The Immovable Property Transfer Levy (IPTL) in Cyprus was introduced in 2021 with the aim of raising funds to support Cypriot refugees who were forced to leave their homes after the Turkish invasion in 1974. This levy, introduced by Law No. 12(I)/2021, has become an important element of the Cypriot tax system, affecting all real estate transactions. The purpose of the levy is to create a fund to assist these individuals by taxing property transactions across the Republic of Cyprus.
Contents
Key Aspects of the Levy
Scope and Tax Rate
The IPTL applies to the sale or transfer of any immovable property within the territory controlled by the government of the Republic of Cyprus. The levy also applies to the transfer of shares in companies that own immovable property if such a transfer results in the buyer gaining control of the company or utilizing the property. The tax rate is 0.4% of the sale price or the latest valuation of the property. For example, if you sell a house for €200,000, you would need to pay a tax of €800.
Exemptions and Important Considerations
There are certain exemptions from the IPTL. For instance, certain property transfers, such as loan restructurings, are not subject to this tax. Exemptions may also apply to specific transactions if they meet the criteria established by law or subsequent amendments. It is also important to note that the tax has retroactive effect — it applies to all transactions conducted from February 22, 2021.
Taxpayer Responsibility
The responsibility for paying the levy lies with the seller of the property or shares. This is a crucial aspect that sellers need to consider when planning real estate transactions, as the levy can significantly impact the overall transaction cost.
Purpose of the Levy
The funds collected are directed to the Central Agency for the Equal Distribution of Burdens, which supports refugees who lost their homes as a result of the Cyprus conflict. Thus, the levy serves not only a financial function but also a social one, supporting affected communities.
Legal and Administrative Aspects
The payment of the IPTL also involves certain administrative procedures. After completing the transaction, the seller must remit the levy to the relevant tax authority. It is important to note that this levy must be paid on time; otherwise, the tax amount will be considered a civil debt subject to court enforcement, which could lead to additional expenses and legal costs.
For companies owning immovable property that transfer shares, it is important to understand that the IPTL is levied based on the latest valuation of the property. This valuation is conducted by the Cyprus Department of Lands and Surveys, and the result can significantly affect the amount of tax due.
Impact on Real Estate Transactions
The introduction of this levy adds a financial burden to the property transfer process that sellers must consider. Although buyers are not directly required to pay this levy, its existence can affect the terms of the transaction and the final purchase price.
The Immovable Property Transfer Levy is an important aspect of Cyprus’s real estate legislation, directly impacting the conduct of property transactions. For anyone involved in the sale or transfer of immovable property or shares in companies related to real estate, it is crucial to have a good understanding of this levy to ensure compliance with the law and avoid potential legal consequences.
For more detailed and specialized advice, especially in complex transactions, it is recommended to consult legal experts specializing in Cypriot real estate law.
