A new property tax was introduced in 2021, but because of a mistake at the House, the tax didn’t actually come into effect until 2022.
It is a tax of 0.4 per cent on the sales price of properties and the party responsible for paying it is the seller.
Real estate is, in my opinion, heavily taxed and it is an easy way for any government to raise tax, since there is no easy way to avoid such a tax on property.
Another property tax at this point in time is not justified, be it that the reasoning behind this tax is that the income collected will be used to compensate owners of real estate in the north.
The law states that the declared price of the sale is the one which should be taken into account and/or the assessed value by the land registry.
There is some confusion as to when the tax applies due to procedural a blunder at the House. It seems to be unclear which the date of sale is. According to information available to my office, the tax authority sees the sales date as that of the transfer, notwithstanding that the initial sale took place several years before, and thus should be exempt from this tax.
The tax is not particularly high on its own, but taking into account all the other taxes related to real estate, it adds to the total burden.
It is of particular importance to developers, who will likely charge the buyer in order to recover their loss. The idea of taxing the sellers who, according to the MPs, gained a lot in terms of increased value as a result of the Turkish invasion, seems to ignore that in the end the seller will pass on this tax to the buyer. This is of particular importance at a time that the government is trying to introduce measures to curtail rising prices in real estate and especially housing.
The taxation on real estate starts from the tax for VAT of 5 or 19 per cent, depending on whether the property is for personal use. Transfer fees amount to around 5 to 8 per cent, depending on the value. Then there are municipal taxes, including the recent addition of a tax to construct cemeteries, to be paid even by people who may not use these facilities, the capital gains tax in case of resale and so on.
Where does this end? Should it be extend to other refugee loses, such as loss of business, cars and so on? Should it apply to goods and any household items and not only for real estate?
This is a messy situation, not easily resolved, that will lead to all sorts of issues.
Antonis Loizou & Associates EPE – Real Estate Appraisers & Development Project Managers, www.aloizou.com.cy, [email protected]