Immovable Property Tax unpaid

Nigel Howarth
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Immovable Property Tax unpaid

DESPITE the generous 75 per cent discount on Immovable Property Tax, Cyprus Weekly reports that by 27th December twenty five owners of immovable property whose value exceeds €3 million have failed to pay Immovable Property Tax.

Citing figures from the Tax Department, the paper reports that 2 people owe a total of €104,564, while 23 businesses owe a total of €3.4 million.

These 25 owners owe more property tax than the property tax owed by the 20,000 owners whose properties have a 1980 value of no more than €40,000 (€2.1 million).

In addition, 143 business and individuals whose properties have a 1980 value between €800,000 and €3 million have yet to pay their tax, estimated to be €3.3 million. Indeed, the highest percentage of non-payers (22.87%) own property within this value band.

The higher the value of their properties the less likely it is that their owners have paid their tax.

(The twenty five individuals and businesses have not been named.)

Cyprus property taxes in 2017

Nigel Howarth
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Cyprus property taxes in 2017

Cyprus property taxesRECENT changes to property taxes in Cyprus will benefit both those who have purchased property and those planning to purchase. Here is a summary of the taxes that apply as we enter 2017.

Immovable Property Tax payable to the Tax Department

Immovable Property Tax (IPT) was reduced in 2016 to approximately a quarter of that in the previous year and is abolished in 2017.

Property Tax payable to Communities and Municipalities

This ‘local’ property tax has not been abolished and those with property on the island will continue to pay this ‘local’ tax, which is calculated on the Land Registry’s assessment of the 1980 value of the property.

Property Transfer Fees

The temporary reductions in Property Transfer Fees that that came into force in 2015 and applied to transfers that took place by 31 December 2016 was made permanent in July 2016.

 (a) If VAT was paid on the purchase price of the property, no Property Transfer Fees are payable.

(b) If VAT was not paid on the purchase price of the property, the Property Transfer Fees are reduced by 50%.

However if the Director of the Land Registry considers that the price stated on the contract of sale does not reflect the market value of the property at its date of purchase he may, at his discretion, charge the full Property Transfer Fees based on the Land Registry’s assessment of the market value of the property at its date of sale less the price stated on the contract of sale.

(The Department of Lands and Surveys has an on-line Transfer Fees Calculator???????????????????? .)

Capital Gains Tax

The Capital Gains Tax concession introduced in mid-2015 that exempted those who purchased property after it came into force and 31 December 2016 from paying Capital Gains Tax regardless of when the property was sold has not been extended.

As a consequence those who buy property in 2017 will be liable for Capital Gains Tax when they sell the property.

Stamp Duty

Stamp duty is calculated on the value of the purchase agreement and remains unchanged at the rate of:

€0 to €5,000 – zero

€5,001 to €170,000 – 0.15%

Greater than €170,000 – 0.2%*

* Capped at a maximum of €20,000.

I expect that we will see further changes to property taxes during the year ahead. Tune in for the latest updates.

Our Top 10 stories from Cyprus in 2016

Nigel Howarth
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Our Top 10 stories from Cyprus in 2016

WHICH topics proved the top 10 most popular with our readers in 2016? Title Deeds (or rather the lack of them), Swiss franc loans, property tax, and Brexit.

Here are our top 10 stories from Cyprus in 2016 in reverse order:

Number 10: Property Transfer Fees reduction permanent – news that the temporary reduction in Property Transfer Fees announced in December 2011 had been made permanent. As the law now stands, those who paid VAT on the purchase price of their home are exempted from paying Property Transfer Fees, while those who did not pay VAT benefit from a 50% reduction.

Number 9: Immovable Property Tax 2016 – a radical proposal to slash Immovable Property Tax collected by the Cyprus government by up to 75 per cent and scrapping it all together in 2017 was passed by a majority vote in parliament. (Note however that an agreement by the Council of Ministers in June to abolish Immovable Property Tax collected by municipalities and communities was abandoned.)

