property tax before title deeds - reimbursement?

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partner
Posts: 6
Joined: 20 Oct 2010 19:23

property tax before title deeds - reimbursement?

Post by partner » 01 Aug 2013 13:42

We have been informed by our developer that as long as we do not have the title deeds it is the developer (as registered owner) who pays the IPT ( immovable property tax ) on our town house.

When the title deeds are transferred to us we will have to reimburse the developer for the paid tax (from delivery date to transfer date) and they will provide us with a zero balance statement. We were also told that we then could take this to the tax office to reclaim the paid tax back. That last bit does not make sense, since that would leave the tax office without income during these years, it seems.

Could anyone shed more light on this issue?

By the way, we are tax residents in another European country.



Nigel Howarth
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Re: property tax before title deeds - reimbursement?

Post by Nigel Howarth » 01 Aug 2013 19:45

Hi partner,

Your developer has advised you correctly. As the owner of the property he is liable to pay the Immovable Property Tax - not only on the property you purchased, but on all the other properties he owns.

In Cyprus you do not become the owner of a property until you have paid the Property Transfer Fees (the local equivalent of the UKs Stamp Duty Land Tax (SDLT), at which time the property will be registered in your name as its legal owner.

Immovable Property Tax is calculated on the total 1980 value of all the properties owned by a company or individual - and as you may imagine, the total value of all properties owned by a developer will be considerable - and as a consequence he will probably be paying IPT at the highest rate. The 1980 value is assessed by the Land Registry when a Title Deed is issued/updated - current rates as follows:
Image
What the 'good' developers do is submit IPT returns to the Inland Revenue each year and provide their buyers with records of the amount paid as Immovable Property Tax (IPT) and a certificate showing the rate of IPT applicable to the property. It is important to note that the buyer may be able to claim back part or the entire amount paid once they have paid the Property Transfer Fees and become the property's owner.

The 'bad' developers do not submit IPT returns each year as they should and wait until the Title Deeds have been issued before paying the tax they owe. Because of the delay in making their payment, the Inland Revenue will impose a fine on the developer, who will then try pass this fine on to those who have bought property (often using the threat of withholding Title Deeds to elicit payment)!

Another trick played by the 'bad' developers is to calculate the IPT owed by their buyers using numbers that bear no relation to what they should be charging.

Here are a couple of articles that explain the IPT 'scams' and how to deal with them:

Cyprus Immovable Property Tax law

Immovable property tax & fraudulent practices

Being resident for tax in another European country doesn't remove your obligation to pay Immovable Property Tax (and other property-related taxes) in Cyprus.

Regards,


Nigel Howarth
Independent information & advice for Cyprus property buyers
Contact Nigel Howarth
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partner
Posts: 6
Joined: 20 Oct 2010 19:23

Re: property tax before title deeds - reimbursement?

Post by partner » 01 Aug 2013 20:48

Thank you, Nigel.

You write: "It is important to note that the buyer may be able to claim back part or the entire amount paid once they have paid the Property Transfer Fees and become the property's owner."
What are the circumstances or criteria for being able to claim back a part of the amount paid? Does it have to do with the developer having paid more than we as 2 owners of 1 property would have paid?

The person at the developer I spoke with made it sound like you could claim all tax back, but as I said, that does not seem to make sense from the tax office perspective.

With best regards,



Nigel Howarth
Site Admin
Posts: 2329
Joined: 24 Oct 2007 14:38
Location: Erimi, Limassol, Cyprus
Contact:

Re: property tax before title deeds - reimbursement?

Post by Nigel Howarth » 01 Aug 2013 22:25

partner wrote:What are the circumstances or criteria for being able to claim back a part of the amount paid? Does it have to do with the developer having paid more than we as 2 owners of 1 property would have paid?
Yes - invariably a developer will pay more than 2 people who have bought a single property and you should be able to reclaim all the tax you have paid prior to this year.

Once you have paid the Property Transfer Fees and received the Title Deeds you may apply to the Inland Revenue, using Form IR 314, to reclaim any overpayment of Immovable Property Tax paid by the developer on your behalf to the Inland Revenue. You should take the completed Form IR 314, together with:
  • Copy of the Title Deed of the property.

    Receipt issued by the Land Registry when the Contract of Sale/Sale Agreement was deposited for Specific Performance.

    Copy of the Contract of Sale/Sale Agreement.

    Receipt(s) issued by the property developer confirming the Immovable Property Tax paid.
to your local local Inland Revenue Office.

Regards,


Nigel Howarth
Independent information & advice for Cyprus property buyers
Contact Nigel Howarth
Read the latest Cyprus property news


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