New tax at Land Registry for applying for deeds?

[bugsy]

We went last week to the Land Registry to pay our transfer tax and obtain our title deeds, and to complete on our villa at the same time. We were charged a 2,000 Euro tax for the registering of the assignment, even though we were completing on the same day, in order for them to proceed. We were told it was a new tax in Paphos, and even our solicitor (from Limassol) knew nothing about it. This is for information really as we paid and have completed now but it was an extra we had not budgeted for and others may be in the same situation.

[Nigel Howarth]

Hi bugsy,

This is also news to me!

The €2,000 was for registering what 'assignment' exactly? Did you borrow money to buy the property or did you pay cash?

Regards,

[bugsy]

We paid cash. We were told it was a tax for registering the assignment agreement. After that we paid transfer tax and obtained deeds (to be posted out). We were doing everything on the same day and it was seen as avoiding the tax so we had to pay that first. Our solicitor said this was not done in any other area except Paphos as far as she knew. The woman at the Land Registry said it was a new tax. (It appeared that even her colleague next to her was not aware of it but I cannot be certain).

[Pantheman]

We paid cash. We were told it was a tax for registering the assignment agreement. After that we paid transfer tax and obtained deeds (to be posted out). We were doing everything on the same day and it was seen as avoiding the tax so we had to pay that first. Our solicitor said this was not done in any other area except Paphos as far as she knew. The woman at the Land Registry said it was a new tax. (It appeared that even her colleague next to her was not aware of it but I cannot be certain).

Bugsy,

It is not a new tax first and foremost.

The reason you had an assignment, is because your seller didn't want or couldn't afford to pay for the transfer fees to the the title deeds in the first place. Since the developer could only transfer them to the original contract holder. hence the need for the assignment contract. This is charged at 0.5% of the amount your seller bought his place for. It was necessary to pay and deposit this before the titles could be transferred to you. The fact that it was done the same day is immaterial and your lawyer is very naive to say she had never heard of it before.

Paphos is not another planet the rules are for all and to prevent some trying to short circuit the system and get away with not paying their dues means that someone else has to.

The net result is, your seller should have paid the assignment charge NOT you. If your lawyer didn't know that, then they are not worth what you are paying them.

[Nigel Howarth]

Hi bugsy

I'm still not clear - you say you registered an 'assignment agreement'. Was this your agreement to purchase the property from its previous owner?

When you register an 'assignment agreement', the person from whom you're buying the property has to deposit a Tax Clearance Certificate along with the 'assignment agreement' to prove that they have paid Capital Gains Tax on the profit arising from the sale. Even if they made no profit, they still need to file a Tax Clearance Certificate (which is issued by the Inland Revenue).

This may have some connection with the €2,000? If you'd like to send me a PM with the name of your lawyer in Limassol, I'll see if I can speak to him/her and find out what happened (or you could discuss it with them).

I'm not aware of any new tax laws that have been introduced - apart from the changes to Immovable Property Tax that came into effect a few months ago.

Regards,

[Nigel Howarth]

Hi Pan,

Our replies to bugsy crossed in the ether.

I have not heard of the 0.5% charge for depositing an assignment contract before - and a number of assignment contracts have been deposited in the past without the need for this payment.

Do you know when it was introduced?

The charge for depositing a 'normal' contract of sale is €1.71?

Thanks,

[bugsy]

I think we are a little clearer thanks to the advice of both of you. We are going to contact our solicitor.

[Pantheman]

Hi Pan,

Our replies to bugsy crossed in the ether.

I have not heard of the 0.5% charge for depositing an assignment contract before - and a number of assignment contracts have been deposited in the past without the need for this payment.

Do you know when it was introduced?

The charge for depositing a 'normal' contract of sale is €1.71?

Thanks,

yes, Nigel, it used to be €1.71 but it changed a few months ago and we (the seller) have been paying the 0.5% of the higher amount**.

The charge for deposit a new contract is now also €50.

** If you bought a property for say €150,000, but was originally bought for €200,000, then the 0.5% relates to the €200,000 amount.

