We’re all aware of the annual property tax which is based on the property’s value as this is set by the Lands Office and with the valuation date 1.1.80. It is appreciated that values as at that date 1980 were very low by comparison to today’s, even now recessionary, prices. The existing tax system is scaled and it is as follows:
From 0 Up to €120.000 Tax 0% *
€120.001 €170.000 0,4%
€170.001 €300.000 0,5%
€300.001 €500.000 0,6%
€500.001 €800.000 0,7%
€800.001 €+ 0,8%
* Note the percentages are per thousand not per hundred
The new proposed law (not approved as yet) which will become effective from the new year 2013 suggests the following.
The values as set at 1.1.80 will be upgraded based on inflation, which is 3.5 times i.e. an apartment valued as at 1.1.80 for €100.000, it 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
€150.001 €500.000 0,6%
€500.001 €1.000.000 0,8%
So the apartment which had a value of €100.000 1.1.80 and which was tax exempt, now it will be:
€100.000 *3.5 = €350.000
Less tax free €150.000
Tax 0,6% €1.200 p.m.
This is a very large hike on taxes and it is especially hurtful when one considers that:
- Cos are not allowed to benefit the €150.000 exemption.
- Individuals property value is the total of all the properties that one owns, e.g. if one owns 3 properties i.e. the flat €100.000 a holiday house €80.000 and a plot €30.000 (at 1.1.80 values) the total of €210.000 will be increased by 3.5 less the exemption (only €150.000) and the appropriate scale levied.
- This will hurt especially the developers who own large holdings sold or unsold units, who will pass on the higher tax to the buyers.
- Most buyers are liable to pay the property tax after delivering of a property. A buyer who is tax exempt on his own will most likely find that he will be taxed on the 1% rate. But if he has deposited his sales contract with the Lands Office he can claim back the difference (or the total if tax exempt).
- Property which belongs to more than one person, each person will be taxed separately, reducing thus the tax accordingly since each person will be taxed exempt by €150.000.
- If you are wondering what the 1.1.80 is and if you have a title, the value of 1.1.80 is so recorded on the title (middle space).
This is a temporary measure until the Lands Office carries out a new valuation at current prices (one expects of course that the scales will be reduced).
You do appreciate that an apartment having a 1.1.80 value of €30.000 (real example on Kennedy Avenue – Nicosia) which is owned/not yet transferred by the developer to the buyer, he will be charged at the top scale of 1% (€30.000 x 3.5 x 1%) = €1.050 p.a. – but if he has no other property, he could claim it (once he pays) back.
In order to continue with the bad news and because the local authorities use the value of 1.1.80 for the local municipal taxes, sewage etc, if they are to adopt the 3.5 factor, you do appreciate what we are talking about.
Those who consider to transfer to a Co each one of their property to separate Cos, bear in mind the setting up cost of the Co, the annual tax of €300 p.a., the auditors fees etc, better check this with your accountant if it pays – bearing in mind the Cos do not have the €150.000 exemption. Some people transfer their property to the spouse and children in shares, but one must consider the side effects of this.
This is a crazy law at this point of time when people are hard up for cash while straggling developers might go under since their property/municipal taxes will no longer be affordable with the 1% rate. No wonder that people are turning to churches in an increasing numbers as well as to the casinos!!