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Immovable Property Tax highs & lows

A month before the deadline for paying Immovable Property Tax expired, the Cyprus government collected in excess of 100 million Euros. However a number of long-standing problems have been highlighted.

immovable property taxTHE CYPRUS government received a total of €100.25 million in Immovable Property Tax (IPT) payments from 232,300 private individuals and companies by the 30th November when the 15% discount period expired.

This compares with the €94 million that was collected by the end of the 10% discount period last year (5th November) and the €102.5 million collected by the 31st December last year.

According to a senior officer with the Inland Revenue Department 85% have paid their IPT obligations, while the tax due from the remaining 15% amounts to €28 million.

Changes to the law

Following a change in the law this year many thousands of people who have yet to receive Title Deeds paid IPT directly to the Inland Revenue Department rather than their property developer.

As property developers pay IPT at a much higher rate (up to 1.9%), this resulted in purchasers paying IPT at a much lower rate (typically 0.6%), while many with a small holiday apartment found they were exempted from paying IPT as the taxable value of their property holding fell below the €12,500 threshold at which the tax is payable.

This change in the law also benefitted property developers and 35% of those who failed to pay their IPT obligations last year have now settled their accounts.

Problems

Although the government has achieved it Immovable Property Tax revenue target of €100 million, changes in the law have resulted in a number of long-standing problems being recognised by the authorities:

Identifying foreign buyers

Although many thousands of foreign home buyers without Title Deeds paid IPT, their details have yet to be recorded on the Inland Revenue system. This is due to a problem that when a property is purchased by a foreigner, their passport number is used to identify them with the Land Registry – and the authorities have difficulty in confirming their identity if their passport has been renewed and given a different number.

This problem affects many foreign buyers, most of whom are British and who mainly bought in Paphos.

Two values for the same property!

Another major problem has come to light according to the official. In many cases the taxable values of deed-less properties calculated by property developers are different to the taxable values calculated by the authorities.

To overcome this problem the Department will propose changes to the law. These will require those selling properties without Title Deeds to send a form to the purchasers informing them of the details of the property that buyers can then use to register their purchase with the Inland Revenue Department. This will also enable the Inland Revenue to issue IPT notices to foreign purchasers who are not resident in Cyprus.

Nefarious developers

The editor has received a catalogue of complaints about nefarious developers grossly inflating the taxable values of properties. This problem came to the fore in 2008 when the Cyprus Property Action Group (CPAG) sought legal opinion on the matter – see Immovable Property Tax & Fraudulent Practices.

This ‘extortion’ continues to this day with at least one developer in Paphos inflating taxable values in the region of three times their ‘real’ taxable value.

Some developers refuse to supply purchasers with records of the amount paid as Immovable Property Tax (IPT) and a certificate showing the rate of IPT applicable to the property as required by the Interior Ministry. (Refer to this letter from the Interior Ministry).

Without these vital records purchasers face great difficulties when trying to recover legitimate overpayments of IPT from the Inland Revenue Department that their developers claim to have paid .

Readers' comments

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  • @Robert Humphreys on 2014/12/15 at 2:20 pm – The Inland Revenue has calculated your IPT liability correctly.

    Immovable Property Tax is calculated on the total 1980 values of all the properties registered in the name of the taxpayer.

  • Robert Humphreys says:

    Re property tax…The issue I have is my 3 properties are valued on the deeds under the €12,500 exemption threshold but they totalled the three together and charged the full amount on all. Two of the properties are for sale for over 6 years but very little is selling in Cyprus.

  • @James Lennon on 2014/12/15 at 11:26 am – Published an article with advice I received from a chap at the Tax Office in Nicosia – see Paying Immovable Property Tax 2014.

    This includes the email address to which your completed forms should be sent and the fact that you now have a different passport number shouldn’t affect you. More than 8,500 have read the article – many of whom (I expect) have completed and returned the forms to the email address in the article.

