Homeowners cheated state of €16.2 mln VAT

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Over 270 people, mostly foreign investors eyeing a Cypriot passport, benefited from the reduced rate of 5% VAT for first-time home buyers instead of paying the standard 19% rate, with state coffers denied €16.2 mln in taxes.

The revelation was made by Finance Minister Constantinos Petrides, who said the state intends to collect due taxes.

He said the 275 cases were identified following proof collected from on-site checks earlier this year.

Since the beginning of October, the Tax Department has been conducting on-the-spot inspections at homes and apartments to establish whether owners were actually living there or renting them out.

He said that checks discovered that 275 homeowners were found to be ineligible for the reduced 5% and, therefore, should be charged with a 19% VAT.

More than 1,700 on-the-spot checks have been carried out in less than two months.

Petrides expressed satisfaction with the results of the checks noting the money owed will be collected.

“However, this also demonstrates an abuse of the 5% VAT scheme”.

“Mainly foreign investors who bought an apartment or house took advantage of the legislation for a reduced rate of 5% VAT but live permanently abroad and rent the property through the Airbnb platform.

“Also, Cypriots who live in Nicosia or another city bought a country house in a coastal town declaring it as their main residence, but which they rent to third parties,” said Petrides.

He pledged the checks would continue, and they would also begin on other categories of taxpayers.