Time zero for reduced VAT on real estate

The government and the Parliament reached an informal agreement to resolve the imposition of a reduced VAT rate of 5% for the purchase or construction of a first home

The government and the Parliament reached an informal agreement to resolve the Gordian knot, the imposition of a reduced VAT rate of 5% for the purchase or construction of a first home and, barring unforeseen circumstances, the much-discussed bill will be brought before the Plenary of the Parliament for a vote, immediately after Easter.

During their meeting yesterday, the competent minister Makis Keravnos clarified to the members of the parliamentary Finance Committee that the government cannot do anything about the issue and asked the parties to vote on the bill as it is.

He emphasized that the two-month deadline for the regulation of the issue by the Commission has expired since the middle of the previous month and the notification from the European authorities for referral to the EU court and the imposition of sanctions on our country is on the way.

The bill is scheduled to be tabled next Monday in the parliamentary Finance Committee, while it is estimated that the parties will submit amendments, among other things to increase the value of real estate that will be subject to reduced VAT, but also to increase the square meters of apartments that will receive the benefit.

According to information from StockWatch, the government does not intend to put a stop to any changes adopted by the Parliament, to increase square footage and values, as the regulation of the issue is urgent with the new letter from the Commission to impose sanctions expected very soon.

It is recalled that the bill provides for the imposition of 5% VAT on the first 170 sq.m. houses, with a total area of ​​up to 220 sq.m. and with a transaction value of up to €350 thousand, as well as for the first 90 sq.m. apartments whose total area does not exceed 110 sq.m. and their total value €200 thousand.

Speaking yesterday before the Finance Committee, Mr. Keravnos clarified that he understands the concerns, but he believes that tax measures such as the one that will be applied over time should not be based on "temporary circumstances that have led to price increases at this level ”, recalling that inflation has decreased.

"That is why I believe that without delay the Parliament should vote on the bill that is before it, so that we avoid any consequences for the state", he emphasized, noting that in its last letter in December 2022, the Commission states that it agrees with the provisions of the bill.

"But the period given to us (by the Commission) has ended in February and there is a risk that we will have some sanctions and measures", he said.

Income redistribution

In the meantime, citing the government's priorities yesterday, Mr. Keravnos reiterated his commitment to fiscal discipline and financial stability. "Whenever we get out of this context, the first to pay the price and indeed the biggest are the middle classes of society, the ordinary worker and generally the non-privileged".

Mr. Keravnos emphasized that the issue of development must be separated between GDP growth and the development of the real economy.

If the growth is at high rates and satisfies us without looking at the need to implement a redistributive mechanism so that the produced wealth is properly distributed in the economy, then we cannot talk about growth, we are talking about growth," he said, adding that the growth is necessary to enter development.

Tax reform

In this context, Mr. Keravnos said that the tax reform has already been launched, which will include, among other things, an increase in the tax-free amount, which will increase the disposable income of the lowest paid classes.

"It is something we will look into. The previous tax reform took place in 2008. We consider it necessary to proceed with another revision of the tax system. The goal is for the tax reform to be fiscally neutral, but the goal is to be an additional mechanism for a better redistribution of income, a fairer distribution of income."

Source: stockwatch.com.cy

Photo: pixabay.com

28 March 2023