As part of its obligations to the Troika, the Cyprus government has pushed through a new IPT regime forcing all owners of property to pay new rates starting from this year. For 2013, the Inland Revenue Department (IRD) will tax owners with properties registered in their name based on the 1980 value of the property. The land registry is expected to update their records for thousands of properties by the end of the month, said acting head of the Land Registry Department Kleanthis Kleanthous.

Those without title deeds will have the value of their property assessed using sales transaction records. From next year, IPT will be based on 2013 values as specified in the memorandum signed between Cyprus and its international lenders. The land registry will get in touch with owners to inform them of any changes in the valuation of their properties. However, it is up to the owners to provide the land registry with a current address.

The IRD will post tax bills in the next two months to property owners though rather than waiting for those, proactive taxpayers can submit their own IPT declaration if they wish. The tax forms will be made available in English on the IRD’s website (www.mof.gov.cy/ird), and payment should be made to IRD.

The deadline for submitting the tax forms is November 15, though those who file valid tax forms to the IRD a month earlier, by October 15, will get a 10% tax discount. Those who delay beyond the November 15 deadline will have to pay a 10% penalty.

Asked to clarify what the new IPT regime means for the thousands of home buyers who have been left without title deeds due to either bureaucratic delays, or developer irregularities, Kleanthous said that the onus is still on the owner, usually the developer, to pay the IPT to the state, not the buyer who has yet to receive a title deed for the property.

Last month, DIKO MP Angelos Votsis tabled a draft bill which would have forced property buyers to pay property tax before even getting their hands on the title deeds, sparing developers millions of euros and much-needed liquidity. Votsis argued that at the end of the day, the property buyer pays for the IPT anyway once they are using the property, even if they don’t have the title deed in their hands. Usual practice is for developers to pay the IPT and then when they are finally in a position to hand over the title deed to the buyer/user of the property, the latter has to pay the developer any IPT paid on that property in exchange for the title deed.

According to Votsis, the new IPT regime lumps all properties owned by an individual together, meaning the more properties one has, the higher the tax band that will be used to calculate the amount to be paid in IPT to the state. This in turn means, property buyers end up paying more than they need to since the IPT is calculated based on a higher tax rate due to the cumulative sum of property in the developer’s name, for example. Kleanthous clarified that Votsis’ proposal never made it through parliament, meaning those who bought property and never got the title deed will not be liable to pay the IPT, the original owner will however. And when the time comes that a title deed can be issued for the property, and the original owner asks for the buyer to return any IPT paid so far, the buyer can get the difference back from theinland revenue department.

For example, a developer who sold ten villas but has yet to give the buyers title deeds will pay this year’s IPT under the new regime at a higher tax bracket based on the sum of the value of all ten properties in his name. When he is in a position to have the title deed issued, he will ask the buyer of one of the villas to pay him one tenth of the IPT paid for 2013. The buyer can then go to the IRD, submit his contract of sale to the department and seek the difference between what he would have paid had the one unit been taxed on its own, using a smaller tax bracket.

Source: Cyprus Mail