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Cyprus MPs lunacy in action

Lunatic decisions taken by MPs in Nicosia drove another nail into Cyprus’ once thriving property sector when they voted though the bill amending the Immovable Property Tax law for 2014.

sheer_lunacyTHERE seems to be no end to the lunatic decisions of Cypriot MPs when they voted through the bill amending the Immovable Property Tax law for 2014 at a plenary session of the House.

The ignorance, lunacy, stupidity of the bill – call it what you will – has driven yet another nail into the coffin of Cyprus’ one thriving property market. I pass all the MPs (with one exception) my wholehearted congratulations on a job well done – bravo ladies and gentlemen!

The only MP with the intellect to appreciate the consequences of the bill was Giorgos Perdikis, who voted against it. It is ‘unfortunate’ that his parliamentary colleagues failed to comprehend the consequences of their actions.

The bill proposes that Immovable Property Tax will be paid by those who have purchased property, and deposited their Contract of Sale at the Land Registry and taken delivery of the property (regardless of whether the property has been issued with its Title Deed). Property developers must have heaved a sigh of relief when they heard the news as it is they who will benefit from the changes – and who knows, they may have even petitioned the government to make these changes.

(However there is a provision in the bill that exempts those who have not obtained the Title Deed through no fault of their own; for example if the developer is insolvent.)

So, on the face of it, the purchasers of those properties whose 39,490 Title Deeds have been issued and are awaiting transfer will be required to pay Immovable Property Tax (plus, possibly, thousands more whose Title Deeds have yet to be issued); this bill is clearly unfair.

Had the bill been worded so that purchasers would be liable for tax if the Title Deed “was available for transfer”, that would have been acceptable and fair. (Although this would not include purchasers who had made illegal changes to the property, I’m sure the legal brains in Nicosia could have conjured up some appropriate wording to cover this situation.)

But as the bill currently proposes, purchasers will have to pay Immovable Property Tax irrespective of whether the property’s title is burdened by a mortgage and/or other impediments, the developer has not cleared the company’s tax debts, etc., etc., etc..

Furthermore, if the development company goes into liquidation before the transfer of title to the purchaser takes place, the purchaser can wave goodbye to the Property Tax they have paid – and even more worrying – possibly the property itself!

Anyone who buys property in Cyprus without a clean Title Deed should now be considered as suffering from a mental illness and hospitalised until they recover their senses.

Who in their right mind is going to agree to pay tax on something they don’t own and may never have the possibility of owning through no fault of their own?

Readers' comments

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  • Steve says:

    Pick up any newspaper these days and you will find the same sort of thing going on in many places – Africa, particularly S Africa and Zimbabwe, Cyprus, Belgium, most of the Middle East – it just goes on and on; the patients are in charge of the looney bin.

    We need a way to make the IPT system unworkable. I read on this web site a short time ago that the Inland Revenue had recommended that the old system based on 1980 values continue to be used, for this current year at least. For properties without title deeds, the developers have generally (over)estimated the tax, paid it and collected it back from the aspiring owners at some stage, often at issue of title deeds, when the value stamped on the deed can be used to calculate the correct IPT and the overpayment can be claimed back by the new title deed holder. I wonder what value the Inland Revenue will be using for properties without title deeds and whether this value can be challenged.

  • jon frazer says:

    Any fool can see that this is all the fault of the moon. Additionally the stress caused by having to return from the seaside to comply with the unreasonable demands of the Troika must have been almost unbearable. (I notice that the conditions of the bailout have morphed into “demands”). Be prepared for dynamic action, which will almost certainly cause some heart attacks….

    I’ll bet that you didn’t keep the Troika waiting Nigel!

  • Spirit of Odd Job Bob says:

    “The law seems very short on detail. I can see the lawyers having a field day”.
    Ker-ching!

  • Knucklehead says:

    Just when we thought the waters were safe the lunacy bites again…. But if we thought Disy would do the right thing were we the ones in cloud cuckoo land? Because there is no way the gov will risk sinking the developers any more.

