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By Antonis Loizou F.R.I.C.S. – Antonis Loizou & Associates Ltd – Property Valuers, Property Consultants & Estate Agents
It is known that to secure a permanent residency visa, the applicant must buy a house (or apartment) of not less than EUR 300,000 of value and for the passport not less than EUR 500,000 of value – plus VAT.
What we have ascertained however in certain occasions, is that some agents/developers inform the potential applicants that they may buy a property for less (than the EUR 300,000 or EUR 500,000), but in terms of value, it is worth much more! So, in one case in Larnaca the agent informed the applicants that notwithstanding the sales price of EUR 170,000, its value is worth at least EUR 300,000 and thus they are eligible to apply for a visa. This is one example of a con, since we can understand the difference between value/sales price for small amounts, but for more?
Unaware clients are subsequently told, therefore, that the Land Registry Office/government may not accept the declared/agreed price as representing the value and thus are left high and dry (having paid the agreed sales price, legal and other fees, etc).
This is a most dangerous circumstance since it might upset the whole, so far successful practice, of the visa/passport measure and it requires, before this goes further, a direction by the Minister of the Interior in order to clear this situation.
We also understand that the “underdeclared” value is an attraction for the buyers who will be required to pay less transfer fees (as this is also encouraged by the sellers/agents), but then the buyers must bear in mind the increased capital gains in the event of a resale (difference between acquisition price and sales price is charged by a 20% tax-subject to various reliefs, etc).
Another odd situation is that applications which are made for new properties will require a 6-months period to be examined, whereas for used properties (resales) more than one year. We find this as being very odd, notwithstanding that we understand the reasoning behind it (to help building development of new projects, which helps the economy, as opposed to those existing). This is not in accord with our constitution, which states that all people should be treated equally.
In this con game, there are also various exorbitant fee charges mainly charged by lawyers and accountants, as well as selling agents. On one occasion, a Paralimni lawyer asked for EUR 7,500 in order to undertake the visa application (for a client of ours). We duly objected and ended up with another lawyer (top brass) with a EUR 2,500 fee.
Similarly agents, especially foreign ones (and in particular Chinese) are asking for commission on sale in excess of 20%. In one case, which came to our knowledge, a beach house was sold through a Chinese agent for EUR 1.8 mln, but the owner/seller would have received EUR 1 mln, with the remaining EUR 800,000 to be paid to the agent in a Hong Kong account.
Is this acceptable by the Tax Authorities – is it a commission at this percentage? Is it tax deductible? If the Tax Authorities do not agree that the EUR 800,000 is commission, then the seller will pay the capital gains on the total EUR 1.8 mln, let alone the danger of being accused of money laundering.
On another occasion, a Chinese agent asked us to buy a property in the Famagusta region for EUR 3 mln and to have the right to resell within six months at any price, with him getting the difference. He even asked that “his” purchase contract from the owner to be just one euro, to be deposited at the Lands Office and upon transfer to the “new” buyer to pay the EUR 3 mln. What a con indeed.
So, when a good measure which has provided the Cyprus economy with more than EUR 4 bln, might stand to be ruined, as a result of the greed and dishonest practices that some people come up with (local and foreign).
Notwithstanding the evident con-artists, some people get carried away by the promised huge gains and on a number of occasions sellers agree, dreaming on the thousands of euros in unexpected added income.
Another shocking story we became aware of is that the Registrar of Companies will accept any email that it receives regarding change of share ownership without checking if it is correct or not, fraudulent statements, etc (an example was an Ayia Napa company). As a result, some people may find that the shares they own in a company are no longer theirs. Is this possible for a country which aspires to become a financial centre? I cannot believe it will.
