An example of how flawed the Mediterranean island’s investment scheme was is the case of a tycoon who bought a luxurious skyrise apartment worth €14.5 million taking advantage of the reduced 5% VAT rate.
This is what the Auditor General office’s recently-released report on the mishandlings by the Cabinet which led to a significant loss of public funds shows, Philenews reports.
The report also pointed out that this case – like hundreds of others – is clearly contrary to the European VAT Directive as well.
The Directive allows member states to apply a reduced rate of VAT to housing but within the framework of a social policy.
Due to the repeal of the relevant Cypriot legislation in 2016, the implementation range of the law was and remains much wider. And as a consequence, the Commission reacted and initiated infringement proceedings against the Republic of Cyprus.
Under the current legislation in Cyprus a residence which is between 200sq.m. and 1000 sq.m. big only – and regardless of value – allows the buyer to pay reduced tax.
The report highlighted the significant loss of public funds “from the illegal use of the reduced VAT rate and the illegal naturalisation of the thousands of people who were given Cypriot citizenship as members of the investors’ families, without these persons making any investment.”
The scheme was abolished two years ago.