Costs of selling Inherited land

Questions about selling property
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Lamb
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Joined: 11 Feb 2008 10:55

Costs of selling Inherited land

Post by Lamb »

Im new to this site, and having read your advice on things, i was wondering if you could help me with this one.

I have been given a piece of land by my father who's family history goes back many generations in the same village. I have decided, as per my other post that i have made as you shall see, to sell this land. I was wondering if you could tell me what expences i will be liable to. I have been told that they take the value date from 1980 or something like that, and charge VAT on this? I know i have to pay the land registry but again not sure how much. I think i pay property gains tax, is that the same as above? This is the first time that i am selling a property and i think there is some kind of allowance that i am excempt because of this. As for income from work, i am far below the threshhold for paying tax so am i allowed to pay less because of this? My family have said that they will not sell (as it is a share, so we will sell together as one) if we get less that 1,500,000 GBP (all my family are in England only my sister and i are in Cpyrus). If as they want, we get this amount, i will receive 1/10th ( we are 6 all together, but my dad halved his 1/5th share and gave half to me, and half to my sister). so say i get 117,602 CYP, how much will i be liable to pay? i figured i will be left with approximately 100,000 CYP(or 171,000 EUROS). Thank you for your help.
Pantheman
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Re: Costs of selling Inherited land

Post by Pantheman »

Lamb wrote:Im new to this site, and having read your advice on things, i was wondering if you could help me with this one.

I have been given a piece of land by my father who's family history goes back many generations in the same village. I have decided, as per my other post that i have made as you shall see, to sell this land. I was wondering if you could tell me what expences i will be liable to. I have been told that they take the value date from 1980 or something like that, and charge VAT on this? I know i have to pay the land registry but again not sure how much. I think i pay property gains tax, is that the same as above? This is the first time that i am selling a property and i think there is some kind of allowance that i am excempt because of this. As for income from work, i am far below the threshhold for paying tax so am i allowed to pay less because of this? My family have said that they will not sell (as it is a share, so we will sell together as one) if we get less that 1,500,000 GBP (all my family are in England only my sister and i are in Cpyrus). If as they want, we get this amount, i will receive 1/10th ( we are 6 all together, but my dad halved his 1/5th share and gave half to me, and half to my sister). so say i get 117,602 CYP, how much will i be liable to pay? i figured i will be left with approximately 100,000 CYP(or 171,000 EUROS). Thank you for your help.
Hello lamb,

I guess i can answer some of your questions but I am sure Nigel will be along to correct things if I stray.

Selling property in cyprus means you have to pay Capital gains Tax at 20%. This has no relation to any level of income you get and so it must be paid.

If the land has been in the family a long time, if you check you title deed you may see the line that say something like value taken as that of 1980. and it will have a value adjacent to it.

There is no VAT to pay. But the new owner/buyer will have to pay the transfer fees before they will put it to his name.

If you are selling for the first time, you are allowed a cy£10,000 allowance, but it all depends on if the others have sold or not and so any proceeds you will have to divide accordingly.

If we can take a worst case scenario, ie the max Tax payable

Everyone is willing to sign (all six of you) and that you have all sold before so you don't get the allowance and we make an assumption about the 1980 figure being cy£1000

An approximate value of tax you are looking at based on getting cy£1,500,000 is roughly;

Cy£299,381.

This figure will vary slightly as it depends on when the sale takes place, the index figures issued by the tax office, so it could be up or down very slightly. Also depends on the 1980 figure but to be honest, it becomes insignificant unless the figure is in the thousands.

You say there are six of you, but you will only get the 1/10th, confused.

Before you sell, you need to make sure all local land tax has been paid, depending on land size this is quite low, unless you haven't paid it for years.
You will need to go to the muktar to get a letter verifying that all local taxes have been paid.

Now, for each person who has not sold before, you can subtract cy£2000 from the Capital gains tax amount above, so if no one has sold before then you will be cy£12,000 better off as long as there are 6 names on the title deed.

I have used cy£, but the same is true for sterling as we are only talking numbers.

Hope this helps, sorry if it sounds confusing, I have tried to explain as simple as possible.

Nigel over to you.
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Re: Costs of selling Inherited land

Post by Nigel Howarth »

Hi Lamb & Pan

Firstly, there's no VAT payable on the sale of land - I've just published an update on the situation:
  • Although originally scheduled to be introduced in January 2008, the Cyprus Government successfully applied to the EU to delay its introduction until August. Furthermore, the Government is currently negotiating with the EU to allow a derogation until 2010 (along with a number of other EU member states).
You will be liable for Capital Gains Tax on the sale at the rate of 20% - as Pan has said, this is not dependent on your earnings, so you'll have to pay all of it - and the 1980 value is shown on the Title Deed.
  • If you have the 'new' style of Title Deed (Form N. 131A), which is four pages and a beige colour - the assessed value is shown on page 2.

    If you have the 'old' style of Title Deed (Form N. 131), which is a single white sheet of paper - the assessed value is shown on the front page - nearly at the bottom of the lined section.
But your Capital Gain is adjusted for inflation and there are a number of 'allowable expenses' that you can use to reduce your liability:
  • Property transfer fees.

