Shock Cyprus Property Taxes May Hit Holiday Homes

The front page of the  Cyprus Weekly On Line for 31 December 2009 carries the headline “Tax Assault” referring to the Cyprus Budget announcement of a range of fiscal measures to deal with a deficit of euro 500 million.

Initially property analysts had interpreted the Minister’s original descriptive announcement where he said ” this package will introduce higher tax on property property other than a home by adjusting valuations on real estate unchanged for 30 years” as meaning that there would be no new Cyprus property tax on ANY home owners.

But Mr. Averof Neophytou, the Vice President of DISY according to Stockwatch, Cyprus said “the values of land in 2010 are 20 times higher than those of 1980 and this means that the Cypriot citizen that currently pays a tax on real estate of €1 thousand, next year he will be called to pay €20 thousand”.

It remains to be seen if the Cyprus Government see those EU Citizens or even Cypriot Nationals who have a second home as the rich because the Minister also said “The burden of this economic crisis should be borne by those who have. That means the rich.” Relative to ordinary Cypriots these small investors could conceivably be seen as rich. With the Government having not seen the title deed situation as serious, relying on yet another planning amnesty in the judgment of many property analysts and protest groups such as CPAG, anything is possible and cannot be ruled out !!  

Unless the Cyprus Government clarifies the position very quickly this could stimulate the sort of panic selling that was seen in Spain and Dubai and defaults that could cause a catastrophic property crash from which the Cyprus economy could never recover  from and small investors who would never, ever trust Cyprus again.

 This would be especially damaging as many thousands of small investors still have no great certainty that title deeds will be issued because the reforms promised by the Republic of Cyprus to the UK Government look like falling well short of the fundamental property system changes  that are needed for title deeds to be safeguarded and issued to UK and EU standards restoring the confidence that has been lost in the minds of many who have invested their life savings in Cyprus.  Many investors are still frightened that mortgages taken out by developers before the title deeds are issued could leave them penniless or bankrupt if developers crash owing billions to Cyprus Banks.

Here is the  Cyprus Weekly article so Readers can draw their own conclusions. The situation is far from clear but there are warning signs that if such a measure does not come in right now then it might be deferred if  the Cyprus economic deficit does not recover. 

“Opposition claims that the government are reneging on a no new tax promise by hitting property owners was denied by Finance Minister Charilaos Stavrakis yesterday.

The Cyprus Government was accused of “tax grabbing” from ordinary Cypriots and damaging a struggling property market with its plans to review real estate prices of multiple property owners.

DISY said the measure would hurt 90% of Cypriots who will be paying 20 times more in property tax under the proposed re-evaluation system. Developers and estate agents have warned against any additional burden that would frighten buyers in an already depressed market partly responsible for the economic slide.
 
Stavrakis tried to allay fears of a tax rip-off by saying that overhauling the system is aimed at large organisations,companies and individuals with “huge” property portfolios. “The burden of this economic crisis should be borne by those who have. That means the rich.”

He said the claim that most Cypriots would be affected was “misleading”.

The Cyprus Government is seeking a €500m revenue boost to stave off an escalating deficit.”

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