- Cyprus Property News Magazine - http://www.news.cyprus-property-buyers.com -

Immovable Property Tax highs & lows

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 .