Latest Headlines

Immovable Property Tax debacle continues

No sooner had the Council of Ministers agreed changes to the Immovable Property Tax rates for 2013 when AKEL stepped in demanding that first residences should be exempted from this tax.

FOLLOWING numerous comments and press articles this week on the ‘notorious’ Immovable Property Tax, I’m considering changing the title of this journal to ‘Immovable Property Tax News’.

What has happened?

On Tuesday at a meeting of the Council of Ministers in Troodos, the Cabinet agreed to scrap the €75 IPT minimum payment and that those owning property whose total 1980 values are no more than €5,000 will be exempt from paying IPT.

This move was designed to “reduce injustices and the distortions of the current legislation” according to government spokesman Christos Stylianides.

On Friday the main opposition party, AKEL, said that it would resubmit an amendment to the Immovable Property Tax that will exempt the first residence from IPT.

(Neither of these amendments have been discussed by Parliament and we will have to wait until any changes to the current law are published in the Cyprus Gazette before we can assess their impact).

Complaints

Meanwhile the Inland Revenue Department has been flooded with complaints from property owners concerning the calculation of their IPT.

It seems that the owners of multiple properties are not being issued with detailed statements of how their IPT has been calculated, but a lump-sum 1980 value of their properties and the tax due.

Inland Revenue Director, George Poufos has said that “We can’t print out detailed statements for some 450,000 registered owners and mail them, that’s neither practical nor feasible at this time.”

According to a report in the Greek language newspaper Phileleftheros, those who want a detailed statement of all their properties nationwide must pay €50 fee, while those who want a breakdown for a specific district are being asked to pay €20.

In addition, many people who have recently had the 1980 value of their properties reassessed are also complaining.

Doom and gloom

As if that wasn’t enough, the ‘doom and gloom merchants’ have been spreading rumours that IPT will increase dramatically next year as the tax will be based on 2013 property values rather than 1980 values as they have been in the past.

To scotch these rumours Interior Minister Socrates Hasikos has stepped in and given his assurance that there will be absolutely no tax increases.

Readers' comments

Comments on this article are no longer being accepted.

  • Mr.M Shah says:

    I was under the impression that Cyprus is Member of EU and in Europe and is developed Country. During the last few years dealing with Solicitor, Land Office and Tax Office I have come to conclusion that it is worse than Zimbabwe which is in Africa. It is not likely to Progress in Future. The Government does not know what they are doing. Civil Servant make their own Laws. If they cannot sort Simple thing like Property Tax then I do not believe they are capable to sort any other issue.
    Manilal Shah

  • Phil says:

    @Nigel

    Thanks. Speaks volumes IF followed to the letter.

    Slight course for concern though –
    “Establish the legal basis for a mandatory annual adjustment of the property unit tax base by a competent executive authority

    Just like The Land Registry revaluing all properties). It would be interesting to see their methodology and qualification to carryout such an important project.

    Hopefully this is being conducted by reflecting “Current Market Values and Demand” and not what someone behind the desk says its worth I’ve had experience of the later, with NO recourse.

    Due Care and Diligence, Incorporating Fairness to ALL will gain respect, is that to much to ask for?

    Phil

  • @Phil – teh revised tax banks have yet to be announced. The Land Registry is currently revaluing all properties.

    Next year there will be a complete reform of Property Tax system as required by the Memorandum of Understanding (MoU):

    Implement a property price index that establishes the average property market valuation in 2013 by square meter of habitable surface and land plot. This index shall be operational to provide imputed market valuations for each non-agricultural cadastral plot [Q2 2014], in time for its application in the calculation of the immovable property tax in 2014. The index shall vary according to location and zoning as well as other building- and plot-related characteristics. Moreover, propose and implement a methodology for annual updates of such imputed market valuations;

    Implement the recurrent immovable property tax based on imputed market valuations of land plots according to a unit tax base established by this property index [Q3 2014]. The tax rates shall reflect the progressivity and revenue of the preceding property tax. For co-owned land plots, individual owners shall be taxed according to ownership proportions as provided in the cadastre;

    Establish the legal basis for a mandatory annual adjustment of the property unit tax base by a competent executive authority [Q3 2014]; and

    In order to retain a stimulus to property demand and reduce distortions in property prices, provide for an extension of the reduction in property transaction fees until 2016 [Q2 2013].”

