YET ANOTHER Immovable Property Tax (IPT) scam in Cyprus has come to light. A magazine produced by a well-known Paphos-based property developer includes the following information on IPT for potential buyers in its advertising literature:
There is also an annual taxation, Immovable Property Tax, which the registered owner is required to pay based on the value of the property. The rates for these are as follows:
This information which, needless to say is totally inaccurate, has resulted in some people paying as much as 15 times the amount of Immovable Property Tax they should have been paying to this particular developer.
How much of this overpayment has ended up in the developer’s pocket and how much has been paid to the Inland Revenue Department, we will leave you to guess!!
Here is what the magazine article should have said:
There is also an annual taxation, Immovable Property Tax, which the registered owner is required to pay based on the assessed value of the property as of 1st January 1980. The rates for these are as follows:
As you can see, there is a significant difference!!
How should Immovable Property Tax calculated?
IMMOVABLE Property Tax in Cyprus is a bit like the old rating system in the UK, which was also based on assessed 1980 property values.
- All property has an assessed 1980 value (which is calculated by the Land Registry) which entered on its Title Deed. And so a plot on which a property is built will have a Title Deed containing its 1980 value. (Where a plot has to be subdivided into smaller plots, so that a Title Deed can be issued for each of the properties built on the plot, the Land Registry will apportion the 1980 value of the undivided plot across the Title Deeds of the smaller plots.)
- As developers build on the land, they declare how much input they have put into the land (i.e. the value of materials and work undertaken in building the properties) to the Inland Revenue Department every year. The Inland Revenue assesses the 1980 value of that input, adds it to the 1980 value of the land and presents the developer with a tax demand.
- Once the bill has been paid, it is a very straightforward task for the developer to apportion it fairly between buyers who have yet to receive their Title Deeds.
Note that a developer’s total Immovable Property Tax liability isn’t calculated on a property by property basis; it is calculated on his total property portfolio. Similarly, if someone were to own two houses, their Immovable Property Tax liability would be calculated on the total value of both properties, not the sum of the Immovable Property Tax on each of them.
Reclaiming legitimate Immovable Property Tax overpayments
Once a Title Deed has been issued for each of the properties and ownership has been transferred to their buyers (i.e when a buyer has paid the Property Transfer Fees and the Land Registry has issued a Title Deed bearing their name as the property’s registered owner) buyers may claim a refund from the Inland Revenue Department for any overpayment they may have made to their developer.
However, the Inland Revenue will only refund legitimate overpayments; it will not refund illegal amounts charged by property developers as shown in the example above.
Anyone who has been charged illegal amounts of Immovable Property Tax should report the matter to the Cyprus CID; fraud is a criminal offence!
Those wishing to reclaim legitimate overpayments of Immovable Property Tax should read this letter from the Ministry of Interior.