The government bill to impose a reduced VAT rate of 5% for houses with a maximum area of 140 square meters (instead of the current 200 sqm), was discussed today in the Parliamentary Committee on Finance, many members of which call for renegotiation of its provisions, introduction of transitional provisions and introduction of criteria other than area.
Many of the members linked it to the end of the Cypriot investment program, with the President of the Commission, Christiana Erotokritou, stating that "after the party of the golden passports, the bill will be paid by the middle class and the young couples".
According to a spokesman for the Ministry of Finance, the bill was submitted following an EU warning letter dated 15 September 2021, and non-compliance with the VAT directive could lead the Republic to the European Court of Justice.
According to the letter from the Commission, the reduced VAT rate of 5% violates the acquis communautaire because there are no conditions that justify the social nature of the measure, all citizens of the Republic, the EU and third countries, regardless of income and property, benefit from the measure. data, financial status of the beneficiary, their family members and the maximum total area of housing, which according to 2011 data from Eurostat in Cyprus is 141 sq.m.
Deputies expressed concern about the horizontal nature of the measure and that no transitional provisions are set so as not to negatively affect those who have made plans to acquire housing, while all professionals expressed concern about the effects of the bill on citizens, the market and the economy. .
The Audit Office, through its representative, expressed concern for the passage of the bill without a ceiling on value and without social criteria.
"A wealthy citizen buys an apartment of 200 sq.m. for € 2 million and for the first 140 sq.m., instead of paying VAT of € 266.000, he will pay VAT of € 70.000 only. "Is this social policy? Certainly not for us," he said, adding that provision should be made in the law that sets a ceiling on value and not just a ceiling on area.
A spokesman for ETEK told the commission that the increases would "probably be the tombstone for many to have a private home".
As he said, a house of 200 sqm before the pandemic could cost around € 300.0000 today there is a 15% increase in materials, which means that it costs € 360.000 and if 19% VAT is imposed in its entirety the price will increase to € 460.000. It was suggested that we return to the 2016 regime.
A representative of the Association of Architects said that the data obtained to determine the area of 140 sq.m. come from the 2011 census, while the average in Cyprus was 205 sq.m. "With 140 square meters we will not help families to get a house, we will send them to apartments," he said.
For its part, the CCCI reiterated the same concerns, but also pointed out the time of the submission of the bill, adding that in Portugal there is a zero rate for first homes. He suggested the withdrawal of the bill.
On behalf of DISY, Vice President Haris Georgiadis said that membership in the EU has not only benefits but also obligations. He also reminded that VAT is a European tax, while he pointed out that the countries that joined the EU from 2004 onwards have different obligations, despite the older member states.
He noted that in 2016 the Parliament had unanimously approved the law and added that, if since then there has been correspondence with the European Commission, the executive is also responsible. He asked for the correspondence to be submitted, while he added that DISY is open to the issue of the transitional period and the introduction of criteria, while he characterized as serious the indication for re-examination of the limit of 140 sq.m.
The Chairperson of the Committee asked the Ministry of Foreign Affairs to inform if there was any correspondence before receiving the warning letter, while she wondered if the Ministry of Foreign Affairs did not negotiate with the Commission. Also ask if there is room for a transition period or other changes.
The representative of YPOIK stated that the warning letter was answered by the Tax Superintendent, who provided information on what is valid regarding the reduced collection, while noting that it is not realistic to request an extension since Cyprus is overdue. He described it as reasonable to introduce a provision based on the value per sq.m.
"It is an unfortunate measure, which comes, not to correct pathogens, but to cover the party that took place all these years, with the result that today the bill is passed on to the next generation, the middle class and young couples." said in her statements Ms. Erotokritou.
As he said, we must bring before the Parliament a legislation that is balanced and does not mean a balanced legislation that allows a multimillionaire to buy an apartment of € 10 million 140 sq.m. and pay 5% VAT and a new couple to buy an apartment of 150 sqm to pay more.
On behalf of AKEL, Aristos Damianou said that his party had submitted a relevant bill since 2019, "which on the one hand aimed to prevent entanglement with all those who built glass towers to sell gold passports and on the other hand meet the criteria of social sensitivity for all those young couples and the wider Cypriot citizens who wanted to buy a house to house their family but the party that was going on made the dream come true ".
"That is why we will insist on our proposal, which is targeted, which refers to height per square meter, but also sets a ceiling on property values, because a property can be 80 sq.m., but when this property is apartment in the towers, you realize the value will be 2, 3 and 4 million ", he said.
On behalf of ELAM, Sotiris Ioannou said that with the bill, the dream of young people to acquire a home will remain just a dream and the acquisition of an apartment will be possible.
EDEK MP Elias Myrianthous said the party disagreed with the bill's philosophy, adding that the bill should be re-drafted and renegotiated with Brussels, and any new legislation should include a transitional period.
DIPA - Democratic Forces Cooperation MP Alekos Tryfonidis said that DIPA has many concerns and reservations about the bill and called on the Minister of Finance to renegotiate the provisions of the bill with Brussels. He also requested that the Ministry of Education and Science attend the next discussion of the issue in the Committee. "We are talking about a major political and economic issue and omissions have emerged in the discussion, as a result of which we have reached the point where we are," he added.
Finally, the MP of Ecologists Stavros Papadouris said that the bill has several economic but more social implications. "It is an opportunity to finally find the right formula to help households with housing, not to subsidize large villas that do not need any help," he concluded.