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Home buyers may pay IPT before getting Title Deeds

A Cypriot MP has tabled a bill for discussion at the House Finance Committee requiring property buyers to pay Immovable Property Tax even though they do not have the Title Deeds to the property they have purchased.

DIKO MP Angelos Votsis has prepared a bill which would force property buyers to pay property tax before even getting their hands on the Title Deeds, sparing developers millions of euros as part of the new immovable property tax (IPT) regime.

Votsis tabled the bill for discussion in the House Finance Committee on Monday, kicking off discussion on the proposal, which he hopes will conclude before September, when the new IPT legal framework is expected to kick in.

The latest rules on IPT were passed by parliament over a month ago as part of the government’s commitments to the troika, stipulated in the memorandum of understanding signed to secure a €10 billion bailout.

The government said at the time that the IPT bill was a provisional one which would be replaced in the summer, once the authorities have time to prepare a replacement.

In the meantime, the current ‘provisional’ legal framework on IPT provides for the collection of around €136 million in taxes.

Under the new law, all registered owners of property will be liable to pay a minimum of €75 a year for property valued up to €12,500 by the Land Registry based on a 1980 assessment.

The new tax bands range from 0.60 per cent (for property valued up to €12,500) to 1.90 per cent (for property valued at over €3m based on 1980 prices), providing a significant increase to the previous IPT regime.

Many developers, holding on to large swathes of property for whatever reason, are concerned that the new tax will dry up any liquidity they may still have.

The draft bill tabled by Votsis basically proposes that people who bought property will be obliged by law to pay the necessary taxes once they are in possession and have use of the property, even if they do not have the Title Deed issued in their name.

This effectively will force property buyers to pay the tax on properties that they may never see the Title Deed for, if for example the developer is guilty of irregularities or illegalities on the complex or even mortgaged property that they have already sold to buyers.

The acting head of the Land Registry Cleanthis Cleanthous was quoted in yesterday’s Politis saying the proposal would likely act as a disincentive to developers to do what needs to be done to get the large number of Title Deeds pending in Cyprus issued.

The Inland Revenue Department said the proposal would create more bureaucracy, making it very difficult for the department to distinguish which property buyers who submitted a Deed of sale to the land registry were actually in possession of and using the property in question.

For his part, Votsis told the Cyprus Mail yesterday that the IPT regime was already failing to act as an incentive to developers to sort out the Title Deeds fiasco, even though the new regime has yet to be implemented.

While acknowledging that very often it was the developers causing delays in issuing the Title Deeds of homes already paid for, he said: “Yes, but this (new IPT regime) is not the way to make the developer cooperate.

“We need to come up with better ways to put pressure on developers, as this won’t work,” he said.

The MP argued that if a person buys property from a developer today, until ownership is transferred, the developer has to pay the IPT.

Since the property is part of a larger sum, the developer pays much more in IPT than the single buyer of one unit would, as he’s put in a higher tax band.

However, when the Title Deed is ready to be issued, the developer forces the buyer to pay the higher tax before handing over the Deed. The buyer then has the right to apply to the tax authorities to get a rebate.

So, argued Votsis, it would make more sense to avoid all the bureaucracy and delays and higher tax bands by making the buyer, who is in possession of the property, and who has submitted a Deed of sale to the land registry responsible for paying the IPT.

“Now that the IPT is much higher, it will create a problem of liquidity for developers,” said Votsis, adding that buyers would be burdened with long procedures to secure the difference from the two tax bands from the tax authorities.

Home buyers may pay IPT before getting Title Deeds

Readers' comments

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  • Gavin Jones says:

    I would go a stage further with this latest tax wheeze and quote the following:

    “No taxation without representation.”

    This was coined during the unrest in the 13 American colonies prior to the War of Independence against the British Crown.

    Over 20% of those who live in Cyprus are indeed foreigners who don’t have the vote and are NOT ‘represented’.

  • Diane says:

    If this approved I for one will not be paying. I agree with Pippa no title deeds no tax.

  • jon frazer says:

    The manner in which some developers conduct their business, one could be forgiven for thinking that Votsis’ ridiculous proposal was already law!

  • UBoat says:

    what a load of B………s

    What are and what will the EU do about this???? Nothing as usual.

    We will all suffer on this one it has to be stopped they are taking the Mickey (I would like to use other language to describe how I feel but it won’t get through the checks) All we all want is title to our property and we pay fair TAX as we do.

    But as it is the goal of the greedy is to hold on to what they have, by not giving us Title. and at the same time try to sell the Island as a going concern to who ever is the most stupid. buyer beware!

  • kufrahdog says:

    This article describes yet another example of vested interests attempting to impose a business and legal solution on the Cypriot national property framework which is already systemically and grossly unfit for purpose.

    According to the above somewhat sketchy report, we now have DIKO MP Angelos Votsis preparing to submit a bill which will place the onus for the payment of IPT on those who have purchased property. This, indeed, would be acceptable if those who had purchased property actually had Title Deeds in their names. However, it is a step too far to suggest that those who have paid for their properties ‘and in possession and have use of the property even if they do not have Title Deeds in their name’ should pay the IPT.

    What defines ‘possession and having use of the property’? There is, perhaps, a legal argument that says that if you don’t have a Final Completion Certificate you are not ‘in possession’, even though you may be living in the property. (Remember, if you are living in your house and you don’t have a Final Completion Certificate, you are occupying the house illegally!)

    It is also a step too far to legally force those who have paid for their properties when their developer has violated planning and building laws and thus introduced infringements and or illegalities.