    The MoU does not require Cyprus to get any more revenue from property taxation next year – so the tax bands will have to change to achieve the levels set out in the MoU.

  • Phil says:

    Hi Nigel

    Can you give me the link please to where a government official has or did announce that new payment bands will be introduced. As a regular follower of CPN and the Cyprus Mail I must have missed that report.

    Kind Regards

    Phil

  • Phil says:

    Hi Peter

    Sorry if you think that I am one of those scaremongering writers and I hope that all you have predicted (other than what we know for sure Re-vised property prices) will come to fruition.

    I only say what is current and stand by that. Which ever-way its painted what I was saying is that IF banding remains the same “god forbid”. Simple.

    Phil

  • @Peter Howard – Thanks for your comments.

    Unfortunately there are many scaremongers around whose brains seem to have been addled by the sun, or the Keo, or brandy sours – perhaps a combination of all three.

    They seem to have convinced themselves – and are trying to convince everyone else – that people will have to pay many thousands in IPT next year when all properties have been revalued.

    This is utterly ridiculous as it should be obvious to anyone with a smidgeon of common sense that the present payment bands will be revised to take into account the revised property valuations.

    My wife and I paid €324.00 IPT in June (including the €75 deduction we each enjoyed). If the payment bands were to remain unchanged next year, I estimate that we would be asked to pay in the region of €4,320 (more than twice that we used to pay in the UK) – and our immediate neighbour’s house, which is more than twice the size of ours, would be asked to pay around €9,500 by my calculation.

    Until this year, owners of properties whose 1980 value was no more than €120,000 were exempted from paying IPT – and in the days of the Cyprus Pound the exemption figure was CYP 100,000. This, according to the figures I have published, meant that 324,282 (96.8%) of those owning property were exempt.

    Now that virtually everyone will have to pay IPT has caused some resentment amongst those who were formally exempted.

    As for Cypriots (and others) not paying, a lawyer friend of mine referred to IPT as a ‘death tax’ because it was only paid when someone died (or when a property changed hands). The non-payment problem was exacerbated by the Inland Revenue Department who, rather than sending out tax demands, relied on those owning property to submit annual declarations.

    (I believe the bill revising the Immovable Property Tax law will be voted on tomorrow and from what I’ve heard it will get through. The ‘loony left’ (AKEL) plans to propose an amendment exempting primary residences with a 1980 value of no more than €40,000 – it will fail).

  • Peter Howard says:

    Hi Nigel

    Maybe you can help, as I am a simple person and now confused about IPT.

    Having followed this forum for some time, I noted that in the past there were non stop complaints and comments in that the system was based on 1980 values and that also many Cypriots were avoiding this tax. As I understand the current situation all properties are being revalued to 2013 values and that everybody will have to pay – both Cypriot and foreigner. Surely this is a good and positive step forward – so why are so many people complaining ?

    As I understand the situation, when the revaluation is completed, new payment bands will be introduced – again all good – yet there are people who seem to be either confused – or scaremongering who seem to think that the present payment bands will be used on the new valuations! Obviously ridiculous especially when some people seem to think that they will have to pay in excess of €5,000.

    If you take the amount of money that needs to be raised and divide it by the number of properties I have estimated that the AVERAGE payment will be in the region of €300. Obviously smaller properties and apartments will be much less. All property owners will have to pay this – not just foreigners, so again it seems obvious to me that in the present economic climate the government will not want to raise the tax too much as there would be a lot of resistance from their Cypriot voters. If you add in local taxes the average cost here in Cyprus to have a property will be about €420 – the average council tax in the UK is €1,700 – for this your rubbish bins are emptied once every 2 weeks!

    I know of people who follow forums like this who have gone to pay their IPT recently, expecting bills of hundreds or even thousands of euros – but ended up paying €75 – the cost of a good night out!

    Constructive criticism of property problems here in Cyprus is good, and hopefully will help contribute to fixing the problems – but scaremongering is not constructive to anybody, lets just stick to the facts.

  • Phil says:

    @Hi all

    Let’s not get confused. IPT is nothing like the UK council tax. Nigel was only using the UK council tax as an example. Cyprus has a similar system (banding scales) in order to work out your IPT against property value. Properties are currently 1980 values that are currently being reassessed to 2013 ready for 2014 IPT demands.

