Very Moveable Property Tax Savings
Sam Orgill www.proactpartnership.com
Confirming the Cyprus Property Tax Savings for 2016 and More
In Cyprus the Tax payment year starts on 1st July, for the current calendar year. Around the start of June a budget and tax changes for the current year 2016 is proposed – with the idea that changes are passed to law by the end of June.
In 2016 we have the culmination and possible resolution of Cyprus Property Tax changes – but not as you imagined, or was proposed in 2016, 2015 or 2014. A fierce debate has raged in parliament and delayed voting until well into July, the outcome of the long term property tax plan is a further sign of the Cyprus government intention.
The very Movable solution are big immovable property tax savings for expats owning overseas property in Cyprus. You will be astonished at the changes in annual property taxes and title deed taxes.
As Cyprus introduces technology to its government, financial, tax and civil services then tax input has risen strongly, resulting in a position you may have suspected: taxes are too high in Cyprus. Cyprus is not burdened with an expensive welfare state or health service or military. Enabling Cyprus to be a low tax jurisdiction.
If the government can achieve a truly low tax, low cost, low bureaucracy economy then Cyprus will grow in the coming years. Good for business, good for property ownership in Cyprus.
2015 Immovable Property
In 2015 the government proposed to introduce new Immovable Property Tax (IMPT) rates based upon a 2013 revaluation of property in Cyprus. 2013 rateable values increased the base figure for property tax calculation by around 10 times ie 20,000 became 200,000
A new tax rate was proposed to leave the net effect the neutral for most….. but the exceptions felt their treatment unfair. The Parliament debates dragged on and in the end No change in IMPT for 2015. But the changes were to be implemented for 2016.
2016 Immovable Property
But the changes were not implemented at the start of the year. SO the tax office carried on charging. The proposals for the 2016 June budget were different again. To use 2013 rateable values but reduce by 50% IMPT. Again this was not agreed and well into July agreement was not reached. Local authorities and the tax office were set up form 1/7/16 to carry on and any IMPT change in 2016 was looking impossible again.
With a number of proposals, amendments, opinions, coupled with the states administration carrying on, and the clock ticking the legislature came up with a wonderfully concise solution that has resolved the IMPT conundrum.
Adopting the philosophy: If you cannot live with it, change it, if you can’t change it, stop doing it.
The Cyprus government stood back and took a different perspective cutting through all the debates.
IMPT Property Tax Saving Summary 2015 -2016 - 2017
The attempt to use 2013 Rateable Values abandoned
The taxable Bands do not change
2016 IMPT based upon 1980 Rateable Values
75% reduction in IMPT tax payable for 2016
2016 overpayments to date will receive the discount and receive a tax credit or cheque refund
25% tax reduction in IMPT retrospectively applied to 2015 IMPT paid
2015 are now being issued with the discount applied
2017 IMPT is ABOLISHED – IMPT to be no more
Penalties are still applied for late payments of IMPT, any payments after 31/12/16 will suffer a 10% tax penalty.
Property Transfer Tax
The 50% reduction in Property Transfer tax payable in 2016 has been extended indefinitely. So any applications for title deeds will still get the 50% tax saving if issue is after the end of year.
In addition those receiving title deeds now have the additional tax saving option of a further 10% for early payment.
Alternatively, the payment of tax can be deferred by up to 12 months without penalty. If Property transfer tax remains outstanding beyond 12 months then a 10% tax penalty is added.
This change allows those trapped in Cyprus property ownership to get their title deeds, then sell the property, using the funds to pay the Transfer tax at the sale.
Don’t get caught out. Since 2014 contract of sale owners, without title deeds, have been able to register and pay IMPT directly. This is always at a lower IMPT rate than the developers who pay at a rate based upon their total land holdings.
This is because developers pay an IMPT rate based upon the whole title deed of their development. This could be 3 times as much, 1.9% instead of 0.6%. So registering to pay IMPT direct if you hold a contract of sale gives a big tax saving on your overseas property.
Buyers only have to pay developers IMPT for previous years if their contract of sale explicitly states the buyer is responsible for IMPT.
While a tax rebate is available to buyers for paying IMPT to developers for previous years, this is only rebated if the contract confirms the liability, and the rebate will not include any IMPT tax penalty paid by the developer for late payment of IMPT from previous years.
ProACT assist clients to negotiate to pay the minimum IMPT in such cases on the principle IMPT is the tax of the title deed owner. Ask us how if you have not reclaimed IMPT paid to a developer.
Tax Saving Plans
What steps should the overseas property investors be taking to protect property assets from the taxman. Tax Changes make this a good time to review how best to protect your wealth and income. .
By gifting property to family, creating more owners, the overall IMPT rate for the property can be reduced, which means the family can save IMPT tax.
Gifts of Cyprus property to family can also avoid inheritance tax at up to 40% in the UK.
This process can also capitalise capital gains and reduce any potential capital gains tax of 20% on a future sale.
The gift can be made to a family member, Investment Company or a family trust that you can control and manage as you would with a investment or pension fund. Someone administers for you while you retain ownership.
Who can you trust?
In crusader days Knights would lock up their wife’s in a chastity belt and entrusted the key to a friend who was responsible for protecting his assets. This law became part of English law and is a basis of inheritance tax trust and estate planning.
Make a Will and Trust your family and friends to protect your assets on death. A Family Trust avoids Cyprus laws of succession. By creating a Family Trust today for Cyprus Property you could also make tax savings in capital gains, inheritance tax, IMPT and inheritance taxes on your death.
Look Forward – Plan Ahead
Overseas Property in Cyprus has become a better investment with lower property taxes in Cyprus. ProACT can offer help and guidance about the Movable Property Taxes for Expats . Asset Protection is about looking forward to make tax savings. ProACT expat experts offer tax saving for people living and working and investing abroad. Find out more at our website.
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