  • @dimitri on 2014/07/22 at 8:20 pm – Thank you. I wonder who is going to decide the developer is at fault and how they’re going to reach that decision?

    The bill seems very short on detail. I can see the lawyers having a field day.

  • dimitri says:

    Nigel my Greek isn’t perfect but from what I have read in the greek section of the law in the link you attached

    page 3 onwards in summary says the owner of the property in which e.g apartments have been built but deeds have been issued but not transferred to buyer OR no deeds issued needs to submit to the ‘director’ the following:

    purchaser details
    sales doc ref number
    completion date of build
    transfer date of posession to purchaser
    the percentage of the plot the purchasers property takes up, and some other details

    pg 4 point 4 says that the ipt is now payable by the purchaser (this is why they want all the purchasers details from sellers i guess)

    HOWEVER on page 5 it says that point 2 to 5 (so this includes point 4 about purchasers paying the tax) are not enforced if the delay in issuing of title deeds is the owners fault (ie developers) or if the owner as a legal entity is in the process of being liquidated

    sorry if this sounds confusing I will try to clarify asap

  • dimitri says:

    Hmmm insane is too mild a word, I will try to makes some calls to the land registry and to the inland revenue to clarify this… I remember near the time the bill was to be amended a number of govt. officials making statements on the radio and TV saying that it would be unjust to lumber purchasers with IPT if it was not their fault that the title deeds had yet to be issued….(and most of the time it is not the buyers fault as it is the developers job to go through all the hoops to ensure that deeds can be issued)

    How on earth one goes about proving that it is not their fault there are no deeds and it is the developers fault is beyond me.

  • Graham on 2014/07/22 at 12:41 pm – The Land Registry is required by law to assess the value of a property at it’s date of purchase when calculating Property Transfer Fees. However, there is no obligation on them to disclose how they arrived at their calculation.

    This naturally leads to much suspicion. Charles Charalambous, who is now in Brussels wrote an excellent article on the subject a few years ago – Is a property only worth what someone will pay for it?.

  • Graham says:

    I think you find that the Inland Revenue take the purchase price as stated in the contract for calculating CGT.

    The LR calculate the transfer fee’s based on their assessment of the “current market value”.

    I have very recently bought some land and I received the title deeds in my name after 4 days.

    The LR did value the land by several thousand euro’s more than I paid but as I felt I had a good deal on the plot I was not too surprised.

  • @Phil on 2014/07/22 at 9:57 am – Thanks for the clarification. I believe the problem is that the paper files get misplace/misfiled/lost. I don’t believe the Land Registry holds these electronically.

    (I came across a case a few years ago where the Land Registry didn’t have all the documents it required. The people buying managed to get their local Muchtar to dig through the files in his office where he eventually found them).

  • @mikesharpe on 2014/07/22 at 9:20 am – If young Cypriots can afford to buy the houses, they can afford to pay the tax. The Inland Revenue will be issuing everyone required to pay Immovable Property Tax with a tax notice, regardless of their race, creed, religion, colour, gender, sexual persuasion, etc., etc., etc.

  • Phil says:

    Hi Nigel

    Firstly, I wish to record that it was never my intention to misled or confuse readers. You are of course correct in that it is the Inland Revenue Department for Capital Gains Tax that they visited as the Land Registry of course would require the tax clearance certificate before the transfer of title deeds.

    My point, though reading back I can understand the confusion, was the demand by the Inland Revenue Department was based on the information available to them with the guidance of the Land Registry.

    Once the their solicitor got involved pressure was applied to the Land Registry Department who amazingly found some additional documentation that was deposited some 20 years ago.

    Phil

  • mikesharpe says:

    We live in Frenaros young Cypriot people are buying houses all round us you speak to them they say can’t pay their IPT tax or Title Deeds so does this mean they are only going after non-Cypriots i.e. English etc.

