Real Estate – Property Tax in Cyprus
We are all aware of the annual property tax which is based on the value of the property as set by the Land Office and with the valuation date 1.1.80. It can be seen that the values at that date in 1980 were very low compared to current prices, even now recessive. The existing tax system is scaled and is as follows:
From 0 to €120,000 Tax 0% *
€120,000 €170,000 0.4%
€170,001 €300,000 0.5%
€300,000 €500,000 0.6%
€500,000 €800,000 0.7%
€800,001+ 0.8%
*Note that percentages are per thousand not per hundred
The new bill (not yet approved) that will come into force from the new year 2013 suggests the following.
The values set in 1.1.80 will be updated based on inflation, which is 3.5 times, that is, an apartment valued at 1.1.80 for €100,000 will now have a value of x €3.5,350,000.
In addition, the tax scale will be as follows:
From + 0%
0 €150,000 0
€150,000 €500,000 0.6%
€500,001 €1,000,000 0.8%
€1,000,0011 +1%
So the apartment that had a value of €100,000 1.1.80 and that was exempt from taxes, will now be:
€100,000 *3.5 = €350,000
less duty free €150,000
€200,000
Tax 0.6% €1,200 pm
This is a very large tax increase, and it is especially damaging when you consider that:
- Cos cannot benefit from the €150,000 exemption.
- Individual property value is the total of all properties one owns, for example if one owns 3 properties i.e. flat €100,000, holiday home €80,000 and plot €30,000 (a values 1.1.80), the total of €210,000 will be increased. for 3.5 minus the exemption (only €150,000) and the corresponding scale.
- This will especially hurt developers with large sold shares or unsold units, who will pass on the higher tax to buyers.
- Most buyers are required to pay property tax upon delivery of a property. A buyer who is tax exempt on their own will likely find that they will pay tax at the rate of 1%. But if he has deposited his sales contract with the Land Office, he can claim back the difference (or the full amount if it is tax exempt).
- Assets that belong to more than one person, each person will be taxed separately, thus reducing the tax accordingly since each person will be taxed free of €150,000.
- If you are wondering what 1.1.80 is and if it has a title, the value of 1.1.80 is recorded in the title (middle space).
This is a temporary measure until a revaluation is done by the Land Office at current prices (of course, it is expected that the scales will be reduced).
You appreciate that an apartment that has a value of 1.1.80 of €30,000 (real example in Kennedy Avenue – Nicosia) that you own/has not yet been transferred by the developer to the buyer, you will be charged at the maximum scale of 1% (€30,000 x 3.5 x 1%) = €1,050 a year, but if you don’t have other property, you could claim it (once you pay).
To continue with the bad news and because local authorities use the value of 1.1.80 for local council taxes, sewage, etc., if they are going to adopt the factor 3.5, if they appreciate what we are talking about.
Those who consider transferring each of their assets to a Company to separate Companies, take into account the cost of setting up the Company, the annual tax of €300 per year, the auditors’ fees, etc. – taking into account that the Cos do not have the exemption of €150,000. Some people transfer their property to their spouse and children in shares, but you have to consider the side effects of this.
This is a crazy law right now when people are having a hard time getting cash while lagging developers could go under as their property/council taxes will no longer be affordable at the 1% rate. No wonder people are returning to churches in increasing numbers, as well as to casinos!