Number 8: Paphos marina contract – after more than twenty five years since initial studies into the five big marina projects in Cyprus were undertaken, including  ten years of legal wrangling by competing bidders and a Supreme Court ruling, the Ministry of Energy, Commerce, Industry and Tourism announced that Poseidon Grand Marina of Paphos was the successful bidder for the construction of a marina in Paphos.

Number 7: Revised citizenship scheme approved – an announcement that the Cyprus Government had approved a revised citizenship-by-investment scheme designed to further encourage investments in the island’s economy by non-Cypriot businessmen and investors. Further details of the revised scheme may be found in the document Scheme for Naturalisation of Investors in Cyprus by Exception.

Number 6: Cyprus real estate market 2016 – a report from Delfi Partners & Co that forecast property prices in Cyprus over the year ahead and the longer term. You can read the company’s full report at Cyprus Real Estate Market Expectations & Forecast.

Number 5: Keep calm and carry on, expats urged – reactions to the result of the UK Brexit referendum. British citizens living in Cyprus were advised to keep calm and carry on as usual.

In November I was invited by the British High Commissioner Matthew Kidd to a briefing at his residence in Nicosia at which matters relating to Brexit were discussed. His Excellency offered a number of top tips to Brits living in Cyprus that you may find in the High Commission briefing for British expat representatives on island.

Number 4: Luxury homes go under the hammer – news that more than 100 luxury homes including a 520 sqm mansion said to be worth over €1 million were about to be auctioned after their owners failed to repay their bank loans

Number 3: Banks playing a dirty game – a report that a number of the Cyprus banks had obtained 30 – 40 temporary court orders preventing the transfer of properties to purchasers who had applied for their Title Deeds.

Number 2: Alpha Bank Cyprus fined – a landmark decision by the Cyprus Consumer Protection Service (CCPS) to impose an administrative fine on Alpha Bank Cyprus of €250,000 for several breaches of the Unfair Business-to-Consumer Commercial Practices Law relating to their Swiss franc housing loan agreements.

Number 1: Applying for Title Deeds – my guide to those who bought property in Cyprus before the end of 2014 should apply for their Title Deeds. Although I have received numerous emails from people who have managed to get their Title Deeds after many years, problems remain. As I reported yesterday more work is needed on Title Deeds; out of the 11,000 applications received by the end of August nearly 4,000 Title Deeds have been issued of which approximately 800 have been transferred to the property’s purchaser(s).

As reported in ‘banks playing a dirty game‘ several legal actions have been taken by the banks who claim that the ‘trapped buyers’ law is unconstitutional. In addition there are numerous planning issues that prevent local authorities issuing a ‘Certificate of Approval’ that would enable the Land Registry to issue Title Deeds; I understand there are approximately 20,000 such cases.

Hopefully we’ll see positive developments in the New Year into what the European Commission refers to as EC refers to as “the currently dysfunctional Title Deeds issuance and transfer system.”

May I take this opportunity to thank you for your support and wish you all a very Merry Christmas and health, happiness and Title Deeds in 2017.

??? ??????? ???? ???????????? ??? ??????????? ?? ???? ???? 2017.

Growing interest in Cyprus property

Nigel Howarth
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Growing interest in Cyprus property

Cyprus property at number 8CYPRUS jumped ten places to number eight in the November 2016 edition of the ‘Top of the Props’ published by the property portal TheMoveChannel.com, accounting for 1.62% of on-line searches on the property portal.

According to the portal, the USA remains the most popular real estate market, accounting for 7.81% of all enquiries, followed in second place by Spain, which accounted for 5.16% of all enquiries.

Commenting on the performance of Cyprus TheMoveChannel.com Director Dan Johnson noted that “Cyprus has now been inside the Top 20 most popular destinations on TheMoveChannel.com for 10 months in a row. In real terms, enquiries for the island’s real estate have varied on a month-by-month basis throughout 2016, but rose 20 per cent in Q2 compared to Q1 2016 and increased 8 per cent in the three months to November compared to the previous three months. Will they keep climbing as we enter 2017?”