  • @Paul Taylor on 2014/07/21 at 10:21 pm – I suggest you read the property tax amendment bill, which you can find at the bill amending the Immovable Property Tax law for 2014. The last 4 pages contain an approximate English translation.

  • Paul Taylor says:

    What exactly does “through no fault of their own” mean ?

    Since 2006 My developer has been coming out with one excuse after another as why we can’t have the deeds. The fact that I don’t have the deeds is down the the fact that they haven’t given them to me yet so does this classify as “no fault of my own” ?

  • kufrahdog says:

    jjames re yours on 21 July 2014 @ 11:09 am.

    You have a point with which I wholeheartedly agree, namely, that we who are blighted and at great financial risk arising from the Great Title Deed Scam are ploughing separate furrows, rather than coming together en masse to overturn the injustices heaped upon us by the dysfunctional Cypriot business model for the management and control of property.

    If I was ten years younger I would be willing to contribute a leadership role to the common cause but, alas, anno domnini dictates that I have just enough puff to see to my own wretched affairs. I suspect the same goes too for many other contributors to this website.

    If collectively we are to make a difference to what is happening to us on this island, then what is needed is an association of members capable of countering the wrongs from which we all suffer. Such an association should be led by a multi-disciplined ‘board’ whose members should have leadership experience in business, banking, the law, real estate management etc etc. Any volunteers?

    Pie in the sky? … perhaps, but perhaps not. In difficult times like these it is the coming together of the like-minded and the use of expertise and intellectual power that will safeguard all our interests. KD.

  • Phil on 2014/07/21 at 10:25 am – I have no idea why your neighbour went to the Land Registry to pay Capital Gains tax? He should have gone to the Inland Revenue Department, paid any Capital Gains Tax and Immovable Property Tax he owed and obtained a ‘tax clearance certificate’ that he could take to the Land Registry to demonstrate he had no outstanding taxes. (I see he got the other confirmation required from the Muchtar).

  • THE IMMOVABLE PROPERTY TAX AMENDMENT BILL 2014 WHICH HAS BEEN APPROVED BY THE DEPUTIES HAS BEEN PUBLISHED – SEE the bill amending the Immovable Property Tax law for 2014.

    THE FIRST EIGHT PAGES ARE IN GREEK – THE REMAINING FOUR PAGES CONTAIN AN APPROXIMATE ENGLISH TRANSLATION PROVIDED BY GOOGLE.

  • @aggis demetriou on 2014/07/21 at 10:22 am – I may have caused some confusion.

    In the UK, Council Tax is paid to the local District Council or Unitary Authority. The equivalent in Cyprus is the Community Tax or Municipality Tax. (In the UK, if the owner of the property is not living in it, Council Tax is paid by residents in the following order – statutory or secure tenants, people living there under a licence and other residents.)

    In Cyprus, in addition to Community Tax or Municipality Tax, property owners pay Immovable Property Tax to the Inland Revenue Department – there is no equivalent tax in the UK.

  • jjames says:

    Just looked again, as I do from time to time, at the pitifully slow progress of Lynn Guy’s petition to Panorama – I suspect now long-consigned to history. Yet here we are in a near helpless position, falling easy prey to these crooks.

    From what I’ve read occasionally in these forums/comments I suspect that, from some, the lack of support has been due to not wanting to draw attention to the sorry situation for fear of not being able to sell their property because of the resultant bad publicity. Also many owners are just “burying their heads”; not interested enough.

    BUT surely it’s now got to the stage where we have nothing much left to lose by letting ALL know exactly what is going on here.

    Media, social media, anyone who’ll listen – spread the word.

    Despite having managed to churn this out I’m metaphorically speechless at the sheer blatancy and arrogance of these people.

    May they one day get their come-uppance! In the meantime – get the word out!

  • Phil says:

    HI all, Sorry to drift away from the topic in question but my comment (report) does have a sense of Lunacy about it.

