M. Hadjipanayiotou: Proposed VAT law a negative for households

Implemented as is, the bill revising VAT laws currently under discussion at the House will have a negative impact on all households, Michalis Hadjipanayiotou, Chairman of the Cyprus Land and Building Developers Association and CEO at Cybarco Development Ltd, said on Wednesday.

He was addressing the 17th Real Estate & Construction Conference & Exhibition, which is taking place at the Hilton Nicosia hotel.

He reiterated his association’s warnings about the VAT bill, stressing how important it was that tax on real estate is reduced, not increased. “We expect the House to be careful with the law on primary residence VAT.” As he explained, with the new proposed rules, someone buying a flat worth €201,000 will have to pay €38,000 VAT, when now they pay around €10,000.

It is noted that the bill provides for a reduced VAT rate of 5% for the first 170 square metres of a house of a total area of 220 sq.m. worth no more than €350,000, and for the first 90 sq.m. of an apartment of a total area of 110 sq.m. with a value of up to €200,000.

“If the proposed law is implemented as is, this will impact negatively on all households,” he said.

In his opening speech, Hadjipanayiotou alluded to the current difficult conditions for the real estate sector. But as he pointed out, “we are used to it because of 2013”, referring to the economic crisis that was followed by the pandemic, abolishment of the Cyprus Investment Programme, the war in Ukraine, high inflation and increased interest rates.

Elsewhere, Hadjipanayiotou mentioned how Cyprus has gone through a complete transformation in recent years, with modern constructions and developments contributing towards improving Cypriots’ daily lives.

He also proposed the establishment of a Deputy Ministry of Development, while addressing the “elephant in the room”, which was none other than bureaucracy. He called for the law and processes to be revised and brought up to date to make it easier for developers and investors to do business.

He said the real estate sector saw a flurry of activity in 2022 which saw it record its best performance in years. However, this was accompanied by a drop in applications for building permits, which means people are more sceptical than before when it comes to developing land. “So we stress the need to accelerate the planning procedures and modernise the law,” said Hadjipanayiotou.

While welcoming the effort that has been underway to encourage more foreign companies to move their headquarters to Cyprus, he said a comprehensive policy was needed for the people who move to the island. There is currently a shortage of schools, flats and general infrastructure to accommodate these workers, he pointed out.

Referring to the trend for green buildings, Hadjipanayiotou called for more incentives and a real contribution from the state and the banks.