The full breakdown of the November 2016 edition of the ‘Top of the Props’ chart follows:

Rank Country Share (%age) Change
1 USA 7.81 No change
2 Spain 5.16 No change
3 Brazil 4.56  Up 2
4 Portugal 4.05 Down 1
5 UAE 2.42 Up 13
6 Italy 1.81 Up 4
7 Hungary 1.66 Up 22
8 Cyprus 1.62 Up 10
9 France 1.6 Up 2
10 India 1.6 Down 2
11 Canada 1.33 Down 7
12 Sri Lanka 1.14 Up 22
13 Mexico 1.08 Up 8
14 South Africa 1.04 Up 27
15 Germany 0.99 Down 8
16 Bulgaria 0.7 Down 3
17 Cape Verde 0.65 Down 8
18 Morocco 0.62 Up 7
19 Turkey 0.5 Down 14
20 Switzerland 0.46 Down 8
21 Australia 0.4 Down 2
22 Croatia 0.34 Down 8
23 Vietnam 0.31 Down 7
24 Greece 0.31 Down 4
25 Thailand 0.22 Down 2
26 Malaysia 0.22 Up 4
27 Albania 0.19 Up 13
28 New Zealand 0.16 Down 4
29 Pakistan 0.16 Up 9
30 Romania 0.16 No change
31 Slovenia 0.15 Down 3
32 Egypt 0.15 Up 7
33 Barbados 0.13 Down 2
34 Montenegro 0.12 Down 7
35 Latvia 0.1 Down 13
36 Panama 0.1 Down 19
37 Malta 0.07 Down 4
38 Cayman Islands 0.06 Down 3
39 Bahamas 0.06 Up 8
40 Costa Rica 0.06 Up 6

More work needed on Title Deeds

Nigel Howarth
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More work needed on Title Deeds

THE EUROPEAN Commission’s post-programme surveillance report on Cyprus acknowledges that although some progress on the thorny issue of Title Deeds has been made there is still “considerable work to be done”.

Here are some pertinent extracts for the European Commission’s post-programme surveillance report on Cyprus:

The reform of the system of Title Deeds transfers has been constrained by lack of support from private stakeholders. A substantial number of property buyers, despite having paid the full purchase price, still have not yet received their Title Deed.

The adoption of the legacy cases law (for property sales up to end of 2014) created some momentum but more steps are needed to have a new system of swift, safe and automatic transfers of titles. Out of the 11,000 applications received as of end August 2016, nearly 4,000 Title Deeds were issued which led to approximately 800 transfers of titles.

This progress may be considered as positive, and actions taken by the Department of Land and Surveys have been very supportive, including website information, training, and an instruction manual sent to all relevant staff. However, despite the promising start and efforts, results are not as positive as hoped, due to several legal actions taken by banks claiming that the legacy law is unconstitutional.

Substantial effort is necessary to engage stakeholders to agree on a new system for the transfer of future Title Deeds. There is general agreement that a future system should ensure that buyers who pay the full purchase price will get their titles quickly and have no possibility to refuse them. The Ministry of Finance is continuing to examine proposals, but with little apparent progress in recent months, in part due to the political sensitivity of this issue.

There is still considerable work to be done to address the backlog of issuance of new Title Deeds. The Ministry of Interior has made some progress, with the completion of a comprehensive report on the streamlining of issuance procedures in 2015. The Council of Ministers also approved measures to assist the issuance and, thus, the transfer of Title Deeds where relatively minor breeches of planning conditions have occurred.

The currently dysfunctional Title Deeds issuance and transfer system is deterring potential investors and thus, weighing on the liquidity of the property market. Although some measures were taken to streamline the issuance of Title Deeds for new properties, no new measure was announced to provide for a sustainable system of transfer of Title Deeds.

Swimming pools law to change?

