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Property tax review gets underway

The government has appointed the accounting firm of PricewaterhouseCoopers to advise on the administration and consolidation of the various property taxes; the work should be completed in 3 months.

ACCORDING to reports in the local media, the Cyprus government has appointed PricewaterhouseCoopers (PwC) as an advisor on the formation of a single framework for the taxation of real estate.

Headquartered in London, PwC is a multinational professional services firm headquartered in London. It is the world’s second largest professional services firm, measured by 2013 revenues, and is one of the Big Four auditors along with Deloitte, Ernst & Young (EY) and KPMG.

Work should be completed in 3 months.

Meanwhile, the Cyprus Land and Building Developers Association has presented its recommendations for property tax reforms to the government. These include:

  • Individual properties should be taxed separately, based on their estimated value. (Currently, Immovable Property Tax is calculated on the total 1980 values of all the properties registered in the name of the taxpayer).
  • The amount of tax should be increased to include the payment of all the other taxes, duties and fees associated with owning a property that are levied by the Inland Revenue, municipalities, and communities together with sewerage charges, which are also based on a property’s value.
  • Those who have bought property and lodged their contracts of sale at the Land Registry for Specific Performance should also pay property tax. I.e. those who have yet to receive the deeds to a property they purchased will be liable, rather than the property’s registered owner (the developer).

The Association believes that its proposals will reduce the administrative costs of calculating and collecting taxes, which will benefit both the authorities and taxpayers.

The Association has also proposed a 10% discount on the tax payable, providing it is paid by the deadline, plus a further 5% discount if it is paid electronically.

It has also suggested that interest charged by the Inland Revenue for late payment should be reduced to 4.75% from its present level of 9% to bring it into line with other interest charges imposed by the state for late payment and hopes that the Inland Revenue will introduce payment by instalments.

Readers' comments

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  • scruffy says:

    @Nigel. Yes it is true that most contracts say that purchasers are responsible for IPT etc. However,I recall that a few years ago, the government were making all sorts of noises about purchasers living in their homes illegally because they should not have taken delivery and lived in the home till they were the legal owners. ie in possession of the title deeds. They cannot have it both ways.

    When it suits their needs we are legal owners and if it does not suit their needs we are not. There is no defense for their behaviour. They are obviously intent on rescuing the developers from the mess they themselves created and hoping that they can create a new wave of sales to the poor unsuspecting Chinese and Russian buyers who according to latest figures have invested half a billion in the last year or so.

  • Peter Davis says:

    “sewerage charges” I have a septic pit like many of those in rural areas which I pay to get emptied.

    It appears I will be paying twice.

  • Mike says:

    Ah bless, the poor developers want the buyer of homes the developer owns to be paying all due taxes. Perhaps they think that buyers should also only occupy the homes they have paid for as long as they are alive thereafter it reverts back to the developer to sell on to someone else. That should please them and eliminate the need to even think about any issuing of title deeds – there would be no point would there. I wouldn’t mind but it is nowhere near April the first, or is it?

  • @Milo – Virtually all the contracts of sale I have seen make the purchaser liable for Immovable Property Tax – and all other property-related taxes when they take delivery of a property. Here’s a typical clause:

    “The purchaser shall, as from the date of delivery of the Property, pay all taxes and rates, in respect of the property and generally all expenditure, taxes, fees and charges in relation to the property and in the event of these being charged to the vendor during the period prior to the registration of the property in the name of the purchasers.”

    Under the present system developers collect payment from purchasers, but many buyers are scammed. The Cyprus Property Action Group sought legal opinion on the matter some years ago and you can read their report at Immovable property tax & fraudulent practices.

    If, in future, those without Title Deeds pay IPT directly to the Inland Revenue Department:

    1. It will stop IPT scams being perpetrated by the nefarious property developers.

    2. It will avoid those buying property first having to pay IPT at the higher rate to the developer and then submitting a claim to the Inland Revenue Department to recover legitimate overpayments of IPT once their Title Deed has been issued.

    3. It will reduce bureaucracy – and hence its cost.

    Of course if Title Deeds were available when a property was delivered, there would be no need for these tortuous bureaucratic workarounds.

  • @Adrian – it is not necessary for a property to be registered before the EAC will supply it with electricity. All that’s needed is a building permit.

  • Di says:

    The fact is that Developers don’t have the money to pay. They are up to their eyeballs in debt due to their rampant greed at the height of the market when they were buying up land with money they didn’t have.

