The authorities of Cyprus have increased property tax

[TOP-CASA]

The authorities of Cyprus have presented the series of unpopular measures aimed at strengthening the economy, which includes increasing the tax rate on property in Cyprus.

The new law provides the reduction of the cost of real estate which is not taxable. If earlier in Cyprus real estate started to be taxed from the value of € 170 000 and above, now tax on property in Cyprus the owners of property € 120 000 and more will be required to pay.

The new scheme to calculate the tax amount will be used:

- Property in Cyprus cost from €120 001 to € 170 000 annually will be taxed at the rate of 0.4% of its value;
- Real estate worth € 170 001 to € 300 000 per year will be taxed at the rate of 0.5%;
- Property value worth € 300 001 to € 500 000 - 0.6%;
- For the real estate worth € 500 001 to € 800 000 the tax is provided at the rate 0.7%;
- All owners of property in Cyprus, worth more than € 800 001 will be required to pay 0.8% of property value annually.

Increasing property taxes, the government of Cyprus hopes to increase revenues from real estate to € 24,2 million.
However, experts of real estate market of Cyprus and its representatives don’t support government initiatives. They believe that the increase in property taxes will only worsen the situation on the market, reduce real estate sales, will increase unemployment and harm the business climate in Cyprus.

Experts of real estate market of Cyprus believe that now is the time when it’s needed to hold the market in every possible way, to help recover and to attract new investors, as some countries such as Spain, Ireland did.

 

[Nigel Howarth]

The changes to the Immovable Property Tax bands will come into effect next year.

Immovable Property Tax (IPT) is calculated on the Land Registry’s assessment of the market value of a property at 1st January 1980 and is paid annually the Inland Revenue Department. In addition, this 1980 market value is used to calculate an annual property tax payable to the Community or the Municipality in which the property is situated. Local councils have the power to raise and set these local taxes which are typically in the region of 0.15% of a property’s 1980 market value.

These changes will not affect the amount of the local property tax payable to the Community of Municipality – and they are unlikely to affect the amount of IPT paid by owners of a single property to the Inland Revenue; but they could affect those owning a number of properties. To check whether these changes will affect you, simply add the 1980 values shown on each of your Title Deeds; if the total is less than €120,000, you will not be affected.

However, these changes will undoubtedly affect a number of the Island’s property developers as they are the registered owners of property whose value runs into many millions of Euros. Some nefarious developers fraudulently demand money from those who have yet to receive their Title Deeds claiming that it is to pay their IPT and this illegal practice may continue and possibly proliferate as a result of these changes.

Cheers,

 

[Cornholio]

Update............

Government plans to earn more from property tax
Published on October 31, 2012

THE government has prepared a bill to reform immovable property taxation that will fetch it an additional €29 million per year, it emerged yesterday.

The bill, already submitted to parliament, lowers the tax-free value of immovable property from €120,000 to €40,000.

Property tax in Cyprus is currently calculated on 1980 values and it would take at least three years for a new evaluation to be carried out.

The finance ministry said this was a “paradox and an anachronism” for an EU member state, leading to huge losses in revenues and inequalities between property owners.

It is necessary and urgent for the land registry to be ordered to schedule and carry out a general evaluation of properties, the ministry said in the note that accompanied the bill.

But it was also necessary and urgent to adopt a scenario that will raise revenues without big delay, the ministry added.

This is separate from the property tax levied by municipalities.

The bill lowers the tax-free threshold to €40,000 – 1980 value – with anything above that amount taxed between €3 per thousand and €12 per thousand.

The ministry expects the change to fetch an additional €29 million.

Total revenues from property tax this year are estimated to be around €27.7 million, the ministry said.

According to land registry data cited by the finance ministry, between 1980 and 2010, the value of land plots in Cyprus rose between 14 and 27 times depending on the area, with Famagusta having the highest and Limassol the lowest.

Plots in Nicosia rose 24-fold during those three decades while those in Larnaca and Paphos rose 18 times their 1980 value.

Flat prices rose seven-fold in Famagusta, eight times in Larnaca, Limassol and Paphos, and nine times in Nicosia.

House values in Famagusta increased 10-fold between 1980 and 2010, followed by Larnaca, nine, Nicosia, eight, and Limassol and Paphos with seven.

Government plans to earn more from property tax - Cyprus Mail

 

[Nigel Howarth]

The proposed rates are as follows:

Properties with an assessed 1980 value up to €40,000 will be exempt.
From €40,000 to €120,000 – the proposed rate is 0.3%
From €120 000 to €170,000 – the proposed rate is 0.4%
From €170,000 to €300,000 – the proposed rate is 0.9%
From €300,000 to €500,000 – the proposed rate is 1.0%
From €500,000 to €800,000 – the proposed rate is 1.1%
For properties valued above €800,00 – the proposed rate is 1.2%

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. There are, apparently, many property owners with portfolios valued above €800,000 and who will be required to pay Immovable Property Tax at the maximum rate of 1.2% (€12.00/thousand).

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.

Regards,

 

[Cornholio]

Update............

Tax hike might prompt developers to sell their plots
By Poly Pantelides
Published on November 1, 2012

THE GOVERNMENT’S proposed changes to immovable property taxation may provide an incentive for property developers to sell rather than sit on land, said a lead consultant yesterday.
A bill submitted to parliament aims to reform immovable property taxation and bring in an additional €29 million for the government.
The bill proposes lowering the tax free threshold from €120,000 to €40,000 and raising the taxation rate itself on a tier basis which will range from 3.0 per thousand to 12 per thousand.
The tax – separate from that set by municipalities – is calculated on 1980 values despite big rises in the value of plots, apartments and houses. So although home owners will now be called on to pay more tax, it is property developers, and those with considerable property to their name who will be most impacted, said Pavlos Loizou, a consultant and member of the Cyprus royal institution of chartered surveyors.
According to government figures most property owners own property valued at €40,000 and less in 1980, and will not be impacted. But ten per cent of all immovable property owners, corresponding to a little over 70,000 people will now be taxed at the rate of 3.0 per thousand.
So someone with a plot of land valued in 1980 at €70,000 will be asked to pay €90.
Someone with property valued at €130,000 will be taxed €280 because the first €40,000 is tax free, the next €80,000 is taxed at 3.0 per thousand and corresponds to €240 and the remaining €10,000 which is over the €120,000 tier is taxed at 4.0 per thousand and is an additional €40.
A property developer with land worth €1.2 million will pay €11,700.
This is because taxation jumps at €170,001 to 9.0 per thousand and then again at €300,001 to 10 per thousand. Between €500,001 and €800,000 the rate is 11 per thousand and for any amounts over that it is 12 per thousand.
There are about 3,500 people with property valued at over €300,000 and about 1,000 with property valued at €800,000, according to the finance ministry.
Loizou said that some may not have liquidity to pay taxes but he hailed the fact that some property developers will have an incentive to sell. “Anyone who buys property will have an incentive to do something with it rather than let it sit,” he said.
“Look at Nicosia with its empty plots,” Loizou said.
Having property in the heart of a city and not doing anything with it forces people to move further out and spend more time and money commuting, and forces the government to build more roads, install more street lights and the like, he said.
Be that as it may, the Green party yesterday said it was unfair that the government was proposing taxing immovable property based on 1980 values.
“Discussions… should not take place while the issue of updating the value of immoveable property remains unresolved,” the party said in an announcement.
But a new evaluation to reflect changes in the marketplace will take at least three years to carry out.
However, the finance ministry has said that it was necessary to raise revenue without major delays.

Tax hike might prompt developers to sell their plots - Cyprus Mail