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By George Mouskides
The majority of property owners in Cyprus belong to the middle class. Civil servants, bank employees, those in the semi-governmental sector and mid-size businesses make up most of the owners, while major property owners are only a very small percentage of the population.
Despite all this, the state, unfortunately, is placing everyone, the mega rich and the middle class, in the same bucket.
Had the government wanted to go after the major players they would have taken into account someone’s overall wealth, (bank deposits, stocks and bonds, immovable property, vehicles, boats, etc), while at the same time also factoring into the equation someone’s obligations and liabilities. This should be the starting point for imposing taxation.
Instead of following this practice the state agreed with the Troika to impose taxes in the region of €104 mln on property ownership.
Which are the various taxes a property owner has to pay?
– Income tax and a defense levy on collected rents;
– Municipal taxes, as well as sewerage charge for the property;
– A 20% capital tax on profits whenever a property is sold;
– If someone buys a property, a transfer fee of max. 8% on the price is paid and if the sale is of a newly-built building VAT is imposed.
It is clear that buying or selling real estate in Cyprus is highly overtaxed, (one of the steepest in the EU).
The property tax had been relatively low up to now and so shaped to affect only about 11,000 owners. This figure is now bound to increase and affect the vast majority of property owners.
Do we honestly want Cypriot as well as foreign investors to put their hard-earned cash in the real estate sector? If the answer is yes, the segmented and erratic approach of taxation is not the path to take. We should rather devise a just and simple taxation framework, attractive to real estate investors. This is the time for incentives, not new taxes.
In today’s market, rent prices are taking a dive, their collection becoming increasingly difficult and taxes and levies are multiplying.
This is a time when property owners are watching their property values diminish daily and their selves becoming the poor relatives of Cypriot society. We hope the government will make a serious and educated assessment of all these factors and take the proper actions.
George Mouskides is General Manager, FOX Smart Estate Agency and a Licensed Estate Agent, US Certified Public Accountant.
