Close windows for 5% reduced VAT

На Кипре хотят внести поправки в закон о пониженной 5% ставке НДС
21 October 2020 Liza Medvetskaya

AKEL seeks to correct the gaps and distortions in the implementation of the law on the reduced VAT of 5% for the construction of a first residence, following the findings of the Audit Service, according to which, Croats who naturalized as Cypriots paid low VAT, despite

They bought villas worth more than € 500 000. It is recalled that under the legal framework in Cyprus, homebuyers benefit from a reduced tax rate for the first 200 m2. Simultaneously, for the remaining square meters, they pay regular VAT, amounting to 19%. On the other hand, the European directive allows Member States to apply a reduced VAT rate for the delivery, construction, and renovation of houses in social policy alone.

Yesterday, the draft law of AKEL was discussed in the Parliament, with which the reduced tax rate will be granted according to the square meters of the property. The draft law of AKEL sets ceilings on the house's value per square meter so that the construction, expansion, and purchase of a home is subject to a reduced VAT rate. It is also proposed to benefit from the reduced VAT of 5% and the house's extension, which is done to cover the family needs that arise after the acquisition or construction of the house, provided that the conditions set by law about the area of ​​the house are met.

AKEL MP Aristos Damianou stated that social policy was implemented in Cyprus with reduced VAT to purchase tycoons' houses. The president of DISY, Averof Neophytou, called the deputies if they want to legislate to exclude only third-country citizens from this measure, something which, as he said, he will vote against. "Not in trying to close holes to open backdoors," he added. DIKO MP, Christiana Erotokritou, noted that if the reduced VAT does not apply to third countries, it will not serve its purpose. The president of EDEK, Marinos Sizopoulos, claimed that, in Limassol, apartments of 200 m2 were sold for € 13 500 000 + VAT.

A representative of the Audit Office stated that the bill corrects somewhat. However, not effectively, the requirement for a reduced rate only for social policy purposes of the state since the measure can also benefit natural persons who build or expand or acquire a house, the total value of which is unlimited, e.g., € 1 000 0000 he cited data from the Statistical Service, according to which the average cost per square meter of buildings in the private sector was € 1,014. As he said, the average cost of construction of residential buildings should be taken into account since the purpose is to limit the amount of reduced VAT in social policy cases. Alongside,

На Кипре хотят внести поправки в закон о пониженной 5% ставке НДС

In six monthly installments and without the additional charge of 10%, the government will collect VAT debts, amounting to € 300 000 000 DISY suggestions.

The DIKO law proposal aims to facilitate the payment of tax liabilities of taxpayers who have been affected by the effects caused by the coronavirus pandemic.

Specifically, the proposal of DIKO provides for VAT payment due in two equal installments, payable until November 10 and December 10, respectively, without the imposition of an additional charge of 10%, meaning that the taxable person submits the tax return on time.

At yesterday's session of the parliamentary Finance Committee, the president of DISY Averof Neophytou proposed, due to the pandemic, that the proposal be extended to six monthly installments, i.e., until April 2021.

DIKO MP and chairwoman of the Finance Committee Christiana Erotokritou accepted the changes, calling on the Parliament's services to proceed with a relevant change in the proposal.

A representative of the Ministry of Finance stated that he agrees that the VAT is paid through six equal installments. He also said that until November, value-added tax receipts of € 300 000 0000 were expected. Next Monday, the revised draft law will be put under the committee's microscope to lead to the Plenary Session of the Parliament in November.

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