    The current banding scales will also need to be reassessed downwards, if not as Nigel said 1billion in Taxes will be collected as opposed to 75million (Troika) recommendation and IPT demands WILL be far far greater than the average owner can afford to pay.

    Cyprus has always had an IPT it was just that a very large percentage of property owners failed to register for IPT, (skipped through the net or under the radar) for whatever reason, and those in authority did not have the necessary IT available, linked to all relevant departments, in order to locate and issue IPT tax demands. THAT IS ABOUT TO CHANGE.

    IPT is a government tax on property ownership, being penalised for the privilege of owning your own house/land, and in the case of your home with no other property it appears to be a very unfair tax (renting it back from the government).

    I paid all my taxes when I made purchase of my land and now they want me to pay more, a lot lot more each year. I don’t mind paying IPT, well I do, but come on as it currently stands, hopefully this will change (downwards considerably) my IPT for next year will be €5000-€5500 PER YEAR and on a small UK pension I have no hope of paying. Taxes or no Taxes you cannot get blood out of a stone, try as you might.

  • @Costas Apacket – there isn’t an equivalent of Immovable Property Tax in the UK (unless the Tories get their way and introduce a ‘mansion tax’).

  • Costas Apacket says:

    Nigel,

    Council Tax, Community Charge, Rates or whatever you may wish to call them cover all of the municipal support costs, Parish Council, Local Council, County Council, Police, Fire Service, etc for properties in the UK.

    It would appear that in Cyprus we have a Community Charge AND an Immovable Property tax!

    Why? What are they for?

  • @Phil – Once the value of all property has been reassessed, the government will revise the tax payment bands.

    (This process is very similar to the change in the old rating system in the UK which were based on 1980 property values – and eventually replaced with Council Tax).

  • @Stuart – This is how the government has agreed to reassess the value of properties for next year’s IPT as per the Memorandum of Understanding with the troika.

    Implement a property price index that establishes the average property market valuation in 2013 by square meter of habitable surface and land plot. This index shall be operational to provide imputed market valuations for each non-agricultural cadastral plot [Q2 2014], in time for its application in the calculation of the immovable property tax in 2014. The index shall vary according to location and zoning as well as other building- and plot-related characteristics. Moreover, propose and implement a methodology for annual updates of such imputed market valuations;

    Implement the recurrent immovable property tax based on imputed market valuations of land plots according to a unit tax base established by this property index [Q3 2014]. The tax rates shall reflect the progressivity and revenue of the preceding property tax. For co-owned land plots, individual owners shall be taxed according to ownership proportions as provided in the cadastre;

  • Phil says:

    Hi both Nigel and Stuart. Both your comments are interesting. Nigel you have confirmed my last comment with the analysis carried out by Leaf Research.

    So a plot of land worth €5000 at 1980 value currently this year no IPT (If Passed). But next year 2014 its value will jump 24 fold to €120000 IPT payable “Bingo”.

    The lower end of the €5000 lets say €1000 will = €24000 IPT Payable “Bingo”

    Using the same table, In order for a property owner to be exempt IPT next year (2014) up to €5000 the value of his property @ 1980 prices would need to be – (minus) something. Mind blowing and only in Cyprus.

    Why did they waste so much time and effort or was it just to try and calm down the over-whelming complaints. As they say “You Ain’t Seen Anything Yet”.

  • Stuart says:

    @Nigel. If the table of increases is to be believed – and Leaf Research are usually reliable – then is the 3.5 fold (CPI) increase quoted by deputy land registry director Andreas Socratous in the article by George Psyllides of 7th December 2012 not still being used as the basis of the revaluation in accordance with the Troika’s MoU requirement you quote below at 1:09 pm?

    I am grateful for the extended correspondence on this topic which is of significant interest at present to all property owners in Cyprus, both native and foreign.

  • @Stuart – the 3.5% was my mistake (which I have now corrected).

    The table I published shows the increase in property values – e.g.:

    A plot of land in Nicosia that was valued at (say) €5,000 in 1980 had increased increased in value to €120,000 by the end of 2010. (a 24 fold increase).

    An apartment in Paphos that was valued at (say) €12,000 in 1980 had increased in value to €96,000 by the end of 2010 (an 8 fold increase).

    etc.

