- Cyprus Property News Magazine - http://www.news.cyprus-property-buyers.com -

Reduced VAT for first-time home buyers

THE GOVERNMENT yesterday handed to the House Finance Committee its counter-offer on a legislative proposal on lower tax rates for homeowners, the outcome of which could set the tone for parliament’s acceptance of the second austerity package, which legislators have branded as inadequate.

Finance Minister Kikis Kazamias has proposed a compromise to the legislative proposal, under which 150 square metres of a residence are to be taxed at five percent VAT instead of 15 percent.

The proposal concerns homes of an area up to 388 square metres – including building additions such as covered verandas and parking space. Legislators wanted the tax relaxation to apply to 200 square metres of a residence, up from the 130 square metres currently. They say the measure will give a boost to the lagging housing market and benefit first-home buyers, like young couples.

The president had refused to sign the legislative proposal into law, and sent it back to parliament.

In presenting his counter-proposal yesterday, Kazamias nevertheless urged politicians to reconsider the size of residences affected by their legislative proposal, arguing that state coffers stand to lose some €80 million in tax refunds.

A technical point that needs to be ironed is whether applicants will be paying two separate VAT rates – five and 15 per cent, as applicable – or pay a single rate of 15 per cent for the whole house and later receive a rebate from the government.

Agreement on this legislative proposal could set the mood for how the government ‘sells’ its second batch of economic measures, which include cutbacks in the state payroll but also raising VAT from 15 to 17 per cent.

Comment

Delays in agreeing and implementing a VAT reduction will slow property sales as it is likely that those contemplating buying their first-home will not do so until the legislation has been passed.