24.04.2023
The Parliamentary Finance Committee appears to be seeking an increase in the value of property subject to the reduced 5% VAT rate, in consultation with the Ministry of Finance, subject to the consent of the European Commission.
At a closed meeting of the Finance Committee, the issue was again discussed with the chairman of the committee, MP DIKO Cristianu Erotocritus . According to him, since the introduction of the bill by the previous government until its discussion today, very important improvements have been made to the provisions of the bill.
As he told reporters, the number and circle of beneficiaries under this bill have been significantly expanded . He added that they were particularly pleased to hear from the Ministry of Finance that the value of residential real estate could be increased to 385,000 euros for houses and 220,000 euros for apartments based on the revised bill. He also noted that there could still be a slight increase in values in the bill to be presented in the plenary. He also mentioned that there is a proposal for a small increase in the area, which is currently 170 sq.m. for houses and 90 sq.m for apartments.
Commenting on DISY’s proposal to set a lower VAT cap of 5% on the value of the property, Mr. Erotokritou said that he did not agree with the proposal. He added that it might not be approved by the European Commission as some might say that it does not satisfy the social policy measure requested by the Commission as it would be universal. He noted that everything that they take into law must be approved by the European Commission.
MP from DISY Savia Orfanidou said the party had, and still has, disagreements with the government’s proposal of 5% VAT on first residences. She expressed the opinion that the division by area, as well as between apartments and private houses, will create many new and serious distortions. She referred to the DISY proposal, which is based only on the criteria of value, not being, in her words, exhaustive and absolute. “For example, the first €350,000 could be taxed at 5% VAT, and anything above that at 19%, possibly with a cap. So the measure will be simple, applicable and socially fair.”
EDEK President Marinos Sizopoulos stated that the content of the bill in its current form would lead to social inequality and possibly serious consequences for the Cypriot economy.
“Therefore, we believe that the only criterion for determining should be the square meters of real estate, and not its value. Including the value of the property in the criteria will increase the shadow economy, because the amounts issued for the purchase will be hidden so that the price can be determined in the context of the bill,” he said. He added that there would be significant revenue losses for the state, both in terms of income tax and as a result of higher prices from VAT.
He also said that price fixing would also lead to social disparity, since the same property has a different value in each region of Cyprus. In addition, the fact that there is a fluctuating factor in building material prices will allow or force price adjustments at regular intervals.
Mr. Sizopoulos stated that the Ministry of Finance should negotiate with the European Union based on the social criteria that exist in Cyprus today. Cyprus, he noted, is not a country like the rest of the EU countries, “considering that we have a 40 percent occupation, we had a large number of refugees, we are a small territorial country and, at the same time, remoteness from other European countries significantly increases cost of building a house.
Deputy Alekos Trifonidis said there was progress in the government bill to increase the cost. “Our proposal is to give an even greater increase in value by increasing building materials, that is, for the first residence, we should move to houses at 400,000 euros and apartments at 250,000 euros,” he said. At the same time, he noted that the issue of the transition period is very important and that the transition period can be regulated either by a six-month period, which will end in November from the moment the bill is adopted, or even until the end of the year (so the transition period will be 7 months). In addition, those who apply for a building permit should also be eligible for a reduced VAT rate, he said.
