FOLLOWING our report earlier this month concerning a possible increase in Immovable Property Tax, the Cyprus government submitted a bill to parliament earlier today designed to raise an additional €29 million/annum in much needed state revenues.
According to the report that accompanied the bill, the island-wide revaluation of property will take three years and the interim solution proposed by the bill is to increase the tax rates based on the assessed 1980 value of property.
The proposed revised tax rates are as follows:
|
Assessed 1980 Property Value
|
Proposed Tax Rate
|
|---|---|
| Up to ?€40,000 | nil |
| From ?€40,000 to ?€120,000 | 0.30% |
| From €?120,000 to €?170,000 | 0.40% |
| From €?170,000 to €?300,000 | 0.90% |
| From ?€300,000 to €?500,000 | 1.00% |
| From ?€500,000 to ?€800,000 | 1.10% |
| More than ?€800,000 | 1.20% |
The hike in Immovable Property Tax was included in the package of measures that the government submitted to the troika last week.
It is estimated that the lowering of the threshold from the present €120,000 to €40,000 will affect many property owners who were previously exempt.
According to the bill, the economic impact will be small for the vast majority of taxpayers.
However, for the owners of multiple properties, such as property developers with large numbers of unsold properties on their books, the tax increase will amount to thousands.
According to the Ministry of Finance there are about 3,500 people with property valued at over €300,000 and about 1,000 with property valued at €800,000 or more.
Charges to Immovable Property Tax were last implemented in January this year, when the tax-free threshold was reduced from €170,000 to €120,000 and tax rates were increased.
The government said that this tax is only the beginning. “Due to the immediate need to strengthen government revenue, it is necessary and urgent to adopt a scenario that will enable the increase in government revenue from taxation of property”, it said.
A well-known local authority on property matters suspects that 50% of private buildings/houses have not been registered on the Title Deed by their owners. As a consequence many of these owners will manage to avoid paying these increased taxes.
In simple terms the Cypriot government is going to try and nail the developer for these taxes on an annual basis. If the site has been completed but still awaiting title deeds then the whole of the development still belongs to the builder. If as stated in previous comments the purchaser would be due to pay lets say 0.5 percent but because the developer through no fault of his own has a portfolio which takes him into 1.2 percent then he will try to pass this on to the purchaser before he releases the title deeds. The purchaser losses out again because of the title deeds fiasco. Only one way this is heading DOWNHILL
Some Cypriot politicians cannot think past the ends of their noses so we must do it for them. I understand there are over 40,000 title deeds outstanding to non-Cypriot buyers and more than that number to Cypriot buyers. Currently the Immovable Property Tax (IPT) is paid by the registered owner, usually a developer with a multimillion Euro portfolio of properties on which virtually all IPT is paid at the top rate, soon to be 1,2%, and reclaimed from the buyer when the title deed is eventually transferred.
I wonder how many developers will default on these payments, which will be treble what they were one year ago and leave a debt to the Cyprus Inland Revenue and how many owners will be presented with a debt they cannot pay to obtain their title deeds. Can the Cypriot tax authorities possess and sell properties if the developer defaults on the IPT payments?
On the plus side, there should be more support from the developers for early transfer of title deeds.
It never ceases to amaze me that this government can organize a bill to increase tax revenues (that will only affect people who have followed all the rules, registered their property etc and stump up the extra tax) and have it pass quickly through to be law and they have failed miserably to sort out dubious mortgages and title deeds!!
@Mike – In 1992 the land (a shade under 700m2) cost us CY£14K and the basic construction cost in 2002 was CY£105K – and we spent a further CY£50K on all the fixtures, fittings and finishes.
When we added the house to the deed, the 1980 value leapt from CY£4,400 (land only) to €60,000 (land + house).
@Kal – if the property has two registered owners (e.g. if it was purchased in joint names) then each owner’ liability would be based on half the assessed 1980 value. In this case the 1980 value of the property would need to exceed €80,000 before either owner was liable for Immovable Property Tax.
In 1980, for 40K, I could have bought the presidential palace – well, not quite but you get my point. In 1994 a large 2 bed property on an ikopethon (building plot) of just under 600m² in a pleasant and now desirable Limassol village cost us CY£36K including the land (self build). A 3 bed ready built villa just outside Protaras was CY£34K.
From what I have read and what friends have told me the 1980 value seems to be ignored anyway in favour of vastly inflated guesstimated valuations. At the end of the day the title deed will specify the value at 1 January 1980.
Somehow I see this proposal having a negative action and it certainly will not help the construction sector I feel. However at the end of the day anything is only worth what someone is prepared to pay for it and as we have witnessed there is a never ending stream of individuals with more money than sense from emerging economies in all four corners of the globe so maybe, just maybe it could just work. If nothing else it will appease the Troika.
In the case of joint ownership (most houses probably are) is the allowance €40k each?
There are many older traditional properties like mine that were assessed on 01-01-1980 at way below the equivalent of €40k. And despite current market conditions are worth considerably more….
Even in Cyprus, I think, zero doubled remains zero!
I am sure they will charge whatever they like.Then probably double it!