Building industry warns of action over new VAT law

Stefanos Evripidou
-
19

unemployed construction workers
THE NEW law on VAT in the construction sector is starving an already cash-strapped industry of liquidity at a time when bank loans have dried up, threatening to neutralise efforts towards economic growth while increasing unemployment, warned building contractors on Thursday.

Vice-president of the Cyprus Employers and Industrialists Federation (OEV) Sotos Lois yesterday called for the immediate abolition of the new VAT law implemented on March 9, warning that failure to do so will lead to the construction industry taking “dynamic measures”.

According to Lois, before March 9, building contractors would charge buyers 17 per cent VAT on a house, which would be paid in stages during construction of the property. The contractors would use that 17 per cent to pay subcontractors (electricians etc) and suppliers during the building of the house. Any leftovers would be deposited with the VAT Service.

The government then decided to change the system, scrapping the VAT that contractors would charge buyers in an effort to jumpstart the construction industry, which has seen one of the biggest downturns in revenue since the economic crisis started, resulting in thousands of unemployed.

Under the new system, the buyer does not pay VAT but the building contractor does on all supplies, such as for metal, wood, glass etc., which counts for about 30 per cent of the total costs, said Lois.

However, contractors are no longer expected to pay VAT to subcontractors after March 9, the government’s thinking being that by and large, subcontractors remember to charge VAT but tend to forget to pass it on to state coffers.

So, with the new law, building contractors do not get paid VAT but are expected to find the money to pay VAT on construction supplies which they then request back from the government every three months.

“Given the way bureaucracy works, it could take anywhere between six and nine months to get it back. This is wrong and unfair,” said Lois, who argued that the government was effectively borrowing.

He warned that many contractors will end up buying supplies from abroad or from the north using the Green Line Regulation where VAT is not charged, creating a knock-on effect for the Cypriot industries supplying bricks, aluminium, plastics, and other materials.

The new system will end up having the opposite effect of its intended purpose, creating serious cash flow problems for the industry, resulting in further layoffs, he argued.

Lois was flanked by representatives of a number of construction industry associations at the OEV offices during Thursday’s press conference.

Head of the Building Contractors Association Aristos Aristotelous said, as a result of this law, the construction industry will end up having between €150m and €200m tied up during a six-month period as contractors wait for the state to pay VAT returns owed.

Little interest in Town Planning Amnesty

Nigel Howarth
-
19

ALTHOUGH the number of Statements of Intent submitted under the provisions of the Town Planning Amnesty exceeds 11,000, there is still much room for improvement according to the Cyprus Interior Minister, Eleni Mavrou.

Speaking at the House Interior Committee on Thursday, the Minister said that between 125,000 and 130,000 Statements of Intent should have been submitted and that ”Although a large number of statements (11,000+) have been filed, this cannot be considered satisfactory”.

At the meeting, MPs discussed how public awareness of the Amnesty could be raised and Mrs Mavrou said that her ministry will pay greater attention to providing information to foreign buyers who may be unaware of its provisions.

Replying to a question about the imposition of sanctions, the minister said that her ministry placed great importance on the cooperation of the local authorities, which are responsible for planning and building control violations.

Asked whether her Ministry had considered changing the law for new buildings, Mrs Mavrou said that said that the most serious deficiencies were not in the law but rather in its implementation and monitoring.

Editor’s comment

Since the start of the millennium more than 175,000 properties have been sold – 52,000 to foreign buyers and 123,000 to local buyers. It is believed that many of these cannot be issued with Title Deeds due to planning infringements resulting from developers breaching planning laws.

However, rather than pursuing developers who have broken the law, the government is expecting those who have suffered at the hands of these law-breakers to pay to have planning infringements legitimised and then take legal action against developers to recover their costs.

Furthermore, it appears that the government has made no progress on helping those who have been duped into buying property built on mortgaged land and who face the very real threat of losing their homes if the developer fails or the bank forecloses on his loans.

Town Planning Amnesty: further extension announced

Nigel Howarth
-
10

THE government has extended the deadline by which Statements of Intent may be submitted under the provisions of the ‘Town Planning Amnesty’ laws that were introduced a year ago.

Applicants need to notify the Interior Ministry of their no later than 31st October 2012 of their intention to submit a full application under the provisions of the Amnesty. They will then have until 31st December 2014 to submit a full application.

The submission of a Statement of Intent does not commit the applicant to submit a full application. However, if a Statement of Intent has not been submitted by 31st October 2012, the right to submit a full application will be lost.

The following announcement has been published on the Interior Ministry’s website (translation):

URBAN AMNESTY

The Interior Ministry announced that the House of Representatives approved on 5/4/2012, Bill or amending Article 10D of the Regulation of Streets and Buildings Law, which concerns the Planning Amnesty as follows:

1. The expiration date for the submission of Statements of Intent is 31/10/2012.

2. The date of expiry of the period is to reduce the claim to compensation by 20% is the 31/12/2012.

3. The date of expiry of the period is to reduce the claim to compensation by 10% is the 31/12/2013.

4. The expiration date for the submission of applications to the respective building or planning authorities is 31/12/2014.

