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Transfer Fees & New Developments

12 June 2016

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Transfer Fees & New Developments

We hope that we have cleared the situation since from the various letters that we receive, it seems that there is some confusion.

It appears that there is an increasing rate of title issue and this without the affects of the Building Amnesty. Be it with some years delay (approximately 4-7 years after completion) titles are being issued. This positive development has brought up at an increasing rate some problems that are related to the transfer of property.

 

Transfer Fees
These are calculated on a scale as follows:

 

Market Value € Percentage Fees Cumulative Fees
 Up to €85,430 3% €2,563 €2,563
 €85,431-€170.860 5% €4,273 €6,835
 €170,861 and over 8%    

In order to promote development in Cyprus and attract at the same time investments, the Cyprus Government has pushed through the house legislation which amends the Department of Land and Surveys (Fees and Charges) Law that allows a 50% reduction on the transfer fees mentioned above until the end of 2016.

The amending legislation also provides for:

  1. Parent to Child: The abolition of any fees payable in the case of a transfer of immovable property.

  2. To third degree of family: The adjustment of the transfer fees regarding donations, using the estimation values of 1st January 2013;

  3. Family companies. The abolition of the refunding of fees on immovable property transfers, after a period of five years;

  4. Equal value property: The abolition of the fee payable in cases of exchange of immovable property.

  5. Family company to a shareholder: The abolition of the right to reduced fees.

Note: There a proposal by the Government (Passed by the Ministerial Council) to allow a 50% discount on transfer fees after 2016 with no limit.

The date of the valuation is taken as being the date of sale/acquisition. As such if one bought a property in the year 2002 and transfers the property now, the transfer fees will be based on the market value on the date of the acquisition i.e. 2002.

Market Value
The law stipulates that the Lands Office must ascertain the value of the property on the relevant (sales) date, based on the market value on the date of sale. Usually the Lands Office accepts the actual sales price, but approximately 20% of the total is disputed by the Lands Office if it can ascertain from its own records that the market value at the time is different (usually it charges higher values and never lower!!). The main method adopted in order to ascertain the market value is the comparable one (there are others also). So if you bought an apartment for say €100.000 and the Lands Office has in the records other sales for €120.000 for similar properties, it will charge you fees on the €120.000. 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 – hence the Lands Office stand.

Objection
You are not in a situation of take it or leave it, but if one disagrees with the Lands Office valuation, you can submit an objection which must be accompanied by a reasoned valuation by a qualified valuer.

This must be done within approximately 40 days from the date that the Lands Office makes its final/determination assessment (recent High Court decision has extended this rather vaguely to a reasonable time). What is infuriating in such cases is that even upon determination/final valuation, the Lands Office does not provide the affected parties with a written report supporting its own assessment, whereas the buyer must do so in writing etc, in order for the Lands Office to re-examine

Date of Assessment
If a contract is deposited with the Lands Office, then the date of sale so recorded in the contract is the one adopted. If the contract is not deposited, you must produce your contract (duly stamped) as well as the receipt of the down payment, so that the Lands Office can ascertain the sales date.

The Economic Situation + Transfer
After all the uphill battle to secure the deeds, it has now been ascertain that only 25% of the title deeds issued are actually transferred and this because nowadays where every cent counts, people are not willing to come up with (say) €15.000-€30.000 transfer fees since they feel that the fees are fixed on a certain date and since no interest is charged and provided you have no immediate use of the title this may be a solution, be it temporary – hence the 50% transfer fees reduction.

Half Transfer Fees
If a sales contract is deposited with the Lands Office by the end of 2014 then 50% only of the transfer fees is charged if transfer takes by end 2016. A recent bill by the Government however suggests that this discount period is to be extended at any time without the 2014 prerequisite (the Bill is expected to be approved prior to July 2016).

We hope that we have cleared the situation since from the various letters that we receive, it seems that there is some confusion.

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