THE House last night passed a number of laws whose enactment was a condition for the release of the fifth bailout tranche for Cyprus, including two bills empowering the taxman to seize debtors’ bank accounts and assets.
Authorities will now be able to seize tax debtors’ bank accounts, confiscate their movable assets and prevent the transfer or sale of their immovable property until the dues are paid.
Following amendments introduced by lawmakers, a person’s movable property will be confiscated or held for tax arrears of €5,000 and over, instead of the lower €2,000 threshold stipulated in the original government bill.
For tax arrears of €3,000 or more, authorities will be able to seize bank accounts and to block the alienation of immovable property; the government bill had set the threshold at €2,000.
Under another amendment, the amount to be left untouched in a debtor’s bank account – after funds have been taken to repay taxes owed – was raised from €1,000 to €2,000.
The measures are aimed at improving the state’s tax collection. A total of €526m is due to the Inland Revenue Department (IRD), of which €165m owed by just 127 persons or business entities. The €526m is the amount established as being receivable.
AKEL MP Stavros Evagorou said that in reality the taxes due come to €1bn, of which €850m is from a small number of persons, whom he claimed are the same people owing the largest amounts to banks.
DIKO chairman and MP Nicholas Papadopoulos said the legislation would help the crackdown on tax evasion, but issued a warning to tax authorities that, should they go overboard, parliament would enact new laws restricting their powers.
He also noted that whereas the state can now sequester people’s bank funds and assets, citizens owed money by the state could not do the same.
Also passed was a government bill mandating self-taxation by corporations and self-employed persons, as well as legislation specifying the deadline by which the IRD must complete tax returns to wage earners.
Parliament also approved a bill making the non-payment of taxes a criminal offence. It makes company directors personally and criminally liable for failure to pay taxes or for providing false data.
Another item was a change in the composition of the Resolution Authority for financial institutions. The governor of the Central Bank of Cyprus (CBC) and two of the CBC’s executive board members will comprise the new Resolution Authority, tasked with implementing relevant legislation, making decisions and issuing decrees or directives. To date, the Resolution Authority was comprised of the CBC governor, the finance minister and the head of the Securities and Exchange Commission.
A bill establishing Guaranteed Minimum Income has been submitted to parliament; it goes to committee early next week and is slated to be put to a vote on Thursday, as will a bill providing for the establishment of an agency in charge of settling out-of-court financial disputes. These two items must be passed by the end of the month.
@Nigel – thank you for your response at 12:35 pm.
I know that this legislation is in line with Troika requirements as referenced. However, I am unable to accept that the requirement prevents the transfer of title to a purchaser, and in particular to a purchaser who has paid in full for his or her property.
The arrangement set out in this and other legislation is tantamount to a property purchaser effectively buying the developers’/vendors’ debt without his or her knowledge. What is worse, there appears to be no viable course of legal redress to those who are caught in this trap.
The Troika should set out a road map to show how Cyprus intends to transfer property titles to those who have purchased their property and whose developers / vendors are in debt to the IRD and or lending institutions. This would go some way to alleviating the stress felt by all those stuck in the great Title Deed trap.
The current situation has all the hallmarks of developing into a real tragedy with dire economic and social consequences for those who are unable to replenish their wealth because they have retired or, in some other way, are impaired.
Again, thank you for permitting me to air my views, which I maintain are reasonable, on your website. KD.
I can think of no good legal reason why this piece of legislation continues to block the transfer of property that has been purchased in full by a buyer. It seems ludicrous that the government would want to forego the income stream that would arise from the transfer of title deeds through the payment of property transfer fees etc.
On the other hand, I can think of several business reasons why the block has been enshrined in law, foremost among them being the need by the corrupt to protect the status quo arising from the old system of asset based lending.
In respect of property transactions, Cypriots have successfully turned the concept of ownership by purchase on its head. They have achieved this legally, by discretely and deviously transferring developer/vendor debt and financial risk to purchasers.
It seems that any attempt to obtain a transfer of title deeds through Specific Performance would be futile in the light of the kind of legislation described in this article.
There are many people in Cyprus who are suffering grievously from the injustices of the property system; and many are retirees, who may never receive their title deeds in their lifetime. That this situation should exist at all, particularly in a member state of the EU, is a disgrace. KD.
@kufrahdog – Unfortunately this legislation formed part of the agreement between Cyprus and the Troika contained in the Memorandum of Understanding (section 3.6).