Similar arrangements have been made under Article 45A of the Town and Country Planning Act.

The revised deadline for submitting a Statement of Intent is 31st October 2012.

The ‘Town Planning Amnesty’ aims to legalise real estate property that lacks a Title Deed due to town-planning or building irregularities.

For further information on submitting a Statement of Intent, please refer to the article Town Planning Amnesty: six month extension agreed dated 8th October, 2011.

No end in sight to the collapse in property sales

Nigel Howarth
-
13

THE collapse in property sales is continuing despite price cuts and government legislation introduced last year designed to provide additional protection to consumers.

With unemployment spiralling out of control and the tightening of lending criteria by the banks, very few people have access to the funds required to purchase a property.

The general uncertainty in the Island’s economic future is also depressing local demand.

The banks are in a pitiful state and the government has said that it is ready and willing to bail them out should it become necessary. Such a move could place such an unbearable strain on the government’s resources that it may have to apply to the European Financial Stability Facility (EFSF) for a loan.

The collapse in sales also reduces taxes flowing into the government’s coffers. According to calculations carried out by the director of the Land Registry, Andreas Christodoulou, state revenues will be lower by 25%-30%. “Lower Land Registry Revenues will affect the general state revenues in 2012 as well”, he said.

During April, a total of 461 contracts for the purchase of property were deposited at Land Registry offices across the Island compared with 542 in April 2011; a fall of nearly 15% – and a drop of more than 70% on the 1,556 contracts deposited in April during the boom year of 2007.

Of the 461 contracts deposited in April, 119 (26%) were in favour of overseas buyers.

Domestic sales

With the exception of Paphos, where there was a slight increase in the number of properties sold last month compared with April 2011, sales were down in all districts. Overall, a total of 342 contracts were deposited compared with the 391 deposited in April 2011; a fall of 13%.

Source: Department of Lands and Surveys

Overseas property sales

With the exception of Limassol, where there was a slight increase in the number of properties sold last month compared with April 2011, sales were down in all districts. Overall, a total of 119 contracts were deposited compared with the 151 deposited in April 2011; a fall of 21%.

The government still has much to do to repair the Island’s tarnished reputation abroad resulting from the on-going delays in issuing Title Deeds and the actions of unscrupulous property developers.

Source: Department of Lands and Surveys

Massive gas finds off Cyprus announced in New York

Nigel Howarth
-
9

NOBLE Energy has found 35 trillion cubic feet of natural gas in the Eastern Mediterranean basin; a much larger quantity than required to cover the needs of Cyprus and Israel.

The finding was announced by the company’s CEO Charles Davidson at a function at the Cyprus US Chamber of Commerce in New York, where the Cyprus government honoured Mr Davidson and Noble.

Mr Davidson expressed the conviction that a great opportunity is opening for carrying Cypriot natural gas to many European and Asian countries and for Cyprus to improve its relations with its neighbours.

He assured that the Noble team is working in co-ordination with the government of Cyprus in drawing up a plan that will guarantee the transport of natural gas to Cyprus as soon as possible and the building of an installation that will allow exports.

In an address read at the event, President Christofias expressed the gratitude of the government and people of Cyprus to Mr Davidson and Noble Energy, underlining that the natural gas finding in Cyprus’ exclusive economic zone cannot be underestimated. It has massive geo-strategic and political importance for EU energy security as well as promoting peace and co-operation in the Eastern Mediterranean.

No respite as property slump continues in 2012

Jacqueline Agathocleous
-
3

ACCORDING to Pavlos Loizou, a board member of RICS Cyprus, the price of rent and properties have continued to drop in Cyprus during the first quarter of this year, following similar tendencies to those of the last quarter of 2011.

He said this was mainly down to the unfavourable economic climate, negative economic forecasts, lack of funding and low performance.

According to the RICS Global Commercial Property Survey, renters’ and investors’ expectations of the properties’ sector have improved in many parts of the world for the first quarter of 2012. However, most markets are continuing to note a negative tendency.

Russia, Canada, Brazil and China are stating that demand by far exceeds supply, when it comes to property sales and rentals. Hong Kong and Thailand have noted an improvement, as have the US, Malaysia and India. The three latter countries had some negative results in the previous quarter.

Apart from Germany and Poland, which have also noted an improvement in their economies and increase in rentals’ demand, the rest of the EU remains weak, said the RICS report.

“In Cyprus, property and rental prices continue to drop, mainly due to the unfavourable economic climate, the negative forecasts for the broader economy, the lack of sponsorship and the low performances,” Loizou explained. “With the simultaneous reduction in rent prices, the result is for commercial properties’ yield to range between 5.0 per cent and 6.0 per cent, which means they aren’t attractive to investors.”

Unless rents start to stabilise and performance levels exceed 7.0 to 8.0 per cent yield, Loizou said the market would continue to be in a slump. “We are going through a long period of trying to balance the rentals with the prices, which will be followed by an extended period of inaction, until the economy stabilises and starts to recover,” said Loizou.

1...489490491...695Page 490 of 695