  • Stuart says:

    @Nigel. Thanks for your clarification. I was relying on the statements made to the Cyprus Mail by Christos Stylianides earlier this year which was probably not a good source to quote.

    I am not sure what the table you have published in your reply is telling us as there is no indication as to what the numbers actually represent.

    In my earlier comment of 9am today, I mentioned that the revaluation exercise is expected to increase property values by 3.5 times their current 1980 levels, not 3.5%!!

  • @Stuart – the figure of €75 million comes from the Memorandum of Understanding (MoU) with the troika, which states:

    “Ensure additional revenues from property taxation of at least 75 million by: (i) updating the 1980 prices through application of the CPI index for the period 1980 to 2012; and/or (ii) amending tax rates and/or (iii) amending value bands.”

    (There is nothing in the MoU requiring the government to collect more in property tax in 2014).

    The government has set its target higher than this to cater for delays, non-payers, etc.

    As for increases in the value of property between 1980 and now, these are significantly more than 3.5 times. Here are the results of an analysis carried out by Leaf Research:

    Cyprus property value increases 1980 - 2012

  • Phil says:

    Owners of properties whose total 1980 value is no more than €5,000 are exempted from paying IPT.

    If passed, this is another cleaver little scam in order to hood wink the none educated. Up to €5000 or less on 1980 values will pay nothing this year but next year (2014) 1980 valuations will be re-adjusted to 2013 values so €5000 becomes a lot more and so on down the line.

    More than I dislike AKEL for once and only for once I do have to agree with their submitting a proposal to exclude primary residences from being taxed.

    Phil

  • @Whirlybird Rtd – Although amendments to the Immovable Property Tax law were discussed by parliament yesterday, the House did not vote.

    The proposals were to:

    1. Remove the minimum tax payment of €75.
    2. Owners of properties whose total 1980 value is no more than €5,000 are exempted from paying IPT.
    3. Owners of properties whose 1980 value exceeds €5,000 will pay tax on their total 1980 value and will not benefit from the €5,000 exemption.

    The €5,000 exemption is not age related – it applies to everyone who owns property that has a total 1980 value of no more than €5,000.

    (I understand that AKEL submitted a proposal to exclude primary residences from being taxed).

  • Stuart says:

    @Nigel. Apologies if I’ve misunderstood the interim IPT Bill but I was under the impression that the €75 million was a ‘provisional’ amount unlikely to be fully realised in 2013 due to the limited time-frame for implementing the new legislation this year.

    The finalised Bill, I believe, provides for €125 million in revenues from IPT – €30 million collected in 2012 plus the €75 million provision for this year plus a further €20 million ‘cushion’ which I take to mean a ‘contingency’ amount for comfort purposes.

    It would appear that any shortfall in the attempt to achieve these revenues could simply be recovered by adjusting the tax bands due to be announced for 2014 when the revaluation of properties takes place, an exercise estimated to increase valuations by around 3.5 times their current 1980 levels.

  • @Whirlybird Rtd – The government debated the proposed changes to the IPT law today. I plan to publish an article tomorrow as soon as I have confirmation of their discussions and vote.

  • Whirlybird Rtd says:

    Am I thinking that the change of IPT payments take into account that the government is protecting their older citizens when they say that the 74 euro min and the pre 1980 value of property not over 5000 euro are exempt from tax?

  • @dimitri – No I wasn’t saying that.

    But if property values are updated to reflect 2013 market values AND the tax bands do not change, the government would receive close to €1 billion next year assuming that everyone paid up.

  • dimitri says:

    @Nigel, are we saying that if everyone eligible pays up this year the state would raise 1 billion?

  • dimitri says:

    Politicians are the same everywhere, anyone remember the labour party pre-election hype, no more taxes rises…..once they got in power they broke this pre – election promise, I doubt politicians in cyprus are any better….Everyone is right if prices are revised upwards then alot of people will struggle to pay, this depsite Mr.Georgiades statement on PIK1 today that the tax will be reviewed next year depending on how well things go this year in terms of the economy, so this can either mean revised upwards or downwards….

  • @Phil – the tax bands will be changed. If they were to remain as they are:

    1. I would have to pay well over €5,000/annum in Immovable Property Tax.

    2. The government would raise close to €1 billion (assuming everyone paid) from property taxation.

    3. The agreement with troika is that they need to raise an additional €75 million NOT €1 billion.

  • Phil says:

    “To scotch these rumours Interior Minister Socrates Hasikos has stepped in and given his assurance that there will be absolutely no tax increases”.