    Stamp duty.

    Estate agent’s commission - but only if the estate agent is licensed by the Cyprus Real Estate Agents’ Association.

    Legal fees.

    Accepted capital additions and improvements to the property (will probably not apply in your case)
Indexation can be applied to the above expenses as well as the initial purchase price and must be submitted with invoices and receipts for the costs incurred.

Additional allowable expenses are also granted for:
  • Immovable Property Tax.

    Interest on loans used to buy the Property, assuming that the interest payments have not been used to offset other tax liabilities; e.g. Income Tax.
These expenses cannot be indexed.

I believe that each of the co-owners may be entitled to a CYP 10,000 Capital Gains Tax allowance. I'm afraid it's impossible for me to work the numbers out and I suggest you find a lawyer to help and prepare all the paperwork for you.

You may also be liable to pay 'Immovable Property Tax' - but how much it's difficult to say. The rules have changed a couple of times since 1980 and I don't know how they were calculated previously.

But at the moment, the first CYP 100,000 of the assessed 1980 value is zero rated (i.e. you pay nothing), between CYP 100,001 and CYP 250,000 you pay 0.25%, between CYP 250,001 and CYP 500,000 you pay 0.35%, and over CYP 500,000 you pay 0.4%.

Once again, I can't work out the numbers as I don't know the old rules. But if you there is an Immovable Property Tax liability that you haven't paid in previous years, the Inland Revenue will add interest to the bill I'm afraid. But the amount of Immovable Property Tax you pay can also be used to reduce you Capital Gains Tax liability (although you cannot use any interest charged for late payment to offset your liability).

I don't believe that you'll be liable for any local taxes - I sat on my plot for 10 years and didn't incur and local taxes (maybe my mukhtar was being kind).

One other thing. If you use a Registered Estate Agent to sell the land, they'll probably charge you between 3% and 5% of the selling price. But this can be used to reduce your Capital Gains Tax liability together with any lawyers fees you incur.

Just to add to the confusion, Parliament passed the bill on December 17 offering a tax amnesty for pre-2002 debts that have been declared but not yet paid. The new law will release debtors of their obligation to pay interests and additional expenses, provided they settle their debts within six months from the date the law comes into effect. This may or may not affect you.

I can't give you any figures better than Pan's - but this is really something you need to sit down and work out with a lawyer or an accountant.

Regards,
Nigel Howarth
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Pantheman
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Re: Costs of selling Inherited land

Post by Pantheman »

Nigel,

Your comments :

But your Capital Gain is adjusted for inflation and there are a number of 'allowable expenses' that you can use to reduce your liability:


Property transfer fees.

Stamp duty.

Estate agent’s commission - but only if the estate agent is licensed by the Cyprus Real Estate Agents’ Association.

Legal fees.

Accepted capital additions and improvements to the property (will probably not apply in your case)

Indexation can be applied to the above expenses as well as the initial purchase price and must be submitted with invoices and receipts for the costs incurred.


If the land is inherited and lamb is selling then the above items are not relavent ?

Transfer fees, stamp duty are paid by the new buyer, OK estate agents accepted and legal fees if solicitor used but usually in a land transaction its a trip to the land registry. The buyer will need to do his own checking.

I don't see how indexation is relavent either here.

I didn't realise immovable property tax was taken into consideration and as the land was inherited i guess there were no loans to pay.

Seems from the explanation, it was a piece of ground , as is uaually the case, amongst a family who now want to dispose of it. No upkeep needed so no invoices to submit.

The figure i calculated was based on a recent sale i made (going through right now), this was made using figures quoted to me from an accountant using his current tables from the tax office. I have, rightly or wrongly, assumed all the indexations were taken into consideration.

I think the figure is the worst case senario as stated. Anything less will just be a pleasant surprise.

But yes professional advice should always be sought, but you must get it from the right people.

How hard can it be to sell a piece of land jeez.

One other point I think you should also consider is this, is the price being sought a reasonable value of the land you are selling? It is likely that the land registry will have its own value (so people don't stitch them up when paying the stamp duty etc) and they will have to accept the tax paid on it. The buyer could also be faced with a larger than expected stamp duty bill otherwise, in which case he may not wish to proceed ! I am not sure if they can send you back to pay more tax as it is paid before the land registry will make any transfer.

Good luck however
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Re: Costs of selling Inherited land

Post by Nigel Howarth »

Hi Pan,

Yes a number of those items may not be applicable in this particular case - but I'm pretty sure that indexation will apply - maybe, as you say, the tables used by the accountant you used has these built in (I must try and get a copy).

Regarding Immovable Property Tax - there's a case/several cases near me where a developer has finally got around to getting Title Deeds issued (after 29 years!). He got quite a large IPT bill, plus interest for late payment, that he's now trying to fob off onto some of the people who bought the houses. (I posted a message about this somewhere).

