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Guilty of tax evasion unless you prove otherwise

The Land Registry is effectively finding you guilty of tax evasion and defrauding the state of much-needed tax revenues if it inflates the amount you have paid for your property when calculating your property transfer fees.

IN virtually all civilised countries, the burden of proof rests with the person or organisation that lays charges against you; in other words, you are considered to be innocent until you have been proven guilty.

However in Cyprus, the reverse is true when it comes to paying your Property Transfer Fees at the Land Registry.

Using its discretionary powers to reassess Property Transfer Fees, the Land Registry relies on historical data to assess the market value of a property – and it will use that data as the basis for calculating the transfer fees to be paid by the purchaser.

The reason for the Land Registry’s reassessment, we are told, is that vendors and purchasers often under-declare the price of a property in efforts to defraud the state of much-needed tax revenues; by under-declaring the price, vendors reduce the amount of Capital Gains Tax they pay, while purchasers reduce their Property Transfer Fees. Of course for this fraud to take place both the vendor and the purchaser have to collude to deceive the authorities.

If the Land Registry considers that a purchaser has under-declared the property’s sale price, it will demand that he pays Property Transfer Fees based on their valuation (which incidentally is always higher that the declared sale price on the contract). The Land Registry is not required to say how it arrived at its valuation; the burden of proof rests with the accused (the buyer) to prove his innocence by showing that the Land Registry’s valuation is incorrect.

Strangely, the Inland Revenue Department does not re-assess the vendor’s Capital Gains Tax liability even though he must have colluded with purchasers to defraud the state.

To British property buyers, and others who have contacted me, this practice is a state sponsored rip-off and is typical of what you might find in less civilised countries in which corruption and nepotism are rife. It merely adds to the dissolution and anger felt by many who have purchased property in Cyprus and who have suffered at the hands of unscrupulous lawyers, developers and banks.

Have your say survey

IN an effort to assess the extent of the problem we are conducting a survey. If you are not Cypriot and have recently paid your Property Transfer Fees, we would like to know if you have been overcharged by the Land Registry and if so, by how much.

Please tick the appropriate button on the right under the ‘Have your say’ heading.

We shall be running this survey until the end of July. If any of your friends, relatives, acquaintances or colleagues have recently received their Title Deeds, please encourage them to take part in the survey.

Readers' comments

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  • jon frazer says:

    @ Mike 8.32. The Land Registry is disputing the veracity of figures which have been provided for use in legal documents, ie, contracts of sale, prepared under the auspices of CBA “regulated” lawyers. Therefore the L.R. is casting doubt on the integrity of the entire Cyprus legal profession.

    This isn’t the same thing as the Inland Revenue being realistic about possible dishonesty in some taxpayers personal tax assessments.

  • @Mike – thanks for your comments.

    One of the problems is that the system is not transparent; the Land Registry will not say how it arrives at its market value.

    Consider a situation where there are two identical penthouse apartments in the same block. One of these has an uninterrupted view of the sea, while the other one faces inland and looks into a block of apartments built behind it.

    The apartment with the uninterrupted view would command a higher price than the one facing inland. Would the Land Registry take this into account when assessing the apartments’ market values?

    There could be other situations where someone has been conned into paying more for a property than it is worth – or perhaps deliberately paid more if they were laundering money. This would skew the Land Registry’s data and result in others who had paid the ‘correct’ price being charged higher Property Transfer Fees.

    If an apartment had been fitted out to a very high (luxury) standard, then it would command a higher price than an identical apartment that had been fitted out cheaply. Would the Land Registry take this into account when assessing a property’s market value?

    I’m sure the heated debate on this issue will continue until there is more transparency in the way that the Land Registry operates.

  • Philos says:

    We are in a class action as our house was substantially over-valued on purchase. I am assuming that the Government will charge us what the property was valued at, not the negligent bank valuers figure!

  • Mike says:

    I have always upheld & agreed with 99% of comment on these pages & 99.9% of editorial.

    On this one occasion I must make a point. Although I agree in principle that the system is rotten, it is a fact that too many deals have utilised black money, as we know it, to expedite deals. The sales contract is deliberately under stated and Land Registry are aware of this.

    That is not to say ex-pats practise this method as the majority buy new-builds or build their own. It happens & it is not as uncommon as some might think. It has been going on for generations. Sadly of course the honest expat cops for it too. Now if each & every one of you has not partaken of the “avoid tax game”, the national sport here then you do surprise me. (I was going to add as I know a few of you & I know that not to be the case – but I will refrain!) However, perhaps not to the degree as sometimes happens.

    I guess Land Registry see this as an attempt to defraud the state but as mentioned then why not then re assess the vendors capital gain liability.

