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Tax breaks for NPL borrowers

Published on 9th October 2018

New legislation offers tax breaks to borrowers with Non-Performing Loans (NPLs). Specifically, when they wish to sell mortgaged property to pay off their loans, they can benefit from tax breaks.


In the case of an ordinary property sale the state collects taxes in the following ways:


.1. The seller pays a 20% capital gains tax on the calculated sales profit. If the seller is considered a dealer in land income tax instead of capital gains tax is paid.


It is understood that at the time of sale the seller must pay all sewage fees, municipal and state property taxes.


.2. The buyer pays transfer fees, ranging from 1.5% - 4.0% on the valuation amount of the property bought according to the land registry.


The buyer also pays stamp duty on the sales contract and mortgage fees for the property if a loan will be used.


Up until recently only banks in the role of a buyer enjoyed tax breaks in cases of mortgaged properties connected to NPLs

Benefit extension
The state has now extended this benefit to borrowers that had NPLs on 31/12/2015.
We will attempt an analysis of the extend of the benefit to NPL borrowers.
A flat valued at € 200.000 which cost the seller € 120.000 is subject to the following taxes at the time of sale:
  • The seller pays €16.000 capital gains tax (20% on the €80.000 profit)
  • The buyer pays €307,50 stamp duty on the sales contract and €4.600 for transfer fees
    Thus, in a normal sale the state collects €20.907,50 in taxes and fees.
    If the new buyer mortgages the property to get a loan, a 1% on the value of the mortgage is also paid (about €1.500).


    Helping hand


    Consequently, if the buyer had an NPL on 31/12/2015, sells the property to a third party for €200.000 and pays the whole amount in the loan, the state lends a helping hand by abolishing all of the above taxes, giving borrowers a chance to pay off banks.


    One of the main benefits of the new legislation is that it offers NPL borrowers an alternative to the pressure brought upon them by banks to sell to them at low prices. Borrowers can now shop around for interested buyers to sell to at a higher price and still enjoy the tax breaks.





     Written by:


    George Mouskides


    Director FOX Smart Estate Agency


    Chairman Cyprus Property Owners Association (ΚΣΙΑ)



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