The new real estate taxation is levelling

  Article By : Marinos Kineyirou|  Published at : Politis Newspaper| 09-12-2012

Marinos Kineyirou: Vice-president of the Cyprus Association of Estate Agent Entrepreneurs, President of the Real Estate Agent Entrepreneurs Association of Larnaca- Famagusta and Property Auctioneer

Marinos kineyirou Manager of Marinos Estate Agencies LTD

Marinos Kineyirou Manager of Marinos Kineyirou Estate Agencies LTD

 THE NEW REAL ESTATE TAXATION IS LEVELING

Substantial changes in the taxation of real estates are reserved by the memorandum in Cyprus, finally putting an end to the prices of 1980. Based on the memorandum, the prices will be renewed with the increase in the Consumer Price Index (CPI) of 1980. In 2012 the increase in the values ​​will be up to 3.3 more than the current existing value based on the Cadastre. An apartment which was estimated by the Land Registry at fifty thousand euro with the price of 1980, today it is estimated at 3.3 times more, i.e. one hundred sixty-five thousand euro. Moreover, the tax rates will be amended by providing tax-free limit to one hundred and fifty thousand euro. For values up to € 150.000, the rate is zero, from € 150.001 to € 500.000 the tax is six per thousand, from € 500.001 to € 1.000.000 eight per thousand and from € 1.000.001 and above the tax rate is ten per thousand. The tax liabilities that every owner of an immovable property have, will be based on the example: an apartment worthy of € 200.000 will bear property tax at the rate of six per thousand on the € 50.000 independently of his income and whether he can pay or not. This new taxation does not mention if the owner has borrowed to acquire the property and no such provision has been discussed by the Government. The memorandum which the Government agreed with the Troika provides sweeping taxes that will be applied from the 1st of January 2013, such as the VAT increase to 18% by 2013 and 19% in 2014. These measures are leveling and further aggravate the already bad image of the property market. The new taxation troubles and will force many owners to sell their property, thus reducing prices and as a result companies close and the unemployment increases. The Cyprus Association of Estate Agent Entrepreneurs expresses its deep concern and stresses that the real estate market does not need additional taxes but incentives to recover, such as the permanent residency visa for investment which will boost the property market and will create an increased interest of third countries nationals. This incentive will positively contribute to a revival of the Cyprus property market with new jobs, increase of state’s revenues and the recovery of the economy. The association notes that negative effects are observed in real estate prices in European countries that either have been intensified under a memorandum, or appear to be close enough to such a procedure. In particular, based on the European Central Bank’s data, during the second quarter of 2012, property prices in Cyprus fell by 5.90% compared to the same period last year, thereby accelerating the rate of decline that had begun earlier (-4, 90% in the first quarter of this year, – 4.10% in 2011 and -1.30% in 2010). With the new tax measures, the property market will be less attractive and the association emphasizes that immediate solutions should be taken to make the real estate sector once again become the driving force of our economy, providing jobs, attract new investors from abroad and increase revenue to the state. The easy solutions to cover the financial needs of the state without having calculated the future implications make buyers evaluate negatively the purchase of a property. The association stresses that there will be problems in the tourism industry, in business, restaurants, recreation centers and hotel business by the increase of tax rates, making these sectors of the economy uncompetitive. Although the proposal of Troika relates to the income of twenty million euro by the property tax, the final proposal included provides revenue of seventy million euro. The state did not considered the implications of the new taxation and the Cyprus Association of Estate Agent Entrepreneurs wants the right measures to be taken before the sector’s prospects are at greater risk.

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