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Concerns over taxman control in property transfers

Property transfers dependence on the payment of outstanding tax obligations are being discussed by lawmakers, with the chairman of the House Finance Committee expressing concern that it could be unconstitutional.

LAWMAKERS have voiced reservations over a bill that would stop the transfer of an individual’s last immovable property until they have paid all their taxes to the Inland Revenue department.

The House Finance Committee has asked the legal services for a ruling on a series of questions regarding the bill’s provisions, which call for a certificate issued by the inland revenue department (IRD) that all due taxes have been paid before transferring the property.

Some of the reservations concern the constitutionality of the provisions, Committee chairman Nicolas Papadopoulos said – “whether you can impose such an obligation that has nothing to do with the property, something that was judged by the Supreme Court as unconstitutional.”

Another point raised by MPs concerned rich people who owned a lot of properties and possibly owed taxes.

They would be allowed to transfer their real estate while a poor individual with a small tax debt would not be allowed to transfer their property because it was the last one.

Papadopoulos said problems might arise for banks too, as such a provision would affect the collateral held by banks.

“If the state is allowed to collect its dues first it will mean the property will have a lower value,” Papadopoulos said.

Papadopoulos said they were looking into exempting mortgages from the law but then there was a matter of also exempting sales documents already submitted to the land registry and obligations stemming from court decisions.

IRD chief Giorgos Poufos urged parties to find a solution because the situation could not go on.

Poufos said people who owed taxes moved faster and sold all their real estate before the state took action.

Concerns over taxman control in property transfers

Readers' comments

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  • Peter Davis says:

    So how many people have made a complaint of blackmail to the police?

    No sane person pays off another person’s debts unless under duress.

    It makes no difference if the demands were made with a view to gain for himself or “another” (ie the Cyprus Government) or during their employment or a robbery. The belief that Cypriot Government employees are above the law needs to be tested.

    A complaint MUST be recorded and a crime number issued. Only then will the unwarranted demands cease.

    At very least the Ombudsman needs to be involved and asked to investigate. I know I would want my money back.

  • Stuart says:

    @Nigel – You have described this bizarre practice so many times in these columns I have lost count. I don’t know of any other country where a buyer is expected to pay a developer’s taxes for him in order to gain the Title Deeds to the property being purchased and to which he or she is fully entitled.

    There is no morality, questionable or otherwise, in a situation where the Inland Revenue exercises coercion over a purchaser by refusing to legalise his or her ownership until they pay another person’s debts which, if that debtor is unable to pay anyway, there can be no hope of ever recovering, even by suing him.

    Were it not for the fact that so many folk have fallen victim to this outrage already, the now essentially obvious recommendation is to only buy privately owned property that has its Title Deeds safely in the seller’s possession. Most guides to buying property in Cyprus now carry explicit warnings to all potential property investors but, sadly, too late for many.

  • @Mike – you’re absolutely correct.

    In circumstances where the developer is either unable or unwilling to pay his taxes, those buying property are unable to secure its ownership. The only way out of this problem is for the ‘trapped’ buyer to pay the Inland Revenue the tax owed by the developer and then sue the developer to recover the money.

    In essence the victim (the buyer) has to pay for the misdemeanours of the culprit (the developer) – and then sue the culprit in the hope of recovering their money!

    There is absolutely no logic behind this approach and the morality is very questionable.

  • Mike says:

    I was unable to be issued with my title deeds by land registry until I had paid the sellers capital gains tax obligations and provided receipts to say I had. Then and only then did they agree to transfer deeds to my name. An unholy mess borne out of incompetance or unwillingness to collect taxes that are due. The whole system needs overhaul from top to bottom as in its present form it is effectively a crooks charter and open to abuse.

  • Andrew says:

    If the banks are hell bent on seizing homes from hapless buyers, then the Banks can pay these taxes. If the Banks then have their ill gotten collateral reduced then so be it.

  • @Stuart – Their ‘muddled thinking’ prevents people get their deeds. They need to start thinking out of the box.

    If I sell shares and make a Capital Gain the fact that I haven’t paid the Capital Gains Tax doesn’t prevent the transfer of the shares. The Inland Revenue sends me a bill and if I don’t pay I’m in deep doo doo.

    The current system is crazy and it looks as if they’re intent on keeping it going!

  • Steve.R says:

    Well we wouldn’t like the Banks to miss out now would we. Imagine the tax man getting his cut first ahead of the mortgage settlement. I would agree if it was a foreign national who was about to sell up up and flee the island but this arrangement would scare the banks even more and could end up with them only offering 65 percent mortgages. The housing market is already in decline, this would kill it off all together.

  • Stuart says:

    If the IRD had prosecuted those guilty of tax evasion in the first place, there would be no need for all this typical ‘muddled thinking’.

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