The statute books of Cyprus are full of legislation that is rarely, if ever, put into use. The laws summarised here seem to me to have been passed far too quickly and easily for there to be serious intentions about general and early implementation, especially considering that many of the prime targets are rich and powerful people with many powerful and influential friends in government and the civil and justice services.
As far as transfer of property is concerned, it is far more likely that the victims, i.e. the aspirant owners, who have already paid the full purchase price for their properties, will be threatened with the application of these laws if they do not agree pay the developers debts.
The transfer of Title Deeds has always been blocked if the vendor owes the IRD tax, so nothing new here.
@Chris Solomon – Currently the vendor has to prove they’ve paid Immovable Property Tax and Capital Gains Tax to the Inland Revenue. This legislation may extend that to other taxes such as Value Added Tax, Income Tax and Corporation Tax. But we will not know for sure until law is published in its entirety.
My developer gave us a bill for 100euro in regards to IPT, no billhead or proper explanation. When someone asked for a copy of original bill from taxman he refused to give a copy also would not give a proper receipt. On a visit to the tax office they stated to go back to him and ask him for these details before paying him (the law states that they cannot take money from anybody. Back to the developer (mmmm) He says he is sorry that he misunderstood so he asked what he should do, I wrote him a request for the tax outlining what should be written also how a receipt should be written and signed. So far no action on his part and no IPT paid to anyone. Is it any wonder there are millions of Euros lying out in unpaid taxes. We all know who are the crooks and the asses.!!!!!
I assume that the developers have received the monies for all properties that have been paid for in full or are being bought with serviced mortgages, therefore these should no longer be considered as asset and removed from the developers portfolio. Until this happens, and I doubt that it ever will, then all of us without title deeds are at the mercy of this government and lawyers. There is no hope that the Troika or this useless government will do anything to help, so basically, we are stuffed!!
Why on Earth do we carry on writing all these posts about the same old, same old. Why don`t we just stop ,and get on with our LIVES the best way we can. This is a CORRUPT Country we chose to live in, We cannot sell our Houses ,we will not get the Title DEEDS in a Hurry. So IF and When we do ,Rejoice and be Grateful , OH YES !! AND BE happy.
Have a nice DAY.
“Parliament also approved a bill making non-payment of taxes a criminal offence. It makes company directors personally and criminally liable for failure to pay taxes or for providing false data”.
So the ploy of either threatening to, or actually having the IRD place a memo against the beneficial owner’s property, must be slightly less attractive if the developer becomes(!) a criminal in the process.
Doubtless I’m missing some clever bit of jiggery-pokery, though!
I was wondering the same thing as Susannah.
Lets hope our interpretation is wrong.
@All – As the law has yet to be published I cannot say for sure if it will affect those who bought property and are waiting for its deeds.
Hopefully the law will be published during the week ahead and we’ll be able to put an end to the speculation. Also we do not know to which taxes the law will apply – Income Tax, Capital Gains Tax, Corporation Tax, Value Added Tax, Defence levy, Immovable Property Tax, Property Transfer Fees.
It is worth mentioning that the Inland Revenue Department will need the written approval of the Attorney General before it can seize assets or prevent the transfer or sale of immovable property.
Seems like another case of Smoke and mirrors, as it would appear that all that will happens is the same as it is now. If you have bought a property from someone that owes tax then you cannot get the title deeds until they either pay the tax, or you do!
It looks to me like these rules are set by people that have no idea of reality.
At least the tax office now have to power to seize the bank account and collect the tax, provided of course there is a bank account to seize.
Now am I getting this right. If a builder/developer completes a site of lets say 8 properties. He gets the completion certificate and then applies for the title deed, which he gets successfully. Under this law, if the builder/developer owes money to the taxman he would not be able to transfer the property to the new owner until all the money owed to the taxman has been paid. Until the transfer has taken place the properties remain a company asset.
Under this new law who ends up with the thick end of the stick ????. The PURCHASER of course. The developer just gets rid of his moveable assets, clears out his bank account and goes bankrupt.
Does this mean another thorn in the side regarding Title Deeds. Ie. If my Developer doesn’t or hasn’t paid his taxes I cannot get my Deeds?
Many people do not have the cash to pay and can not sell their properties that are mortgaged! so you put them in jail!
Would it not have been better to name the people owing one billion in back taxes and taking measures against those only; I really wonder how much money will move out of Cyprus to countries that do not have such laws after the lifting of transfer restrictions.
Oh my goodness! Does this mean that all those big Developers who have tax liabilities will not be able to transfer Title Deeds to their rightful owners until they have paid up? Please tell me I am wrong because surely this means that people will never get their Deeds?