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Developers unhappy with property tax changes

The Land and Building Developers Association has warned that the new property tax regime agreed as part of the island’s bailout conditions will threaten prospects for the sector’s recovery.

DEVELOPERS are unhappy with a new immovable property tax regime, agreed as part of the island’s bailout with the troika, saying it will jeopardise the already badly-hit sector’s prospects.

In a written statement, the Cyprus Land and Building Developers Association warned that implementation of the new regime would lead many people to sell their properties because of the high tax.

This will in turn force the value of mortgaged property down and create fresh recapitalisation needs for the banks, the developers said.

“We think that immovable property is once more used as the easy way out to cover the state’s financing needs, without considering the effects such a choice would have on the future growth of the sector and employment,” they added.

The preliminary agreement between Cyprus and international lenders provides for updating the 1980’s prices by applying the consumer price index (CPI) over 1980 to 2012 and amending tax rates for the value bands.

Until now, immovable property tax was calculated based on the value of the property on January 1, 1980.

Under the new regime, the taxable figure would be the result of multiplying the value of the property in 1980 by around 3.5 – the CPI, according to deputy land registry director Andreas Socratous.

Developers called on MPs, who will be asked to approve the changes, to also consider several other factors, which the bill appears to ignore, according to them:

The property at the disposal of developers is stock and a tool of the trade and not wealth; and the bill fails to tackle the fact that from the moment a property is sold and until a title is issued it is the developer who is obliged to pay the tax, although most developers who have not issued title deeds collect the money from people who bought homes on their properties, in many cases charging in excess of what was owed in actual taxes.

They added that their association will soon be submitting a compromise proposal on the matter.

Cyprus developers unhappy with tax changes

Readers' comments

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  • @All – the controversial bill hiking Immovable Property Tax has been temporarily withdrawn and pending a further study.

  • Whirlybird Rtd says:

    (“And still, now that the proposals have allegedly been accepted and agreement reached, developers wish to submit a compromise proposal – presumably to protect their sources of ill gotten gains and funding.”)

    As Mike says above is true but lets not forget that we are talking of a chain here, not just the developers. Until the back pocket or under the bed cash stash is stopped also the extortionate prices in the consumer stores are adjusted to meet these depressed times then nothing will change for the good of the man in the street. How many countries that get aid from other countries / sources which never fully reach the areas for it to take any real effect. The fat cats will have a way to get to it before the real problems get attended to.

  • andyp says:

    Nice to see moaning Cypriots!

    All the developers have to do to reduce their tax bill is hand over the titles to the rightful owners pay off the mortgages and stop holding sold properties as “stock”.

  • Martyn says:

    Aaaaah! Poor developers, do we feel sorry for them? They’ve, most of them, had 2+ decades of fantastic growth, using outdated property values – made good profits if they were any good as builders/developers, been assisted by a sloppy sales, legal, title system. Now they want to ‘plead poverty’, it’s only 3.45 x 1980 values, not like hotels where apparently the Cyprus government has decided to squeeze them for much, much more?

  • Mike says:

    And still, now that the proposals have allegedly been accepted and agreement reached, developers wish to submit a compromise proposal – presumably to protect their sources of ill gotten gains and funding.

  • Costas Apacket says:

    I’m not sure how ‘many people’ will sell their properties because of the ‘high tax’ because ‘many people’ have not got their Title Deeds and in addition there are not ‘many buyers’ to buy from the ‘many people’.

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