Nigel Howarth
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Swimming pools law to change?

THE REPORT in Phileleftheros earlier this week concerning unlicensed swimming pools and petrol stations prompted an announcement by the Interior Ministry; it seems that the swimming pool laws and regulations may soon be revised as part of the package to reform Cyprus’ complex and time-consuming planning system.

In summary, the announcement from the Interior Ministry advised that a bill to amend the existing legal framework and regulation of swimming pools has been drafted and forwarded to the Attorney General for legal vetting.

However, during the vetting process it was identified that some of the provisions in the draft bill already existed the Streets and Buildings Law and Regulations; as a consequence the draft bill was returned to the Interior Ministry for further work.

According to the ministry’s announcement, two pieces of legislation will cover:

  • Issues concerning the design and construction of public and private swimming pools will be included in the relevant legislation under the Streets and Buildings law. (A working document will shortly be issued for public consultation.)
  • Matters relating to the licensing of swimming pools will be included in separate legislation.

 The swimming pools fiasco

In 1992 Cyprus introduced a law that recognised two types of pool – ‘private’ and ‘public’.

A swimming pool shared by more than one family (such as those shared by those living/holidaying in apartment blocks and other private building complexes) are classed as ‘public’ and subject to the same laws and regulations that govern swimming pools in hotels and tourist complexes.

The regulations for ‘public’ pools include the provision of a lifeguard, showers, male and female toilets, footbaths, etc. (The cost of a lifeguard alone is more than €2,000/month.)

In November 2005 Lakis Tofarides, the Chairman of the Land and Building Developers Association at the time, suggested the following measures should be taken to alleviate the situation.

“The swimming pools in apartment buildings and complexes to be considered private (not public) because the residents and their guests use them. At the same time, residents, in proportion to the number of persons living on the building/complex, could be trained as lifeguards. This means that if there are large families on the building, the number of persons to be trained would be decided accordingly”.

“As far as public pools are concerned, the number of supervisory staff needed (lifeguards, etc.) should be reduced”.

In June 2007, Denis O’Hare, Linda LeBlanc and I met with the Permanent Secretary of the Interior Ministry, Dr Lazaros Savvides, and discussed the problems of the swimming pool laws with him.

In August 2008 it was reported that the Cyprus Government was looking to change the swimming pool laws. However, absolutely nothing happened.

In September 2008 the European Committee for Standardization approved two standards relating to swimming pools:

Under these European Standards, which Cyprus should have adopted by March 2009, complexes that share a pool for the use of the property owners, their families and guests are classed as a Type 3 swimming pool, making it subject to different standards than a public swimming pool and would therefore not require lifeguards, etc.

The standard defines ‘public’ pools as “open to everyone or to a defined group of users, not designated solely for the owner’s/proprietor’s/operator’s family and guests independently from paying an entrance fee.”

Question: Did Cyprus implement the European standards for swimming pools?

Answer: Don’t ask silly questions – of course it didn’t!

The plot thickens

In 2011 Arlene McCarthy MEP questioned Cyprus swimming pool legal rulings in the European Commission after Paphos municipality took legal action against one of her constituents and others for not having a swimming pool licence for the pool in their holiday complex.

In 2012 a group of residents living at a complex in Kato Paphos had their passports confiscated temporarily for failing to comply with swimming pool regulations.

In January 2015 Phileleftheros reported that the Interior Ministry was proposing a new law to classify swimming pools into five different categories and that the draft of the new law was under scrutiny by the Legal Service. (Yawn)

Light at the end of the tunnel?

Now, in December 2016, we see that swimming pool laws and regulations are once again on the Interior Ministry’s agenda.

We can only hope that the new laws will resolve the problems and costs incurred by thousands of home owners in apartment blocks and other private building complexes whose shared pools are currently deemed to be ‘public’.

However, given the Interior Ministry’s abysmal performance to resolve this matter over the past ten years (and more) I don’t hold out much hope.

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