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20 Sep, 2013

Cyprus Immovable Property Tax

Categories: Uncategorized

We would like to inform our clients about the recent changes that were applied on Immovable Property Tax in accordance with the law 33(I)/2013.

Provisions of the Law

The legislation specifies that all persons (physical or legal persons) owning immovable property in the Republic of Cyprus are subject to Immovable Property Tax in accordance to the new bands and tax rates from 2013 onward. The minimum tax payable is set at €75 per property owner.

The tax is calculated on the total value of properties owned by a person at the beginning of each year and is payable the latest by 15 November of the same year.

According to the relevant legislation, the value of each property is defined as its estimated market value as at 1 January 1980, irrespective if the property existed at that date or not. This value is given by the Land Registry Department and it is presented on the title deed of each property.

The Inland Revenue Department will provide a discount of 10% for settlement up to the 16 October 2013, however for late payments made after the 15 November 2013, a penalty of 10% will be imposed.

Furthermore, we would like to remind you that from 1980 onwards, every person that buys or sells immovable property during a year, is obliged to inform the Inland Revenue Department about this change by submitting the relevant form IR.303 the latest by the 30th of September of the following year.

Until the year 2011 there was no penalty for not submitting this form, but from the year 2012 onwards there is a penalty of €100 for late submission.

In addition, if for any reason a person will pay less than 75% of the amount he is supposed to pay an additional charge of 10% will be imposed. However, some title deeds do not include the building value because the final approval has not been obtained yet by the Land Registry and as a result the value on the title deed is much less than the actual value as at 01.01.1980. In such cases the taxpayers should revise their own tax liability by including their estimated building value as at 01.01.1980 in IR.303 form.

Most of the taxpayers are expected to receive tax assessments the latest by September 2013. In cases where no tax assessments are received the taxpayer is obliged to pay the tax by using the IR.303 form.

Registered Owner Vs. Actual Owner

The tax plus any penalties are imposed on the registered owner of the property and not the real owner. This creates problems in cases where the real owners are expecting their title deeds from their developers, because the developers usually include a clause in their contracts of sale that make the buyers liable for the tax when they take delivery of the property. In such cases not only the real owner is liable to pay the tax, but he will also be charged at a higher tax rate because he has to reimburse his developer who is subject to high tax bands.

Although this is unfair on behalf of the buyer, the legislation gives the right to the buyers to reclaim any overpayment of tax by submitting the form IR.314.

If you are not the registered owner of your property and your developer will request from you a payment regarding the payment of the Immovable Property Tax, ensure that he will provide you with records of the amount paid as Immovable Property Tax relating to your property and a certificate showing the applicable tax rate.

Objections and Tax Refunds

Due to the fact that the information held by Inland Revenue Department might not be accurate, errors may and have already occurred, for example, a tax assessment may be issued to the wrong person and for the incorrect amount. In such cases taxpayers have the right to make an objection the latest by 30 September 2013 and submit it to Inland Revenue Department for examination.

As already mentioned above, in accordance with the article 7 of Immovable Tax Law 24/1980 if a person has overpaid his immovable tax for any reason, he has the right to request a refund from Inland Revenue Department by submitting the form IR.314.

Tax Rates

The new tax rates applicable from 2013 onward are as follows:

Bands

Tax Rate

Tax

Cumulative Tax

€1 – €40,000

6‰

€240

€240

€40,001 – €120,000

8‰

€640

€880

€120,001 – €170,000

9‰

€450

€1,330

€170,001 – €300,000

11‰

€1,430

€2,760

€300,001 – €500,000

13‰

€2,600

€5,360

€500,001 – €800,000

15‰

€4,500

€9,860

€800,001 – €3,000,000

17‰

€37,400

€47,260

Above €3,000,001

19‰

For more information and/or advice, please contact us via email at info@finexpertiza.cy