capital gains or VAT?

Questions about selling property
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Kwacka
Posts: 5
Joined: 07 Jan 2008 18:49

capital gains or VAT?

Post by Kwacka » 11 Jan 2008 15:02

Hi, and many thanks for all your work here.

we're selling a house, for which no titi\le deeds are available. The developer has charged us Cy 1,500 for cancellation contract and sale contract for new buyer.

He's also holding on to a significant sum as a guarantee that we will pay taxes due (we get it back when we give him sight of receipt that tax has been paid).

I had roughly calculated what I thought maximum capital gains tax would be, (20% of buying price, less selling price, less Cy10,000 accountant advises that other deductions could be made but I just wanted a rough idea) but now have been told that as we never 'owned' the house we will be paying what is (in effect) the extra VAT on the sale - about 50% much higher total with no allowances.

Is this true?



Nigel Howarth
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Re: capital gains or VAT?

Post by Nigel Howarth » 11 Jan 2008 20:11

Hi kwacka and welcome,

Even though you may not have Title to the property you are selling, you are liable for Capital Gains Tax on any gain arising from the sale (as it's you who have made the gain).

No VAT is payable on the purchase/sale of resale property.

There is a page on my main website that explains the Capital Gains Tax situation together with the allowances. You can find it at http://www.cyprus-property-buyers.com/l ... ns-tax.htm

One approach you could take, if you have the money available, is to pay the Capital Gains Tax into an escrow account (maybe held by your accountant) who will then pass it to your developer once he has handed over the proceeds of the sale to you - and the cheque has cleared! This should reduce the chances of the developer claiming more than he's entitled.

Regards,


Nigel Howarth
Independent information & advice for Cyprus property buyers
Contact Nigel Howarth
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Kwacka
Posts: 5
Joined: 07 Jan 2008 18:49

Re: capital gains or VAT?

Post by Kwacka » 11 Jan 2008 23:04

Many thanks for your rapid response, Nigel.

The sum held against payment of capital gains was demanded by the developer before he would sign contracts. We did suggest that it was held by solicitors, but he wouldn't have it. Then, when we wanted something from them for the accountant they said "if we knew you were going to an accountant we wouldn't have asked for the money"!

felt like we've been banging head against wall several times during this process.



Nigel Howarth
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Re: capital gains or VAT?

Post by Nigel Howarth » 12 Jan 2008 16:12

Kwacka wrote:felt like we've been banging head against wall several times during this process.
Try banging the developer's head against the wall. It's much less painful and much more satisfying :wink:

Cheers,


Nigel Howarth
Independent information & advice for Cyprus property buyers
Contact Nigel Howarth
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Kwacka
Posts: 5
Joined: 07 Jan 2008 18:49

Re: capital gains or VAT?

Post by Kwacka » 18 Jan 2008 16:53

Nigel Howarth wrote:
Kwacka wrote:felt like we've been banging head against wall several times during this process.
Try banging the developer's head against the wall. It's much less painful and much more satisfying :wink:

Cheers,
Unfortunately we can't get to him - his company has grown large enough for him to employ minions to protect us from us plebs.

He/his company haven't even responded to emails/phonecalls/letter from our accountant - we lived in the house for a few months using the companies electricity supply before we could get connected (but that's another story; involving being moved to the bottom of the pile after the municipality adopted the street). The upshot is we can't demonstrate that we lived there for 5 years.

However I do get quite a bit of pleasure imaging me banging his head against the wall. 8)



bitterlemons
Posts: 19
Joined: 10 Jan 2008 13:05

Re: capital gains or VAT?

Post by bitterlemons » 24 Jan 2008 12:56

Hi Nigel
Do you have to pay a different rate of capital gains when you sell your property if it has been rented out rather than your first residence, even if you live in another property in Cyprus ? Will the builder charge more for title deeds etc if it is seen as an investment?



Nigel Howarth
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Joined: 24 Oct 2007 14:38
Location: Erimi, Limassol, Cyprus
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Re: capital gains or VAT?

Post by Nigel Howarth » 24 Jan 2008 14:16

Hi bitterlemons

In a word - NO.

The Capital Gains Tax and Property Transfer Fees are the same regardless of how the property has been used and how many properties you have.

(and taxes and transfer fees are set by the Government, NOT by the builder).

Click here to read more about Property Transfer Fees

Here to read more about Capital Gains Tax

Regards,


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

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