    I have reported on a number of occasions how those in Land Registry “are and will remain a law unto themselves” regardless of the outcome.

    Recently (approx a month ago) a neighbour sold their property and went to the Land Registry to pay Tax on profit. This has to be paid before the transfer of title deeds plus any outstanding IPT. They were also required to provide other documents from the local village Muchtar confirming that all village taxes and bills have been paid to date.

    None of this gave them any course for concern as they had the documents with them however the shock then hit them when they (Land Registry)demanded €17000 (yes seventeen thousand euros) in tax. This was based on selling price minus the original purchase price and then minus €85000 personal tax allowance and what is left taxed at 20%.

    So what’s the problem you might think, its coming, they of course disagreed and contacted their solicitor to deal with. After some heated exchanges, paperwork and documents flying around the demand was reduce to €1700 YES ONE THOUSAND SEVEN HUNDRED. But hold on, on the day last week when they went to pay it had been reduced again this time to €900 stating that they had found some other documents.

    You could not make it up could you.

    You of course are thinking what a great solicitor and I have to give credit where due however the bottom line here is BE VERY VERY CAREFUL IF YOU ARE IN THE UNFORTUNATE POSITION TO BE DEALING WITH “LAND REGISTRY” THEY ARE THEIR TO OBTAIN A MUCH MONEY (TAXES) AS THEY CAN LEGAL OR NOT FAIR OR UNFAIR. THEY DO NOT CARE AND HAVE NO MORALS

    Phil

  • aggis demetriou says:

    Nigel you will find in the UK they call the IPT Council tax

  • Paradox says:

    I completely and utterly agree with Nigel’s final paragraph in the piece, and indeed, would say that anyone considering purchasing property here would be dangerously exposed to a property fraud, even if title appears to be clear and unencumbered, and I state as example the many buyers who have contracts of sale that unequivocally state an absence of any impediment and yet, have later discovered that their property, or the land upon which it is built, is actually encumbered by a previously undisclosed mortgage, lien or memo, thereby rendering the contract fraudulent and the property mis-sold.

    Kufrahdog makes a good point in that a challenge against this law revision may be the way to go, however, I would add that such a move would need to be en-masse by those affected, as anything less will not succeed and will be ignored.

    There are many many people, like Karen below, who, through honesty, live their lives by doing the right thing and, when presented with an IPT demand, will pay it, even though no title deed is to hand and the property is in the name of another person (developer), and with absolute respect to Karen, and the many others like her, as long as we, as buyers, continue to pay whatever is demanded, we actually assist in perpetuating the very corruption that plagues us.

  • @Karen on 2014/07/21 at 1:38 am – If the deeds are at the Land Registry waiting for you to pay the Property Transfer Fees to secure ownership, it looks as if you will be billed by the Inland Revenue Department.

  • @aggis demetriou on 2014/07/21 at 8:48 am – There is no Immovable Property Tax in the UK.

  • aggis demetriou says:

    Why shouldn’t the occupier pay the IPT regardless if title has been passed?

    In the UK the tenant pays the IPT not the landlord, and as you know the tenant doesn’t have a title he/she only rents the property.

    I’d be only too pleased to be billed if my sales contract is lodged at the Lands office that way you wont be overcharged.

  • Karen says:

    Nigel,
    Our developer has told us our title deeds are ready, but we are not in a financial position to take them, the last email I received stated “when can you take your title deeds as my company cannot keep them” we have paid €3300 already in IPT, one of the previous comments on this thread mentioned developers going into liquidation…. and people not getting refunds or even their property… My question is, if the deeds are ready would they be lodged with the land registry automatically and therefore be ‘safe’ and would we then get a IPT tax demand directly from the tax office, which would be preferable from getting ripped off by being over charged by developer!! Thanks in anticipation

  • kufrahdog says:

    It seems that the only way to test this law would be for a purchaser who is not the registered owner to refuse to make payment of IPT and then, when charges are pressed for non-compliance, contest the issue through the District and Supreme Courts. If the latter upholds this law and finds against the purchaser, the way would then be open to take the matter to the European Court.

