Real es­tate tax restruc­tur­ing is a must

Financial Mirror (Cyprus) - - FRONT PAGE -

Each and ev­ery prop­erty in Cyprus is taxed three times: at ac­qui­si­tion, while it is be­ing held and upon its sale.

It is a well-known fact that in Cyprus, prop­er­ties are heav­ily taxed when they are sold or bought and they draw a neg­a­tive com­par­i­son with what is the norm in other Euro­pean coun­tries.

It is also well known that the hold­ing prop­erty tax was con­sid­ered “rea­son­able to low” up to 2011, but when all taxes and levies were taken to­gether Cyprus prop­er­ties were bur­dened with “av­er­age to high” taxes when com­pared to other mem­ber states.

Since changes in the prop­erty tax were brought about in 2012, (from EUR 12 mln in 2011 to 105 mln in 2014), taxes in­creased sharply plac­ing Cyprus at the top of the list among Euro­pean coun­tries.

For the real es­tate sec­tor to sur­vive and pros­per, own­ing a prop­erty for own use or as an in­vest­ment must be prof­itable.

Steep, un­pre­dictable and com­plex taxes that cur­rently ex­ist in Cyprus make it not worth­while and trou­ble­some to own a prop­erty.

A good num­ber of in­di­vid­u­als and pro­fes­sional in­sti­tu­tions have been sug­gest­ing for quite some time now that prop­erty tax­a­tion must be sim­pli­fied and set at a lower level. In ad­di­tion, the gov­ern­ment must of­fer in­cen­tives to boost sales. Our sug­ges­tions are clear: - Re­duc­tion of the Cap­i­tal Gains Tax (CGT) from 20% to 10%;

- The ba­sis of the val­ued price for CGT to be set tak­ing into ac­count 1/1/2013 val­ues; - Raise the ceil­ing for tax ex­empt amounts for CGT; - Waive trans­fer fees if VAT is payable and adopt a set fac­tor at 3% for all other cases (in­stead of 3%, 5%, 8% in force at present).

If a prop­erty is sold by an owner who buys another prop­erty within a six-month pe­riod, the Cap­i­tal Gains Tax should be waived. This would be help­ful to own­ers who want to move to a smaller or big­ger prop­erty but are hes­i­tant to do so due to heavy tax­a­tion.

In prin­ci­ple, levies such as trans­fer fees or mu­nic­i­pal im­mov­able taxes should be in di­rect re­la­tion to the ser­vices of­fered by the state or mu­nic­i­pal author­i­ties.

Our sug­ges­tion is for ev­ery prop­erty to have its own set own­er­ship tax, ir­re­spec­tive of the owner. We also pro­pose the set­ting up of a ceil­ing both for the im­mov­able prop­erty tax and the sewage fees so that the var­i­ous author­i­ties do not charge at will.

We ap­plaud the gov­ern­ment’s de­ci­sion to in­cor­po­rate the state and mu­nic­i­pal prop­erty taxes, but we ob­ject to the level of tax­a­tion which will be at 2014 lev­els. This was a once-off cash in­jec­tion for the state in 2013 and 2014 and should not con­tinue.

We also agree with the re­duc­tion of trans­fer fees pro­posed and hope to see the leg­is­la­tion tabled soon. The Cap­i­tal Gains Tax should also be low­ered to com­pen­sate for the higher own­er­ship tax.

Another in­jus­tice must be pointed out. Rent in­comes are dou­ble-taxed. An in­come tax as well as a de­fense levy is im­posed. Own­ers should be li­able for ei­ther the one or the other.

Our politi­cians mis­tak­enly con­sider that any­one own­ing prop­erty is well off and must pay a wealth tax. If such a tax is to be in­tro­duced it must be done cor­rectly. All as­sets should be taken into ac­count, not just real es­tate owned. Bank loans should also be an in­te­gral part of the equa­tion.

It is vi­tal to make sure that prop­erty tax is in no way re­lated to the wealth tax. This would be a huge stum­bling block to growth and will force many in­di­vid­u­als to sell their prop­er­ties. This will deal a deadly blow to the real es­tate sec­tor, one of the main con­trib­u­tors to the gov­ern­ment cof­fers.

Newspapers in English

Newspapers from Cyprus

© PressReader. All rights reserved.