  • Andrew says:

    “Those who have bought property and lodged their contracts of sale at the Land Registry for Specific Performance should also pay property tax”.

    Surely that sentence infers that anyone who has lodged their contract is the rightful property owner. If so, then issue the title deeds at the same time as the tax demand.

    It is clear that the developers just want to avoid making paying their dues and the government are trying to scrape up some money from somewhere.

    Milo is right in saying don`t pay, if you don’t have your title deeds.

  • Steve.R says:

    If a developer is running up a bill with the local rates department wouldn’t this encourage him to get the issue of title deeds sorted as soon as possible. Get the property off your books as soon as you can.

  • Stuart says:

    This must surely rank as the epitome of effrontery for the Cyprus Land and Building Developers Association to present recommendations for property tax reforms which not only benefit themselves but add insult to the injury of all those who are victims of these arrogant developers’ reprehensible conduct that has caused so much misery to so many.

  • Richard says:

    Let’s hope they apply the two most important ingredients to the mix: Fairness & Common sense.

    Interesting how recently Hague & Cameron signed away the deal on military bases and now (a few days later) a UK based financial services firm win a nice juicy 3 month contract with the Cyprus government.

    I’m also unclear about what the term “Land Registry for specific performance” means? Clearly if you are in that situation – does it mean your developer (who could be sat on MASSES OF UNPAID TAX) slips their head quietly back out through the noose – but the unsuspecting (and usually impoverished) buyer (mortgaged or unmortgaged) has their head put through it instead in the form of being liable for a nice fat I.P.T tax bill as defined by the good folks at PWC?

    Is my understanding correct on this? I hope NOT!

    Should I be so – if that ISN’T a violation of human rights on a near biblical scale – then I’m a banana!

  • Adrian says:

    Hundreds of mainly Cypriot owned homes are not registered and therefore do not pay any tax. Before connecting electricity the electric authority should have proof of registration.

    The government should organize the land registry so that the valuations are done in a clear and transparent manner.

    The government have known for years what a corrupt system has been operating and yet they expect PWC to have it organized in 3 months.

    While I have every confidence in the ability of PWC you can bet your IPT that it will not come into operation for a long time.

  • Milo says:

    I seriously hope that purchasers who don’t have their TDs ( through no fault of their own ) pay absolutely nothing towards their property tax, in fact I think it would make much more sense to make the developers pay any property tax on property in their name, with no way of regaining payment !

    Watch then as magically all TDs get transferred to the real owners name! Nothing else has worked so far so let’s turn the tables while we can!

    If it wasn’t so serious, the suggestion of purchasers who aren’t given their TDs on purchase completion should pay property tax when they actually own nothing, would be laughable.

    When will the developers and others realise that real purchasers don’t give a damn what happens to developers or their money, or their loans etc, as long as purchasers are cut free from the tangle of mire they’ve innocently been put in. I think those scissors are soon to start cutting!……..

    Why can’t property values be set on a scale according to size, locations etc, as in the UK?

    Anyone with large property living in the capital or in prime front line positions to the sea pays higher, than those living in small villages with few services? Values have dropped so heavily, but at one time values were inflated by developers and a price index was compile led by an estate agent! Those valuations were then used to calculate mortgages by banks on the property!! You couldn’t make it up could you……:(

  • brian french says:

    In the case where a buyer has not yet received the Title Deeds to the property purchased (8 years now) and rates are now payable, what happens if the developer is liquidated and the buyer loses the property through no fault of his own. Does this make business sense?

    The buyer, such as myself has no idea of the solvent or insolvent position of the developer. In this case it is Leptos. I do not know the financial position of the company but must pay rates on some property I may never get Title Deeds to. Crazy set up.

  • andyp says:

    And most of all benefit the developers who have mortgaged our houses thereby preventing the issue of our title deeds. Nice one!

  • tom says:

    The tax should not be set such that “multiple owners” of a property evade payment!

  • jjames says:

    So far the developers have been one of the main causes of the present mess surrounding title deeds, property tax etc.

    Why on Earth they now think they are qualified to advise is beyond me.

    As someone waiting for Title Deeds, whose developer has consistently ignored requests for information.

  • Richard Hernaman says:

    One glaring omission to the review is surely that of who will calculate the value of a property.

    With prices falling and no benchmark to go on, how will anyone be able to come up with a formula that is fair.

    At present, the land registry is in dispute with multiple buyers as they value properties using a secret formula that seems to be made up as they go along so how can there be any audit on valuations by stakeholders.

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