    Exhaust local remedies first. Bear in mind, would the cost be worth it? If you can afford to contest the principle, do it.

    Like so many laws in Cyprus to do with the management and sale of property, this is a bad law, notable for its lack of fairness, its muddled logic, its favouritism towards developers, and drafted and passed by the incompetent and corrupt – yes, and even lunatics. KD.

  • Paradox says:

    If they can’t squeeze money one way be very sure they will try another way…..what a money grabbing, uncaring, dismissive and immoral place this Island has become.

    Cheats, liars and thieves have no capacity for appreciating or doing ‘the right thing’……it’s all about the money. They have compromised the property market here to such a degree that I would suggest that any recognisable recovery will never happen.

    This latest gem just adds to the ‘joke’ that Cyprus has become, and the despicable clowns that have passed this law have, in so doing, simply deepened the Cyprus property cesspit.

    I really have seen offal in a slaughter house given more respect than property buyers on this Island.

  • Pauline Read says:

    This situation already exists in the north and the bank who now live in my villa were extremely annoyed that I had not paid the IPT on it.

    Not asking for sympathy, just telling it like it is.

  • Dunn good on 2014/07/20 at 3:14 pm – I’m sorry to hear that you (and everyone else) has been caught in this mess. I’ve been reading Mark Harpen’s report of proceedings on Facebook.

    Unfortunately you do not get an opportunity to defend a European Enforcement Order. (For those who are unaware, a European Enforcement Order is a certificate that enables judgements, court settlements and authentic instruments on uncontested claims to be recognised and enforced automatically in another Member State, without any intermediate proceedings.) Basically an uncontested court judgement made in one EU member state can be automatically enforced in another EU member state – and the defendant against whom the uncontested judgement has been made is given no opportunity to defend.

  • Spirit of Odd Job Bob says:

    Dear Nigel,
    I think Gavin’s pretty much said it all. The property market WILL resurrect in some shape or form at some stage in the future, but those who’ve enriched themselves at its expense regard its demise as simply collateral damage so just aren’t bovvered.

  • Gavin Jones says:

    Nigel.

    I believe that the answer to your question is simple.

    The MPs are ambivalent when it comes to the Cypriot property market. What they ARE keen to protect are their relationships with the developers and all that that entails so the latter more than trumps the former.

    Add into the mix the fact that the financial spin-off for the MPs’ law practices (as we know, by far the majority of MPs also happen to be lawyers), and there you have it. They’re so intertwined and party to all the excesses and underhand practices which have been part of the corrupt landscape.

    With due acknowledgement to Dante, “Abandon hope all ye who enter here.”

  • Dunn good says:

    The Alpha Bank have already started to seek first and second charges on U.K. properties. All day hearing in London on Wed. 16th against multiple defendants. So if buyers of CY properties who have a mortgage free home in the U.K. the predator is coming.

    Unfortunately in my case they will have done all their investigating at great expense for nothing as I do not have the collateral to satisfy them. They may have thrown a number of losing dice here in the U.K.

  • cab says:

    All good conmen will work endlessly to earn your confidence. Once they have earned your trust they will establish what you want to hear they will respond in dulcet tones in order to relieve you of your wealth. Then like all blood sucking parasites once they have bled your pockets they will move onto the next victim.

    The Cyprus government can see no sense in passing legislation that will help a flagging property sector that is a long way from hitting bottom. Instead they have moved on to the TROIKA and the government will pass whatever legislation is necessary in order to receive continued bail out funds (free/easy money) which they will likely never be in a position to pay back.

    I can envisage a situation where once Cyprus has bled the EEC of all available bailouts it will leave the EEC hoping that it’s off shore resources will then be it’s next phoenix like economic solution.