In effect the seller either pays a cancellation charge to the developer or the 0.5% for the registration of the assignment. I suppose whichever is the cheapest.

However, with a cancellation agreement the deal can happen much quicker as we don't have to wait for the tax clearance before we deposit the new contract of sale, whereas, with the assignment, we need the tax clearance to be able to register the assignment contract. Hope that helps.

Sorry don't know the exact date of change.

Aren't you glad you got me?

[Nigel Howarth]

Many thanks for the explanation Pan - this could also be described as 'state-sponsored fleecing'.

The government seems intent on destroying the island's property market.

It seems the way things work here is if things are not selling you put up prices rather than lowering prices to encourage more sales. It defies logic.

Regards,

[bugsy]

Which means - either way - the seller should have paid? Is that right, although its all too late now I expect. I will ask my solicitor why we paid and not the seller. Thanks for the replies.

[Pantheman]

Which means - either way - the seller should have paid? Is that right, although its all too late now I expect. I will ask my solicitor why we paid and not the seller. Thanks for the replies.

IMHO, yes, he either supplies the deeds or pays the for the fact that he cannot. Your Lawyer, well, say no more.

Nigel, this is all part and parcel of the Troika instructions to raise revenue. Up until that time they only charge a measely amount, but now things have change.

TBH, I would rather pay the money to the state than to the developers. If the developers didn't make this charge then there would be no need for the assignment, except of course in cases of memos.

[Nigel Howarth]

Hi Pan, there's no mention in the Troika Memorandum of Understanding (a copy of which you can get by clicking here) about increasing these charges.

The only agreement was to increase taxes raised on property taxation by by:

(i) updating the 1980 prices through application of the CPI index for the period 1980 to 2012; and/or
(ii) amending tax rates and/or
(iii) amending value bands.

and that happened (as we all know to our cost).

The other benefit of an assignment contract is that the new purchaser will not be affected by any mortgages, etc that the developer took out after the fist contract had been deposited.

Cheers,

[Pantheman]

Yes, OK, it is all part and parcel, of charge increases. €10 now for a title deed copy, €2 for a cadastral plan, N50 searches now heavily increased, even a marking out of the plot costs a small fortune to do. These are all areas of taxation that have been done for revenue raising.

[bugsy]

Update on the tax we paid.
You are both right in that the tax was not a new one but for depositing the assignment contract to protect our interests. Your information made this clearer for me. I asked our solicitor why we had paid and not the seller - this is the reply
Quote: In relation to the fee of deposition of the assignment agreement, this shall always be borne by the assignees/ purchasers, in order to secure their interests on the property. This has nothing to do with the transfer of the property or with the original contract of sale.

As we have already paid, I suppose it is irrelevant now. As you say, the Cyprus government should be encouraging house purchasers rather than springing surprises at the last moment. We researched to find all costs to do with house purchasing but we did not find or expect this one. Thank you both for an excellent site. BTW - we love the house!

[Pantheman]

Update on the tax we paid.
You are both right in that the tax was not a new one but for depositing the assignment contract to protect our interests. Your information made this clearer for me. I asked our solicitor why we had paid and not the seller - this is the reply
Quote: In relation to the fee of deposition of the assignment agreement, this shall always be borne by the assignees/ purchasers, in order to secure their interests on the property. This has nothing to do with the transfer of the property or with the original contract of sale.

As we have already paid, I suppose it is irrelevant now. As you say, the Cyprus government should be encouraging house purchasers rather than springing surprises at the last moment. We researched to find all costs to do with house purchasing but we did not find or expect this one. Thank you both for an excellent site. BTW - we love the house!

I wholly disagree with this comment 'this shall always be borne by the assignees/ purchasers, in order to secure their interests on the property.'

If the seller had provided the title deeds, then the buyer would not have to pay this. It is not for the buyer to secure his interests, it is for the seller to ensure his (the buyers) interests are protected by paying this additional fee. All of my assignment contracts the seller has paid. Otherwise the buyer will end up paying twice, once for the assignment and once for the title deed transfers. You lawyer is a plonker I'm sorry to say.