Imposition of 0.4% Tax Levy on Sale of Immovable Property to Support Greek-Cypriot Refugees
In February 2021, the House of Representatives of Cyprus passed a law (Law 12(I)/2021) levying a 0.4% tax on all sales of immovable property whereby the proceeds would go towards supporting Greek Cypriot Refugees for their inability to possess, have access to, or otherwise gainfully use their land in the occupied north of the Republic. Reference to our article published on 15/02/2021 can be found on our website in Greek and English.
However, the law failed to specify how the tax would be levied and which government department would be responsible for its collection therefore it was rendered unenforceable.
In October 2022, the revised law was passed by the House of Representatives of Cyprus and the Tax Department has been designated as the responsible body to levy and collect the 0.4% tax on the sale of immovable property for the Central Agency for the Equal Distribution of Burdens.
The law has a retrospective effect, and the tax applies to all sales completed from 22/2/2021 onwards.
0.4 % tax is applicable on the sale price of the immovable property as well as the sale of shares of a company that owns an immovable property, and such transfer will result in the purchaser acquiring control of that company.
Some transactions may be exempt from the special levy, which is under discussion by the House of Representatives, such as in the case of; a restructuring of a non-performing loan as defined in the Capital Gains Tax Law, a company reorganisation as defined in the Income Tax Law, and the transactions took place between February 22, 2021 and November 18, 2022.
The obligation to pay the tax rests with the seller.
Tax Commissioner Soteris Markides announced that the tax department has sent out 37,000 letters to taxpayers concerning payment of this fee. This concerns an estimated €24 million to be collected and the proceeds generated go to a fund managed by the Central Agency for the Equitable Distribution of Burdens.
We have been informed by various clients of ours as well who have conducted transactions in mid to late 2021 that indeed they have received such letters. We did inform them at the time of the transaction of the existence of the 0.4% tax however when we made inquiries at the land registry and the tax department, we understood that there was no mechanism in place to collect this tax.
For further information please contact us via email at info@zambartaslegal.com or via telephone +357 22262108.