    HE IS PLAYING ON WORDS. NO TAX INCREASES ON THE % PER 1000 BUT YOU WILL BE PAYING A LOT LOT LOT MORE IPT AS THE VALUES WILL BE BASED ON 2013 AND NOT 1980. (Simple maths) Please please can someone prove me wrong

    “Doom and Gloom Merchants” I am one, who will be required to pay next year (2014) between €4000-€5000. Before any of you come back with “its a wealth tax” so you must be able to afford it. The short sharp answer is NO I cannot.

    Again Please please can someone prove me wrong

    Phil

  • Manilal Shah says:

    Worst Country. They cannot provide how Tax has been calculated. Even if you go to any Country in Africa they give you how your Tax has been calculated. Cyprus is considered as developed Country.

    Shah

  • @Keith – if you have two properties, one of them will be your first residence or primary residence. The second will be a holiday home or something similar.

    Some of my Cypriot friends have two properties – one in town is their first residence while the second is in the mountains or by the sea that they use at weekends/public holidays, etc.

  • @Stuart – the additional €75 million in property taxation is to be raised this year (2013).

    Next year Immovable Property Tax will be based on the 2013 value of a property rather than its 1980 value as at present.

    At the same time the payment bands will be revised.

  • Martyn's says:

    At least by raising these ‘doom and gloom’ rumours in these columns we seem to have flushed out an assurance that there will be ‘absolutely no tax rises’. Two ends of a ‘spectrum’. We should organise a competition to guess what the final outcome will be – and WHEN!

  • Stuart says:

    Having given his personal assurance that there will be absolutely no IPT increases in 2014, can the enigmatic Socrates Hasikos tell us how he proposes to raise the additional €75 million from property taxation that is demanded by the Troika?

    With the majority of the 352,000 owners of properties being Cypriot and almost 100% of properties on the island already having Title Deeds, it will be interesting to see what options the government intends to explore.

    To trace and prosecute those individuals who have decided to exempt themselves from any IPT liability could take years to accomplish.

  • UBoat says:

    Well ……. The usual fiasco from Cyprus, Nothing changes 1 step forward and 3 back.

    Looks like they can send detailed statements if your willing to PAY (Money talks AGAIN) Ah Well enjoy the sunshine and the KEO while you can.

    Carry on AGAIN Cyprus.

    Stin Yamas

  • Clive of Payia says:

    Why am I not surprised! I don’t think this tax will come fully into force; tax for 2013 perhaps to satify the Troika.

    So glad I didn’t rush in and pay this.

  • Basura says:

    Let’s contact a UK variety agent and get them to book these political Muppets onto the London Palladium Theatre. With the demise of the Tommy Cooper they need a good comedy act!

  • Denton Mackrell says:

    When I hear any government minister stating there will be ‘absolutely’ anything, you can bet your bottom Euro that there WILL be an increase in 2014. Remember previous ministers, such as Sylikiotis swearing blind that once a sales contract was lodged at the Land Registry it is ‘absolutely protected’?

    That’s not ‘doom and gloom’, just recognition of ministers’ proclivity for uttering reassuring falsehoods.

  • Martyn's says:

    What a complete BLAHMESS.

    So now having paid our €75 right at the start we find the Cyprus taxman owes us €16.50, plus interest?!?

    Hurrah, a few more litres of petrol – or bottles of wine!

    And the Interior Minister assures us (apparently) that there will be ‘absolutely no tax increases’.

    Well that seems ‘reassuring’ , all shout Hurrah!

    But, wait, in view of all else around IPT…..

    ……..Maybe he should have done a Bush Snr and added ‘watch my lips’

    We won’t order the Christmas wine just yet!

    As the header says – a complete ELCABED

  • Keith says:

    AKEL stepped in demanding that first residences should be exempted from this tax.

    What is meant by first residences?

    Also before the changes I believe the first 100,000CYP or 170,000 Euros was tax exempt for an individual owner?

    Regards
    Keith Cannon

  • Costas Apacket says:

    Clearly this tax should be renamed ‘Property Movable Tax’ or PMT for short!

  • The views expressed in readers' comments are not necessarily shared by the Cyprus Property News.

  • Text size

Back to top