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.