    Why yours should have ‘security issues’ I cannot say – maybe something in the text/attachment, malware on your computer – who knows. If you can manage to get the email delivered successfully there is no need for you to make a personal appearance.

    If you cannot get the email delivered I suggest you call into the Paphos Inland Revenue office when you move here permanently next June (You’ll need to visit the office to register yourselves anyway, so this will not be an additional burden on your time).

  • James Lennon says:

    Good Morning,

    My wife and I bought a property in Mesogi approx 8 years ago and we are like many others still waiting for our deeds. I have been following your articles on the IPT issues and have attempted unsuccessfully several times recently to register with the Inland revenue. We are currently still resident in the UK and hoping to move to Cyprus permanently in June 2015.

    On each occasion my email application was returned with a message stating unable to deliver due to security issues. Do I have to make a personal appearance with the Revenue to register? Also as mentioned in your recent article we fall into the group who have newly reissued passports.

  • Peter Davis says:

    Without transparency come the opportunity for corruption.

    Just one example IPT.

    Those making up the figures don’t, won’t or can’t explain where they come from.

    An appeal costs money, paid to the Government, so the Government gains financially from being inept.

    I don’t know of a single area in the UK where to challenge a Government decision incurs a penalty.

    In the meantime I have found out that a GC owned villa twice the size of mine close-by has an IPT value of less than half the €304,000 that mine has been assessed at. I can only guess that the remaining GC neighbours are no way as high, but I will never know and can’t find out.

    As I had to explain to one lady in the Land Registry, it makes no difference if she doesn’t gain financially from her wrong doing, and it’s the Government who pockets the money, she knew that what she was doing was illegal in asking for excess amounts of cash for the title deeds, and then bartering for a reduce cost if I would accept the status quo.

    Corruption appears acceptable in some areas when working for the Government.

  • Rosemarie says:

    Does the Department seriously believe that people will continue to be so gullible as to buy property without title deeds now that the full extent of the Cyprus property scam is known worldwide amongst ex-pat communities. Instead of a piece of paper showing details of the property for IPT purposes, the law should be changed so a title deed is issued when full payment for the property is paid.

  • Steve R says:

    The biggest scammers in Cyprus are the Government. When they order the banks to shut down without notice to the account holders and then proceed to take money out of the accounts without permission, that is highway robbery at the highest level. What message does that send out to the rest of the business community. If you thought that the black economy was bad before then it’s going to get a whole lot worse now. Would you keep a whole lot of money in a Cyprus bank ????

  • @Mike – on 2014/12/14 at 9:17 am – Corruption exists throughout the world as those involved believe they can ‘get away with it’ and profit at the expense of others. Changes to the law may make corruption more difficult but they cannot eradicate the problem completely.

    I spent some time in Hong Kong working with the Government a couple of years after the Independent Commission Against Corruption (ICAC) was established. In the forty years since its inception the Commission has transformed the place – but corruption still goes on.

    As for the situation in Cyprus there’s an ‘interesting’ article by Hermes Solomon in today’s Sunday Mail – Bribery began with a leg of smoked ham.

    There are many honest people here – I had no problems then I bought my land from a family living in the village and built my house and I know many other people who’ve also had a trouble-free purchase.

    I’m certain that things will improve here, but it’s going to take a very long time.

  • Mike says:

    When oh when will the authorities realise that the countless amendments to the law only serves to offer another opportunity to some scam merchant to come up with another novel way of extorting and fraudulently taking money from unsuspecting and trusting buyers. I accept the amendments are written in the expectation of dealing with honest people with integrity, ethics and morals but we are so clearly not dealing with such people are we, so how much more evidence of endemic corruption and fraud do the authorities need to draft their amendments in a manner that mitigates any possible fraud. Of course issuing title at the point of sale in exchange for the money I guess is far too easy also penalties of no less than 25 years in prison with no scope for early release may make perpetrators think twice. In the meantime the scams go on and on.

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