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PRESIDENTIAL ANNOUNCEMENTS ABOUT PROPERTY TAXES DISAPPOINTING

Published on 6th July 2015

capital-gains-tax_thumbIt was with some relief that we heard President Anastasiades’ announcement of measures for the real estate sector. Unfortunately though, the tax breaks and incentives offered, come too little and hopefully not too late.

We have not yet had access to the relevant bills and have to base our views on the announcements made by officials.

Let us take the example of the abolition of the Capital Gains Tax for property bought from the date the law is passed until end of 2016. Can this be considered a measure to boost sales?

 

 

What do we in essence tell an interested buyer?

If….

If you have the means to buy a property by the end of 2016, then if you sell the property in the future at a time when prices are up and you make a profit, and assuming you liable to pay tax then you can benefit from this measure, (not pay Capital Gains Tax).

The market is in urgent need of measures that produce results today, not in some decades.

I’d love to meet with the President’s advisors and have the chance to ask them how this measure will boost the market. Are they expecting buyers to take to the streets and starting buying because of this measure. I honestly don’t think so…

Another example concerns the reduction of transfer fees by 50%.

Slight improvement but…

I will not hesitate to admit that it is an improvement from the current status. On another note though, from the time of the announcement up until the law comes into force, (which we certainly hope will not be too long), market activity will freeze as everyone will play a waiting game so that they pay lower fees.

The main scope of transfer fees should be to reflect the cost of the transaction and not serve as a repulsive tax levy. What on earth does a property buyer gain if on top of securing the funds for the purchase a transfer fee must be paid as well?

It would be just if a uniform fee of let’s say €100 was applied, irrespective of the property and the price paid. Let us also not forget the state stamp duties the buyer has to pay for, a measure which should have been abolished anyway.

A third objection concerns the existing range system. Why is it still in force? We understand that the 3%, 5% and 8% will be reduced to 1.5%, 2,5% and 4%. It is known that this multi bracket system forces people to register all adult family members as co-owners to reduce the transfer fees required and creates all sorts of problems.

Not permanent

One also cannot help but wonder why the measure is in force only until 2016 and not permanently.

On a positive note, we fully agree with the abolition of municipal/community fees which have been integrated in the state property tax.

It is also positive that the government is proposing a common coefficient for all properties.

Of course this coefficient is quite steep, one euro tax per 1000 euros of property value. In no way it reflects government promises a couple of years ago that high property tax was only a temporary measure.

 

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