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Land Registry & Property Transfer Fees

In Cyprus, Property Transfer Fees are the local equivalent of the UK’s Stamp Duty Land Tax (SDLT), is a tax that is paid by a purchaser when they buy property or land; so why are so many people complaining?

Cyprus Property Transfer FeesAN INCREASING number of people have got in touch with me recently complaining that the Land Registry has overcharged their Property Transfer Fees when they attend Land Registry offices to transfer the Title Deeds to the property they purchased to secure its legal and undisputed ownership.

In Cyprus, Property Transfer Fees are the local equivalent of the Stamp Duty Land Tax (SDLT) paid by someone buying property in England and Northern Ireland, the Land and Buildings Transaction Tax (LBTT) in Scotland and the Land Transaction Tax (LTT) in Wales – and like the property transaction taxes levied in the UK, Cyprus’ Property Transfer Fees are based on the market value of a property at its date of purchase.

The date on your contract of sale will be accepted as its date of purchase (assuming your contract was stamped and deposited at the Land Registry.) If your contract was not deposited the Land Registry may ask for payment receipts, utility bills, etc. to confirm its purchase date.

Problems in Cyprus arise because the Land Registry is required (by law) to assess the market value of a property at its date of purchase which, in an increasing number of cases according to the reports I receive, is more than the purchaser actually paid for the property.

In 20 years of advising and helping those with property issues I have only heard of one single case where the Land Registry valued the property at less than the purchaser actually paid. And in another case, where the Land Registry admitted mistakenly overcharged the purchaser, it transpired that their staff had wrongly taken the uncovered area of his property to be part of its covered area.

The Land Registry maintains historic records of property prices and it’s often reported that they use these records to assess a property’s market value. However, this is only part of the story; the Land Registry’s valuation process is shrouded in secrecy and it will not advise those who challenge their valuation how they reached their figure.

Recently purchasers who bought identical properties on the same development at identical prices within days of each other found themselves paying different Property Transfer Fees. And how the Land Registry assesses the market value of a property located where there no similar properties were sold for many years is a mystery.

In a recent case when a Cypriot examined the Title Deed he’d received from the Land Registry he discovered that the Land Registry had mistakenly registered his neighbour’s property as his.

The Land Registry is not as ‘infallible’ as some may wish believe.

Why the discrepancy?

This is where the infamous ‘brown envelopes’ come into play. Some vendors come to an arrangement with purchasers whereby they under-declare the sale price in the purchase agreement and receive the balance in cash from the purchaser. The vendor’s objective in doing this is to reduce their Capital Gains Tax liability and it will also reduce the Property Transfer Fees paid by the purchaser.

The Land Registry procedures attempt to reduce this tax evasion. But these processes and staff are not without problems and those completely innocent of attempting tax evasion often end up paying for the misdemeanours of others.

Challenging Land Registry valuations

You can try reasoning with the Director of the Land Registry office.

One purchaser who challenged the market valuation was advised by Land Registry staff that properties in the area were being revalued because the construction of a new marina and a high-end development had recently been announced. The fact that these announcements were made several years after he purchased the property and had no bearing on its market value at its date of purchase was irrelevant. (The Land Registry’s market value of his property was €50,000+ more than he actually paid for it.)

If you get nowhere reasoning with the director of the Land Registry office, you can the matter further by getting the property to valued and a report on how the valuation was assessed by a suitably qualified valuer such as a RICS Chartered Valuation Surveyor or a member of the Cyprus Association of Valuers and Property Consultants .

Your written objection together with the professional valuation has to be submitted to the Land Registry within around 40 days of its valuation.

This may result in the Land Registry reviewing its assessment of the property’s market value. However, there is no obligation on the Land Registry to accept the professional valuation or provide you with a written report supporting its own valuation. Furthermore the Land Registry’s re-assessment may result in a higher valuation and higher transfer fees.

Your lawyer may also apply to the court, but even if the court decides in your favour it may cost you more (€3,000 – €4,000) than the excess Property Transfer Fees demanded by the Land Registry.

Readers' comments

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  • Jan says:

    @Lawless; it’s not the EU, it’s Cyprus that is unfair and duplicitous. And I suspect the irony of the sentence “The law in the North of the Country falls below Council of Europe standards.” was missed by the author of your example paper.

  • embapaphos says:

    Have to agree with Nigel, land reg gets you between a rock and a hard place, and for those who went through the trapped buyers law and had some ray of hope regarding deed ownership, having to pay trumped up transfer fees was by no means palatable but another rut in the system you hit and reluctantly accept alas. Below statement by editor sums it all up.

    “the Land Registry’s valuation process is shrouded in secrecy and it will not advise those who challenge their valuation how they reached their figure”

    Flip side as I have discussed with Nigel (off topic sorry) is when you come to sell in such a case another arm of the state machine (tax authority) will come to use your ‘wrong/false’ sales agreement purchase price as lodged at the land registry as a basis to calculate your capital gains, and tax burden will be higher. Again the state comes out on top!

  • Lawlesss says:

    As usual Cyprus has done nothing to implement any FOI legislation however a draft legislation is in pending, don’t hold your breath How on earth is the EU a fair and equitable union ?

  • Peter Davis says:

    Strange that the Land Registry only ‘hit’ the buyer, usually a Brit.

    I was accused of paying under the counter and the Land Registry wanted thousands more than the contract price.

    BUT they never mentioned if that was the case that the Developer had taken a cash bung to reduce his tax costs.

    Perhaps if they went after both parties the system would be sorted sooner…as I can imagine what the Cypriot builder will tell them.

    In the end I walked out of the building with the Land Registry file to cries of “You can’t take that out of the building”, my developer came to Land Registry and the problem was solved.

    I had never made any payments under the counter. And demand of we will deduct something if you pay now, and you can’t leave the building before you’ve paid didn’t work.

    Ed: I can assure you that from the emails I receive it’s not only Brits who have this problem; it affects Cypriots and other nationalities.

  • scott stanfield says:

    Simple, anyone thinking of buying a property abroad don’t buy in Cyprus.

  • Steve says:

    Our property value for transfer fees was significantly increased on transfer of title deeds. After talking to others whose title deeds had been issued recently, we were very wary about objecting. The sort of things others had heard were

    – You must object now before you pay the transfer fee, otherwise you have agreed to it.

    – The Land Registry is under no obligation to accept external valuations.

    – If your objection is accepted, the Land Registry may decide to exclude you from the 50% discount you would otherwise receive.

    Needless to say, none of those we spoke to had objected.

    One possible cause of the problem is that when buying off-plan, the agreed price pre 2007 used to be much lower than it would have been 12-18 months later when the property was completed.

    More recently, the opposite has at times been true: when prices were falling the amounts paid for off-plan purchases were higher than on the date of completion, but there are very few references to lower than expected transfer fees.

    Ed: Property Transfer Fees are calculated on the market value of a property at its date of purchase not on the date of legal completion.

    The Land Registry cannot decide to exclude you from the 50% discount if you object (I suspect this is/was a ruse to make you cough up.)

  • Alex G Grant says:

    Am I right in saying that if vat was paid on the purchase price of the property then no transfer fees need be paid? Thanks in advance.

    Ed: That’s correct. If you paid VAT on the purchase price of the property you (currently) pay no Property Transfer Fees.

    If you did not pay VAT, Property Transfer Fees are (currently) reduced by 50%. More information by following the links in the article.

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