THE RECENT increase in the issuing of title deeds is generating a new form of discontent, particularly amongst the expatriate population who find that the money they put aside for this tax inevitably fails to meet the demand of the Lands Office who dream up an inflated value with no scientific or other evidence upon what this is based.
The market value of a property must depend on what money is paid for it or based upon the cost of the land, the build plus the builder’s profit margin. It cannot be based upon what similar properties have sold for at the same time. One house could have a superb outlook whilst another is situated on a busy road. The houses may be similar in design but the value of one may be more than the other because of its situation. How then can the Lands Office determine a fair value? The answer is that it cannot and it should be contested.
It would be interesting to run a survey of those people who have recently paid their transfer tax to ascertain how many of them have had their tax increased because of this flagrant rise in the value of their property arbitrarily imposed by the Lands Office. Of those who have, how many of them are expatriates and how many are Cypriots? If the majority are expatriates then clearly there is a legal issue of discrimination to be addressed. An informal survey of one complex of houses that have just had their title deeds released shows that every one of them has suffered the same Limassol Lands Office “sting”.
Why was this revaluation system introduced in the first place? In his recent article in the local press, head of a real estate agency Antonis Loizou stated that “regrettably a good percentage of locals and others under declare their sales/acquisition price for the purpose of saving capital gains (by the seller) and transfer fees (by the buyer) and this is widely known”. So in Cyprus, every property purchaser is presumed by the Lands Office to be guilty of fraud and tax evasion and only has recourse to the Supreme Court to prove their innocence!
Isn’t it about time that Cyprus acknowledged that we do not all lie about what we paid for our property and therefore should not be penalised as though we had. The legal principle of Natural Justice obviously has no place in the Cyprus judicial system. How can a purchaser raise the money to pursue the legal process of appeal when they have exhausted their savings on payment of the inflated transfer tax? How can they obtain proof of market valuation for a property purchased seven years previously! Meanwhile, the Lands Office is not required to submit the same level of proof either at the final assessment or to the Supreme Court. More injustice Cyprus style! As regards appealing to the Supreme Court, we are all aware how long that would take, with very little hope of success. Is this just another money making legal scam?
I know of many expatriates who are now so disillusioned with Cyprus and the apparent discrimination against them that they are selling up and leaving. This will have many detrimental consequences for Cyprus. For example, most expatriates contribute considerably to the local economy. They did this when they made their major capital purchases on coming to Cyprus. They now do this directly by paying their income tax on time and indirectly with their living expenses. Coincidentally, because inflation is now rife here, the living expenses are greater in Cyprus than they would encounter were they to return to their home countries!
Transfer tax is an even larger nail in the coffin of the decimated Cyprus housing market. Imagine the consequence of an even greater oversupply of resale houses by a mass exodus of owners who experience the frustration of securing a bargain property at market value only to be told it really was worth more because we, the Lands Office, say it was! Oh, and by the way, you are all guilty of fraud and tax evasion but we do not have to follow any judicial process to prove it because we are the Lands Office!
Transfer tax should ideally be abolished because it is open to corruption, appears discriminatory, is plain unfair and presumes that the purchaser and seller are guilty of tax evasion and fraud. Governments have connived to allow purchasers to be deceived by misleading advertising. Airlines are no longer allowed to advertise ridiculously low fare prices only to add the extras at a later time. They are required to publish an upfront price. On their large, roadside billboards one major developer appears to have some very attractive deals and in very small letters does include, “plus VAT”. Why do these adverts not include “Plus Transfer Tax”? If transfer tax is to remain then the Lands Office must inform the purchaser of their tax liability when the contract is lodged with them. This should be via a written assessment. Even better, the Lands Office should inform the seller of the tax liability in order that they inform any prospective purchaser so that they can make a reasoned judgement as to whether they can afford to buy!
Why not therefore abolish transfer tax and replace it with a more robust form of stamp duty? This would be administered by the solicitor and remove the cash element from any payment of tax (stamps are less open to corruption and do not represent legal tender for any other purpose). Of course, on receipt of this revenue the government would have to issue a receipt in the form of a purchase guarantee! This would then encourage the rapid transfer of title because it is in the government’s interest to reduce its guarantor liability. If the Lands Office were no longer required to recover transfer tax then layers of civil service administrators could be abolished and the burden on us Cypriot taxpayers would be reduced!
There is no reason why transfer should not be quick on resale properties where the seller is already in possession of their deeds. On new builds the process can be considerably streamlined by accepting the completion certificate as just that! The process is complete! It should not require frequent re checking by various layers of administrators and surveyors designed to ensure the workload of the civil servants concerned. It should be a one off visit by a team authorised (and trusted) to ensure the building meets all aspects of its planning and building permits!
Such a system would do much to restore confidence in the decimated property market because it is fair and upfront. It would provide the purchaser with a clear indication of costs at the time of purchase and not the bombshell of an arbitrarily inflated tax liability at some indeterminate date in the future?