    My next point is one of order, when I was in business my income came from all corners of the globe. My personal tax assessments were such that the Inland Revenue (as they were then) often applied an estimate to my additional earnings and the tax they required as a result of that estimate and I was guilty until I could prove myself innocent. Sometimes I managed to other times I couldn’t for various reasons we need not go into in public. So even in UK you are in fact guilty until proven innocent where tax is concerned. That is when your accountant earned their fees.

    I hope this is taken in the spirit it is intended, I am probably more critical than most of the nefarious practices by government departments but on this one subject I understand why. I agree it is a state sponsored rip off however but only because everyone is tarred with the same brush & supporting evidence to explain the higher valuation is not produced. They do themselves no favours.

  • Frank says:

    @ Nigel

    In your article, you wrote: “To British property buyers, and others who have contacted me, this practice is a state sponsored rip-off and is typical of what you might find in less civilised countries in which corruption and nepotism are rife.” The lies and deception which are practised as a norm in Cyprus by many developers, many lawyers and the Cyprus government agencies lead me to the conclusion that there are NO “less civilised countries” than Cyprus in the realms of property purchase. Lies, fraud, deception are all endemic; as also are the rife corruption and nepotism which you mention.

  • Odd_Job_Bob says:

    Do you know why the tax authorities, the lawyers, the Cyprus “system” try all these things on?
    Because it works!

    I almost fell off me stool when I heard that some people have paid the lawyers for these “we can get your deeds for a price” schemes. You can bet your bottom dollar (or should I say Euro, but only the ones whose serial numbers start with an X, the others will soon be valueless) that there will be some who pay these exaggerated transfer fees…

    Good for all those who are refusing to pay for this, and all the other, “just give us some more money and we’ll get you your deeds” schemes.

    The only way to win (even though we won’t, just not lose so badly but you’ve heard me go on about this before) is to collectively NOT PAY A PENNY MORE. None of us. Starve the system – everybody out!

    Sorry, got a bit trade union, Brothers. Won’t happen again.

  • out of the frying pan into the fire says:

    Another nail in the Cyprus property coffin.

    Give them the rope and they will hang themselves.

    Short term profit for long term loss.

  • Hector says:

    Why has this come as a surprise? Was the practice of under valuing the price of the property to avoid tax almost a standard practice? Is this just a typical example of Greek tax evasion that expats have been sucked into and another example as to why the Greek economy is on the verge of collapse?

  • Dave says:

    I would ask the following. Are the tax authorities pursuing my developer, are there any intended tax enquiries. If the answer is negative, then on what grounds are they increasing the valuation.

    As stated this can only be done with both sides benefiting.

    Bring a successful case via the tax authorities and I will come back and pay any difference and only on that outcome will I accept any other figure than the sales contract. That will be my stance if and when I get to the stage of getting my deeds.

  • Johnny Cyprus says:

    Some, lucky enough to have two separate contracts with a Developer for the Land and for the Building have had PTT levied on the Land only and were not troubled by this irksome matter.

  • Robert Briggs says:

    I am not going to be ripped off, end of story !!!

  • @Denton – As far as I am aware, you cannot sue the Land Registry for defamation. You are deemed to be guilty as charged and are not given an opportunity to defend yourself.

    You can appeal the Land Registry’s decision. You can pay the increased fees under protest and ask the Land Registry to visit the property and carry out a valuation (can you see the admitting a mistake?).

    You can also get the property independently inspected and valued using a suitable qualified valuer and then lodge an appeal with the Supreme Court.

  • andyp says:

    Perhaps buyers should start to get together with their neighbours now and compile a sales register which can then be shown to Land Registry at a later date.

    OK some may feel this private info but in most countries this information is public and it is likely to be of help when you turn up at the Land Registry particularly if their demands are way off the mark.

  • Denton Mackrell says:

    I’ve heard a lot about this rather nasty practice but as my Title Deeds application is still plodding on through the labyrinthine process I will have to wait to see if the Land Registry tries it on with me.

    Apart from what appears at first sight to be a state organised fraud, the so-called appeals process seems equally rigged to ensure that the Land Registry as combined valuer, prosecutor, judge and court of appeal all-in-one can not only falsify property values but then approve them with a sham appeals process.

    If a person receives a false valuation from the Lands Registry, as you say in effect they are being accused of tax evasion and fraud without credible evidence. Do you know if it is possible to sue the Land Registry (e.g. the local Director and/or individual officials who made the false valuation and issued the papers) for defamation, for example? Can such officials be forced e.g. by a court order to show how they arrived at their ‘valuation’?

  • The views expressed in readers' comments are not necessarily shared by the Cyprus Property News.

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