Cheers,
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Lamb
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Re: Costs of selling Inherited land

Post by Lamb »

Ok things have progressed slightly. An "Agent" who is not registered in any way whatsoever has found someone interested in the land. He has told them that my family have requested 1,300,000 CYP for it (still cant think in EUROS). And we will pay him 3%. As mentioned before the reason i will get 1/10th is becuase orriginally there were 5 brothers and sisters (my dads not mine). My dad seperated his piece with me and my sister, making us now six ppl in total, but my sister and i receive 1/10th and my aunts and uncles 1/5th. In theory say we get 1.250.000 i will get 120,000 - 3%. From what i have gathered i wont pay tax, but i will pay 20% on 120,000 = 24,000 ? the worth on the title deed is only 2,000 ! , Do they take into consideration inflation? i think 2,000 in 1980 was worth a bit more than today :lol:
Lamb
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Re: Costs of selling Inherited land

Post by Lamb »

sorry my mistake instead of 120,000 i will receive 125,000
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Re: Costs of selling Inherited land

Post by Nigel Howarth »

Hi Lamb,

The 20% you pay will be the Capital Gains Tax - this will be calculated on the the amount you receive for the land (125,000) less its worth on the Title Deed (I'm not sure if the 2,000 you mention is the 1980 assessed value of your share or the total plot). And yes, they will take inflation into consideration when assessing your Capital Gains Tax liability and there's also a CYP 10,000 allowance to take into account as well.

Maybe Pan will be able to give you a better idea of the actual numbers.

I won't comment on your agent - only to say that he's acting illegally and that you will not be able to use his fees to offset your Capital Gains Tax liability.

Regards,
Nigel Howarth
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Lamb
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Re: Costs of selling Inherited land

Post by Lamb »

Thank you v much, i know i may be boring you with the same topic. I agree with the agent thing, but what can i do, to be honest i have spent the past 2 years trying to get my family to agree to sell it, so if he finds someone and my family agree finally on the amount offered then i dont care. I wasnt aware that i could get a discount as such for using a registered agent, unfortunately most are unregistered in Cyprus anyway. I had contacted quite a few agents in the past i think including antonis loizou, but unless you push them continuously they give up after a while and dont seem to be giving it their all. I dont suppose you could tell me how much 2,000 pounds from 1980 is in todays money? so i could figure it all out.
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Re: Costs of selling Inherited land

Post by Nigel Howarth »

Hi Lamb,

The only inflation figures I have are for 1996-2003. And as these were not produced by the Cyprus Government, I'm not sure how accurate they are:

1996 3.0%
1997 3.6%
1998 2.2%
1999 1.7%
2000 4.1%
2001 2.0%
2002 2.8%
2003 4.1%

Regards,
Nigel Howarth
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Pantheman
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Re: Costs of selling Inherited land

Post by Pantheman »

Lamb wrote:Thank you v much, i know i may be boring you with the same topic. I agree with the agent thing, but what can i do, to be honest i have spent the past 2 years trying to get my family to agree to sell it, so if he finds someone and my family agree finally on the amount offered then i dont care. I wasnt aware that i could get a discount as such for using a registered agent, unfortunately most are unregistered in Cyprus anyway. I had contacted quite a few agents in the past i think including antonis loizou, but unless you push them continuously they give up after a while and dont seem to be giving it their all. I dont suppose you could tell me how much 2,000 pounds from 1980 is in todays money? so i could figure it all out.
Hello Lamb,

The figure of 2000 pounds is the value on the title deed I presume ? This figure does not get increased with inflation as I know it, it is used in the calculation to subtract an amount from the selling price before you are taxed.

Like I said in my earlier post, the figures used by the tax office (already take inflation into account I believe) and so when they calculate the tax with these figures you get you tax liability.

I cannot imagine someone sitting there trying to workout the inflation rates over the years !

Anytime soon I will have had a deal completed and when the tax is paid I will compare it with my calculations and see the difference and I will let you know.

What you will evetually pay in tax will also depend if any of you have sold before or not as already explained.

The calculation above won't be far off and will probably be the worst case condition based on the criterial I used.

Sorry can't give any more accurate figures.
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Pantheman
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Re: Costs of selling Inherited land

Post by Pantheman »

Nigel Howarth wrote:Hi Lamb,

The 20% you pay will be the Capital Gains Tax - this will be calculated on the the amount you receive for the land (125,000) less its worth on the Title Deed (I'm not sure if the 2,000 you mention is the 1980 assessed value of your share or the total plot). And yes, they will take inflation into consideration when assessing your Capital Gains Tax liability and there's also a CYP 10,000 allowance to take into account as well.

Maybe Pan will be able to give you a better idea of the actual numbers.

I won't comment on your agent - only to say that he's acting illegally and that you will not be able to use his fees to offset your Capital Gains Tax liability.

Regards,
Ok just an update.

on the sale of a piece of land, selling price Cy£150,000 and with a 1980 value of £5000, the tax that has to be paied is Cy£26,947. Flippin heck!

So my calculations were correct, the figures from the tables are used to calculate the tax which would take the inflation into account. This tax also assumed that it was a first time sale. ie Cy£10,000 allowance used.

Best of luck
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Re: Costs of selling Inherited land

Post by Nigel Howarth »

Ouch :cry:
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