Understanding the New Property Tax
In 2021, Cyprus introduced a new property tax, but due to a mistake
in the legislative process, it didn't come into effect until
2022. This tax is a 0.4% levy on the sales price of properties, and
it is the seller's responsibility to pay it.
Real Estate: A Heavily Taxed Sector
Real estate in Cyprus is already subject to a variety of taxes,
making it a convenient way for the government to generate revenue.
This new tax adds to the existing burden on property transactions.
While the tax itself isn't particularly high, when combined
with other real estate taxes, it significantly increases the
overall tax load.
The Justification and Its Controversy
The rationale behind this tax is to generate funds to compensate
owners of real estate in the north. However, many argue that
introducing another property tax at this time is not justified. The
declared price of the sale or the assessed value by the land
registry is used to calculate this tax.
Confusion and Implementation Issues
There has been some confusion about when exactly this tax applies.
Due to a procedural error, it's unclear which date of sale
should be considered. The tax authority views the sale date as the
transfer date, even if the initial sale occurred years earlier,
which many believe should exempt it from this tax.
Impact on Developers and Buyers
Although the tax isn't substantial on its own, it adds to the
cumulative burden of real estate taxes. This is particularly
concerning for developers, who might pass this cost onto buyers to
offset their loss. The intention to tax sellers, who supposedly
benefited from increased property values post-Turkish invasion,
fails to consider that sellers will likely transfer this tax burden
to buyers. This is especially problematic as the government tries
to manage rising real estate prices.
The Existing Tax Landscape
Real estate in Cyprus faces various taxes:
o VAT of 5% or 19% depending on whether the property is for
personal use.
o Transfer fees ranging from 5% to 8%.
o Municipal taxes, including recent ones for cemetery
construction.
o Capital gains tax on resale, among others.
Broader Implications
The introduction of this new tax raises questions about the future
of taxation in Cyprus. Will this extend to other losses, like
businesses or cars, or even household items? The situation is
complex and could lead to numerous issues, making it a challenging
problem to resolve.
Conclusion
The new property tax in Cyprus adds to the already heavy tax burden on real estate. While aimed at compensating specific property owners, it raises significant concerns and complexities for both sellers and buyers in the property market.
About Us
CYAUSE Audit Services has extensive experience in the insurance industry has helped tens of insurance brokers and agents register and get licensed by the local Cyprus regulator granting them passporting access to the rest of the European Union.
CYAUSE Audit Services is an Audit & Assurance firm with offices in Cyprus and the UAE. During 2015 we have been awarded by I.C.P.A.C and the A.C.C.A (local and international association of Chartered Certified Accountants) for the Quality of our Audit Services and our Office's Procedures.
Being a Truly International Audit & Assurance firm, we have associates from all over the world and we are constantly looking for new associates to expand our network further. At present, CYAUSE Audit Services operates internationally through its membership with BKR International amongst the largest American associations in the world, Accace Circle, a co-created business community of like-minded BPO providers and advisors who deliver outstanding services with elevated customer experience. Our network covers almost 40 jurisdictions with over 2,000 professionals, it supports more than 10,000 customers, mostly mid-size and international Fortune 500 companies from various sectors, and processes at least 170,000 payslips globally.
CYAUSE Audit Services Ltd is also a member of BKR International one of the biggest US Accounting Associations of the word and the 3E Accounting Network, an international accounting network which originates from Hong Kong and has more than 80 members from all over the world.
Learn More about Cyprus Corporate Environment
Information about CYAUSE Audit Services and the Cyprus Corporate & Tax System can be obtained from our Website or our YouTube channel which provides valuable information about the Corporate & Tax Environment of Cyprus.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
