IP Tax ect.,

[Ken]

Hi Nigel,
Thankyou for your reply to my original post on CL
I sent off an email to my lawyer in an attempt to clarify the legal position. I have no wish to
be in conflict with the developer and possibly delay the issue of the Title Deeds, but at the same time do not have any desire to part with funds that I am not legally required to.

The reply that I have received is :-

"We agree with your comments, but it is normal practice that the purchasers pay their share of the immovable property tax to the developer until the Title Deed is issued. Because the developer is still the owner of your property on paper until the deeds are ready, he appears as the owner of high value properties and he pays taxes, so he divides them among the clients. When you acquire your deeds you will then not have to pay."

This seems a most bizarre situation that just cost's the purchaser unnecessary funds for a delay which is not of our making. The developer gets his IP tax paid on an asset that he still(on paper) owns.

No comment was made as to whether these payments were reclaimable when we have the deeds.

Consequently I am still confused.

Best regards,

[Nigel Howarth]

Hello Ken & welcome,

Regarding the legal position - it is my understanding that it is the Registered Owner of the property who is liable to pay Immovable Property Tax (you may wish to confirm this with your lawyer - or there's an Introduction to the Laws of Cyprus written by Andreas Neocleous in the download area of my main website).

But from a moral perspective, you may feel obliged to pay Immovable Property Tax once you have taken delivery of the property. After all, you are living in it and making use of it. I personally have no qualms about this. However, the amount you may feel morally obliged to pay needs to be in accordance with the Immovable Property Tax Laws 1980-2004.

Here are a couple of snippets from the Inland Revenue's website that describe what it is and the rates:

• On what value is IMMOVABLE PROPERTY TAX in Cyprus imposed?
  Immovable property tax is imposed in accordance with the Immovable Property Tax Laws 1980-2004, on the value of immovable property in Cyprus, on the 1/1/1980. This value relates to the value of immovable property which belongs to an individual or a company, on the 1st January each year.
  
  What are the current IMMOVABLE PROPERTY TAX rates?
  Value up to CY£100.000 - 0‰, value over CY£100.000 and up to CY£250.000 - 2,5‰, value over CY£250.000 and up to CY£500.000 - 3,5‰ and value over CY£500.000 - 4,0‰.

It is extremely unlikely that the assessed 1980 value of the property you've bought will be more than 100,000 (unless you paid a few million for it).

So even if you look at it from a moral perspective, you owe nothing.

I see that your lawyer just refers to it as "normal practice" - he makes no mention of whether it's legal or not! And as I mentioned elsewhere, someone who bought their property back in 1982 received an 'Immovable Property Tax' bill from their developer amounting to more than half what they paid for the property in the first place. The developer is holding them to ransom, refusing to transfer Title until the money's been paid. Their lawyer has threatened to take the developer to court (at the law firms expense) if he doesn't withdraw his demand and transfer Title.

Also, you need to bear in mind that you may have to wait many years before your Title Deeds are ready. What's the developer going to try and charge you next year and the year after? What are you going to do if he invests a couple of million in buying land and then expects you to pay his Immovable Property Tax bill?

Regards,

[peterc]

Nigel, surely it would be in kens interest to pay these taxes, as further confirmation that the property and title are hes. bearing in mind the number of disputes regards to title. the more you can show the stronger your case

[Nigel Howarth]

Hi Peter & welcome,

The problem is that developers pull numbers out of the air and expect people to pay. Invariably these numbers bear no relation to the amount laid down by the law.

Once people have taken delivery of a property, they may feel morally obliged to pay Immovable Property Tax - but the amount they pay needs to be in accordance with the Immovable Property Tax Laws and not some figure dreamed up by their developer.

I mentioned one case I'm looking at in a previous posting (I have the paperwork in front of me) about someone who bought their house back in 1982. Last year they got a letter from the developer saying that their Title Deeds were ready along with a bill for more than CYP 16,000 for 'Immovable Property Tax' - and that bill, which had been put together by the developer, included interest payments of 9% for all the back years taxes they hadn't paid!

This is a complete and utter scam. I met their lawyer a few weeks ago and he agreed - he's now going to take the developer to court over the matter if he doesn't transfer the deeds (at the firms' expense).

And not all developers charge 'Immovable Property Tax' - so it's a bit of a lottery whether people are asked to pay or not.

Regards,