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Cabinet approves new property taxes
THE CABINET yesterday approved new immovable property tax (IPT), which exempts property of up to €40,000 at 1980s values, but also scrapped the tax-free threshold.
This means that if a property was worth €50,000 at 1980 levels, the tax will be charged on the full €50,000 and not just the €10,000 difference.
The bill, which will be submitted to parliament today, is in line with a preliminary bailout agreement and could fetch the government some €120 million in 2013.
The government expects to collect at least €90 million, meeting its obligation to international lenders, it said.
Speaking after the cabinet meeting, government spokesman Stefanos Stefanou said this was essentially a transitional tax since the state must update values in 2014 to be in line with current market prices.
According to the bill, properties worth up to €40,000 in 1980s values would not be taxed.
Stefanou said around 262,000 people and some 8,500 companies would not have to pay. “This means that 76.9 per cent of property owners will not pay property tax,” said Stefanou.
"The price of real estate throughout Cyprus has mushroomed since 1980, For statistical purposes, on average, real estate values have increased seven or eight times over. So when we talk about a house worth €40,000 in 1980, its current value will be around €300,000, maybe more depending on the exact location. But the government’s effort was to ensure that the largest percentage of average homeowners would be tax-exempt,” he added.
According to the new rules, properties worth more than €40,000 and up to €120,000 will be taxed at a rate of 4.0 per thousand on the full amount, without subtracting the tax-free €40,000.
This means that around 61,800 owners, 18.45 per cent of people will pay between €257 and €480 per year, Stefanou said.
From then on: between €120,001 up to € 170,000, the tax rate will be 8.0 per thousand, an average of €1,127 and a maximum of €1,360 per year. Stefanou said this would affect 1.6 per cent of property owners.
At the next stage – properties worth between €170,001 and €300,000, the tax rate will be 12 per thousand, which will affect around 3.657 owners who will have to stump up on average €2,592 to a maximum of €3,600 per year.
For properties worth between €300,001 and €500,000, the tax rate will be 15 per thousand, affecting 998 owners who will pay on average €5,580 with a maximum set at €7.500 a year.
Some 315 owners whose properties are valued between €500,001 and € 1.0 million will pay 18 per thousand, or on average €12,000 with a maximum of €18 000.
Those who have properties worth more than €1.0 million will be taxed at the rate of 20 per thousand. Around 35 people with properties worth up to €3 million will be affected, Stefanou said with the tax per annum coming to €28 000 on average and a maximum after of €60 000 a year.
The tax will be applied on the total value of the property in someone’s name.
Previous draft legislation, scrapped after an uproar by hoteliers and other large property owners, had taken the 1980s value and applied the consumer price index – around 3.5 per cent – before calculating the new tax.
It provided that the first €150,000 would be tax-free. From then on: €150,001- €500,000 coefficient of 6.0 per thousand, €500,001- €1,000,000 coefficient of 8.0 per thousand, €1,000,001 and above coefficient of 10 per thousand.