    Similarly it is a step too far to legally force those who have paid for their property when the developer has already mortgaged the property.

    One has to ask: is Angelos Votsis also a developer as well as being an MP? Is he making money from developers? What is in it for him? Legitimate questions to ask, don’t you think, Mr Votsis?

    There will, no doubt, be other such crazy bills in the Cypriot parliamentary system designed to tinker with the all aspects of buying, selling, owning and financing property, and to protect and advance those with vested interests. Those of us who have property issues in Cyprus live in precarious times. We would do well, in my opinion, to be proactive in defence of our interests.

  • steve says:

    Many developers, holding on to large swathes of property for whatever reason.

    The reason being is that if they hold on to properties it forms part of the company assets which in turn can be used as collateral to negotiate further developer loans. Build some more houses/flats, don’t issue completion certificates and the properties then enhance the company portfolio again. When the bubble bursts skip the island taking with you all the funds and leave the unfortunate purchasers to pick up the pieces.

    Over the last 10 years I have witnessed this on many occasions and it is still allowed to carry on.

    People are still falling for this and the only way to stop it is by educating purchasers.

  • Steve says:

    Much has been said already about incentives and disincentives for developers to pay IPT and the effect on transfer of title deeds. Now that the rates of property tax have increased 500% or more since 2011, it seems to me that one risk is that the developer will either stop paying and leave me to pay the accumulated IPT and penalties to receive my title deed when it is ready, or invoice me every year for the payment. There is nothing in the sale agreement to prevent him from doing either of these; from occupation onwards the liability for IPT rests with me. There is nothing in the agreement about the developer paying and my reimbursing him years later in order to receive my title deed.

    In other words, Mr Votsis bill is unnecessary in terms of assisting the developer. What it does is to ensure that the Cyprus tax authorities continue to receive IPT if the developers stop paying or can’t pay. In theory, the amount if IPT collected from each undivided development would be reduced so the tax man is not going to be enthusiastic. As one might expect there is no consideration of the poor buyer and his/her ability to pay, but in the eyes of some Cypriot politicians that would be the icing on the cake.

    I have said before that it is wrong for North Europeans to assume that they can understand Cypriots or that they will think the same way.

  • Ronny V says:

    An incentive for the real estate developers to actively push forward with the issuing of title deeds would be that

    (1) the developers have to pay the IPT, even at the elevated rates, until the date of actual transfer of the deeds and

    (2) they are NOT allowed under any circumstances to claim this money back from their buyers.

    But that would be too simple and logical, probably.

  • andyp says:

    If this amendment is approved it will confirm the reality of the President’s desire to solve the title deed scandal.

    Just another scam to add to the list to raise cash because they know we victims will probably pay it whilst the developers, who are liable for the tax, do not.

    When will the scams end and Cyprus sort the problems and help their victims?

    No answers required.

  • Costas Apacket says:

    I wonder if the Auditor General could tell us how the revenue collected from IPT is spent?

    Could it be spent on remunerating MP’s?

  • Andrew says:

    Is this Votsis geezer or one of his relatives a developer perchance?.

    Give homebuyers their title deeds and then issue demands for IPT. Otherwise, as Spirit of OJB suggests, give them nothing.

  • Denton Mackrell says:

    This crazy idea is just another bit of populist nonsense (in this case, in favour of the developer class) for which Cypriot politicians are so well known. It will no more fly than other crazy quick-fix suggestions to solve the current fiscal crisis e.g. mortgaging the, as yet, virtual offshore gas and the SOCs – CYTA, AEK etc – clubbing together to get a loan to avoid the Troika directed austerity measures affecting them.

    As for the exquisite nuclear Sozer option mooted by Spirit of OJ, luverley to contemplate but it would probably involve the extermination of half the population since all the prime suspects have such large extended families and networks. Hmmm. Now there’s a thought!

  • Spirit of Odd Job Bob says:

    On December 7, 2011 at 12:47 pm, OJB wrote:

    “…All the lenders and the Powers-That-Be in this society know that if they try new and what-they-believe crafty ways to extract money out of the expats here, with the vague promise that at some stage, you’ll get your deeds, MONEY WILL BE EXTRACTED. NOWHERE though do you see a total figure for the liabilities outstanding against your property cos if anyone did, we would all just hand back in the keys…

    … If we factor in penal interest rates, transfer fees, VAT, IPT, CGT, Amnesty Fines … (and still to consider is)… any property the developer has built and NOT sold (plus what he’s borrowed money for and not built!). All debts against these get lobbed together against all HIS assets (in his LIMITED LIABILITY company, not his personal stuff as we’ve all seen now), your property being one of these assets.

    … Either the bank (and all other creditors) writes off the developer’s debt (which it won’t as the thumb screw is not fully turned yet) or you eventually get repossessed… However, if anyone goes down the route of paying a single penny into any of these new-fangled money-extraction schemes, this will be not only a penny wasted but a further indication to the Powers-That-Be that a few more turns are still possible.”

    OJB then featured a rather tasteless clip from the film The Usual Suspects showing a rather brutal but EXTREMELY effective way of avoiding being blackmailed when an asset is held hostage: (http://en.wikipedia.org/wiki/Keyser_S%C3%B6ze). Ouch…

    Anyway, final line was this: “what we have to do… (is) … consider Immovable Property Assets here as lost and save as much of your remaining money as possible.”

    It hurts being so right all the time…

  • Pippa says:

    It is true, The Banana Republic of Cyprus is in another universe. If you want our money give us the title deeds. No title deeds no payment of tax and that is that!!!

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