EARLIER today the House of Representatives voted unanimously to abolish or reduce Property Transfer Fees for a period of six months, according to a report in Stockwatch.
- For those who pay VAT on their house purchase, no transfer fees will be payable.
- For those who do not pay VAT on their purchase, property transfer fees are to be reduced by 50%.
The House also approved an amendment to the bill enabling those who submit applications under the provisions of the Town Planning Amnesty to enjoy the same benefit.
The draft law will be effective for six months, until the Island’s Government submits a full proposal to the House.
Property Transfer Fees are based on the Land Registry’s assessment of the market value of a property at its date of purchase. However, using its discretion to reassess the amount of Transfer Fees payable, the Land Registry relies on its own historical data in a way that cancels out any transfer tax benefit of a “bargain-buy”, which can result in double the expected amount being levied.
There have been many reports of the Land Registry bumping up the perceived value of properties in order to extract higher Transfer Fees to help boost state coffers. This practice, which has been labelled “State Sponsored Fleecing” in the media, has done nothing to enhance the reputation of the Island.
The bill applies to cases where a contract of sale has been lodged at the Land Registry but for whatever reason a Title Deed is not issued within six months. It will come into effect when the changes are published and is not retrospective.
Update – 13 November 2011
Although the temporary abolition/suspension of Property Transfer Fees were agreed by MPs ten days ago, nothing has been heard since.
I spoke with a lawyer in the week who is of the opinion that that the amended laws will only apply to the first sale of a property – where the first deposit of a contract of sale occurs within 6 months of the enactment of the amended laws. (If this proves to be correct, it will not benefit those whose contracts have already been deposited at the Land Registry or those buying a resale home).
However, no-one can say with any certainty if and when the changes will be implemented or to which type of sales they will apply until the legal amendments have been published in the Cyprus Government Gazette.
Stay tuned for further information.