Property Tax Refunds

Could you be eligible for a property tax refund?

In Cyprus, the purchasers of immovable property are entitled to claim a refund of the immovable property tax. George Coucounis explains.

Most of those who purchase immovable property in Cyprus are not subject to the payment of immovable property tax. However, since their property purchased has no separate title deed, they are obliged to pay the vendor the immovable property tax for their property until it has been transferred into their name.

They do so according to the rate paid by the vendor and they are entitled to its refund if they are exempted or taxed at a lower rate.

This right is given to every purchaser provided his property was transferred to him, the purchase price and the immovable property tax on it has been paid and his sale contract was deposited at the Land Registry. To be entitled to the refund, a purchaser must prove that the vendor has paid immovable property tax for his property at a sum higher than the one he is to be charged or exempted.

The immovable property tax is imposed and payable every year prior to the 30th September on the value of the whole immovable property of the vendor at its market value as at the 1st January 1980 at the following rates:

• If the value of the property is between €0 and €170,860 the tax payable is zero.
• If the value of the property is between €170,861 and €427,151 the tax payable is 0.25%.
• If the value of the property is between €427,152 and €854,300 the tax payable is 0.35%.
• If the value of the property is over €854,300 then the tax payable is 0.40%.

It is evident from the relevant provisions of the law that most of the foreign purchasers are exempt from the payment of the immovable property tax, since they do not own a property valued over €170,860 as of the 1st January 1980.

The Inland Revenue Department collects the immovable property tax from the vendor since he is the registered owner and he is asked to pay immovable property tax for the whole of his property, including that of the purchaser, according to the rates which apply to him. This is due to the lack of a separate title deed for the property of the purchaser which remains in the name of the vendor. Therefore, the more the value of the property of the vendor, the higher the tax rate and the immovable property tax payable. Consequently, the purchaser must annually pay the vendor an immovable property tax based on the vendor’s tax obligations rather on his own.

If the purchaser was to be taxed on his property, he would have been exempt or pay tax at a lower rate. The immovable property tax is always payable by the registered owner, thus by the vendor, who claims it from the purchaser. However, the person who is subject to the payment of the immovable property tax is the "owner" of every immovable property, a term which means the purchaser is the person entitled to be registered as the owner so the relevant provision in the law qualifies him to claim the refund.

To clarify: If Mr A bought his only property in 2000 for €85,430, its value as at the 1st January 1980 is estimated to be €25,620. If the value of the whole of the property of the vendor including the property of the purchaser as of the 1st January 1980 is up to €170,861 the tax rate is zero (in such a case there is no tax payable or refundable); if the value is up to €427,151 the tax rate is 0.25%; if the value is up to €854,300 the tax rate is 0.35% and if the value is over €854,300 the tax rate is 0.40%. Therefore, Mr A will have to pay annually either no tax, or tax at 0.25% (€64.05), or tax at 0.35% (€89.67), or tax at 0.40% (€102.48), minus any other immovable property tax, if any, payable by him.

These amounts payable annually to the vendor can be refunded from the Inland Revenue Department since Mr A is tax exempted.

Purchasers who are entitled to a refund of the immovable property tax need to apply to the Inland Revenue to claim the amount of the tax the vendor paid for their property. They are entitled to do so provided the property was transferred into their name, their sale contract was deposited at the Land Registry and they submit to the Director of the Inland Revenue the relevant sale contract and receipts proving that the immovable property tax was paid.