. plot of the first social purpose residence with a maximum area of 235 sq.m. and be combined with the maximum total market value of the home.
A spokesman for the Accounts Chamber said the agency contacted the Commission’s technocrats because “it was felt that it might have been misled by this omission,” explaining that the Tax Department’s correspondence relates to the 2011 law and not the law as it stands. as it was approved in 2016.