New property tax not justified

2 mins read

A new property tax was introduced in February 2021, but because of a mess up at the House of Representatives, the tax was actually introduced in October 2022 and refers to a tax of 0.4% (four per thousand) on the sales price of a property.

The responsible person to pay is the seller and prior to the transfer of a title from the seller to the buyer, the first must secure the tax allowance of such payment by the seller.

It is a fact that real estate is, in my opinion, heavily taxed and it is an easy way for any government to make money, since it is there for taxing with no easy way to avoid.

Another property tax at this point of time, is not justified, be it that the promoters of this tax support that the income collected will be used to compensate owners of real estate lost in the Turkish occupied areas.

The law states that the declared price of the sale is the one which should be taken into account and/or the assessed value by the Lands Office (including taking into account the value assessed by the Lands Office for taxation purposes).

There is some sort of a confusion as to when the tax applies due to a mess up by the procedures in the House, but nevertheless the confusion seems to extend to what is the date of sale.

From our information (be it that a reply by the tax authorities is pending to us) the Tax Authority takes the sales date as that of transfer, notwithstanding that the initial sale took place several years before (and thus being outside the law and is tax exempt).

The tax is not particularly high on its own, but taking into account all other taxes related to real estate, it adds to the total tax burden.

Important for developers

This tax is of particular importance to developers (as well as to private individuals and others) who may charge the buyer for this, in order to recover their loss.

The theory of taxing the sellers who (according to the MPs) gained a lot in terms of increased value as a result of the Turkish invasion seem to ignore that at the end the seller will pass on this property tax to the buyer, especially at times that the government is trying to introduce measures to curtail the increasing prices in real estate and especially that of housing.

The tax applies to real estate as well as the sale of such in a company’s share.  In this way it becomes more complicated since an A seller sells to B real estate in company’s shares and then B sells to C in the same manner (thus paying both the same tax? – not clear).

When one examines the taxation on real estate, it starts from the tax for VAT (19% or 5% for the second home for own use), the transfer fees (around 5-8% depending on the value), whereas municipal taxes (including more recently the taxation for cemeteries – even by owners who are foreign and will not use this facilities), the capital gains and income tax in case of a resale etc.

If we are to project this to other refugee losses, such as loss of private property or business, cars, etc in theory, at least, it should apply to goods and any household items and not only for real estate, so where does this end?

A messy situation not easily resolved creating at the same time all sorts of odd side effects.



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