    Russia must seem like a very attractive prospect for the Cyprus government a country with great benefits and in need of friends. A suitable next target for a parasite with a voracious appetite. Please sit uncomfortably while you await the inevitable repossessions bill.

  • @Spirit of Odd Job Bob on 2014/07/20 at 1:36 pm – You may be correct, but why would the Deputies want to destroy the property market?

  • Spirit of Odd Job Bob says:

    Sorry to disagree with you Nigel, but as I and a few others have been saying on here for a few years now, these Deputies absolutely HAVE thought this through.

  • Deanna says:

    @ Nigel: I could feel your wrath as I read the above; a pent-up anger shared by us all, so I don’t need to say any more.

    That’s what happens when you have a government comprised – majority – of lawyers.

  • @Ronny Verhoeven on 2014/07/20 at 11:24 am – Unfortunately MPs have not thought through the potential consequences of the bill. I’m sure that many will object to paying for valid reasons – and it’s going to prevent the government achieving its revenue target while the objections are investigated by a horde of civil servants.

    Whose going to pay? Taxpayers eventually.

  • UBoat says:

    I dont know what to say on this one …. apart from we are all doomed.

    Lunacy absolute lunacy.

    So all these years I (and thousands of others) have paid my local Tax’s, electricity, water etc etc Paid the lawyers and Developers and banks. Supported the Island of Cyprus hoping to one day own a little part of paradise to be able to enjoy retirement or even live there permanently. Invested money there by visiting many times for what? For the government to turn round and say blow you we got all your money now your not having your property unless we get more, and may be even then will still not get the Title to the property and land we are all entitled to and where promised at the time of purchase.

    I’m disgusted and sickened alike that this can and dose go on. Blatant fraud and theft. Covered up by lies and deceit, spun by people who are trusted to run a country…. Ye right!

    Sorry I had more to say than I thought.

    So basically we are stuck with the properties unless we can find some fool to take it off our hands and stuck with continuing to pay money into this corrupt land to corrupt deceitful people (Not all Cypriots I hasten to Add) Damn shame as I used to love Cyprus and love going.

    I feel cheated.

    I deliberately avoided Spain when I was looking to purchase as I thought It was a safe bet here in Cyprus….
    How wrong was I ???

    Enjoy the day All.

  • Ronny Verhoeven says:

    There is another aspect to this law. The IPT has to be paid by the “real” owner, i.e. the holder of the title deed or the buyer in case a contract has been deposited with the Land Registry. Unless if this buyer can prove that he cannot have the title deed transferred in his/her name due to reasons beyond his/her responsibility.

    Any idea of the volume of bureaucracy and the number of bureaucrats that will be involved each and every year again to investigate thousands of such disputed cases?

    And who will be paying them?

  • Mike says:

    Did anyone even begin to think that the culprits would ever be held accountable. It will never happen, with or without any Troika threats the circus will go on, as will any form of re-unification or settlement talks, as will the daily bombardment of rhetoric from politicians telling anyone prepared to listen how clever they are. They will continue to promise each citizen a life of luxury, care in their latter years, the imminent transformation into millionaires for each and every man, woman and child because we have gas and oil, and a gold plated pension for everyone to retire on. Some idiot in the EU will pay for it so no problem.

    Anyone still buying property must be either seriously deranged or has escaped from a secure institution.

    The only thing that can almost be guaranteed is that the rhetoric will be designed to make each citizen thankful that our deputies have done us a massive favour and really do need to be re elected to carry on the good work. Those moaning foreigners just do not understand the Cyprus way do they? Funnily enough no one else seems to understand the Cyprus way either it seems. Co-incidence?

  • Peter Davis says:

    As the Cuban comedian said. “It could be worse you could be living in Cyprus”.

  • pils says:

    Nothing surprises me relating to issues within the lunatic asylum of the Cyprus government offices.

    All has been said before government officials, developers and lawyers sing from the same hymn book and are in bed with each other.

    Once again developers are let off the hook and we the purchasers of Cyprus property take the bait.

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