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Lobby slams property tax scam

A GROUP of Paphos expat home buyers who checked with the authorities how much they should pay in Immovable Property Tax (IPT) discovered that their developer was charging them each 500 times too much annually. According to the website of the Inland Revenue Department, IPT is imposed on the value of the property as it […]

A GROUP of Paphos expat home buyers who checked with the authorities how much they should pay in Immovable Property Tax (IPT) discovered that their developer was charging them each 500 times too much annually.

According to the website of the Inland Revenue Department, IPT is imposed on the value of the property as it stood on January 1, 1980. Property worth less than €171,000 on that date is exempt from IPT. The rate of charges on the 1980 values in excess of this amount are calculated on a sliding scale from 2.5 per cent to 4.0 per cent, depending on how much the land was valued in 1980 over and above the €171,000.

However, according to the Cyprus Property Action Group (CPAG), unscrupulous developers have for years been charging home owners without title deeds huge percentages on the current value of their houses rather than on 1980 values of the total development, while only paying the state the real amounts.

The difference can run into hundreds or even thousands for each home owner and millions across the property market, CPAG said.

For example, the residents on a site developed by one of the largest developers were receiving annual demands for IPT based illegally on 50 per cent of the purchase price,” said CPAG spokesman Denis O’ Hare.

On researching the facts with the Land Registry and the Inland Revenue Department, the residents’ association discovered that the developer was charging the buyers, on average, 500 times too much! The developers falsely assure buyers that this is what they actually pay to the government on behalf of the buyers.

O’Hare said, however, that it was not always easy for people to find the correct information with government departments.

In another case, he said a couple paid €60 at the Limassol Land Registry to find out the 1980 value of their development. They were part of a group of buyers on an estate near Limassol whose developer was demanding huge amounts of IPT before he would transfer the individual title deeds.

O’Hare said the couple paid the file search fee on May 5 and have visited the Land Registry a number of times over the last five months only to be told that they could not have the information they had already paid for and that they should see their lawyer.

This failure to supply the requested information is in contravention of EU legislation,” O’Hare said.

CPAG also has a case of a widow of 83 being asked for more than €25,000 on a property bought for €62,000 some 25 years ago. If the woman was in possession of her title deeds she would not be liable for any IPT, but her deeds are still held by the developer.

(Editor’s note. See Elderly widow victim of property scam and Cyprus Immovable Property Tax Law).

In another instance, a developer asked buyers for €1,700 each for IPT when he himself was paying only €25 per owner to Inland Revenue. In yet another case, a developer was charging each buyer €600 and paying €17 per home owner to the tax department.

O’Hare said that in June this year when CPAG met the Minister of the Interior, who is responsible for the Land Registries, he assured them that they should contact him directly for any special cases.

CPAG wrote to the Minister asking for his intervention in order to obtain the requested, and paid for, information for the Limassol-based couple, but received no response to the letter.

Nothing has yet transpired, while four months later the Land Registry is still in cover-up mode,” O’Hare said.

In January this year, CPAG submitted a report to the government, which was commissioned by the former Minister of Finance on behalf of the government on the IPT issue.

We described this IPT crime with full supporting legal opinion,” said O’Hare. “Since that time, however, the government have not refuted anything in our report nor have they had the courtesy formally to respond.

CPAG considers the illegal IPT practice by developers as obtaining money under false pretences, which they say is a crime under Criminal Code 298 and punishable by five years’ imprisonment.

But when a group of home owners recently filed charges with the police in Paphos, in a “one-line response”, the Chief of Police said his investigations showed “no crime had been committed”.

To counter the lack of interest on the part of the police and the government, CPAG has prepared a comprehensive guide to IPT for all property buyers to be aware of their rights and how to deal with developers when they come asking for unwarranted huge sums of money.

The organisation said seeking advice from ‘the experts’ would only confuse home buyers when the law was actually clear. O’Hare said one so-called expert has on three different occasions publicly given three differing amounts people should pay for IPT that included “20-30 per cent of the present value“, “one third to half of the current market value“, and “a third of the value of the property when sold“.

So which is it? 20 per cent, 30 per cent, one third, a half, and on which basis – present value, sale price, or current market value?” asked O’Hare, who added that most developers charge the rate of IPT on the basis of 50 per cent of current value of a house.

The answer is simple. None of these – as our legal opinion states they are all illegal, and part of the shameful fraud by developers which has gone on for around 20 years,” he said.

With no response from the government, CPAG says it is now turning to the EU to seek justice.

Copyright © Cyprus Mail 2008

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