Cyprus is poised to debate the introduction of a new “Mansion Tax” targeting high-value properties, following a similar move announced in the UK. The proposal, put forward by AKEL MP Stefanos Stefanou, seeks to impose an annual tax of one per thousand (0.1%) on all immovable property valued at €3,000,000 or more.
The draft bill is anticipated to be discussed in the House of Representatives early in the New Year, after lawmakers return from their holiday break, once the government’s broader tax reform package has been finalized.
Aims: Fairness and Social Funding
The explanatory memorandum accompanying the proposed bill outlines the tax’s dual purpose: to create a more equitable and socially responsible tax system and to generate revenue for critical public needs.
-
Social Cohesion: The tax revenue would be allocated to support vulnerable populations and small and medium-sized enterprises (SMEs), thereby promoting social cohesion and sustainable economic development.
-
Tax Reform: The Mansion Tax is presented as a component of a wider legislative initiative aimed at reducing the financial burden on households and correcting existing inequalities within the current tax framework.
-
Historical Context: The proposal appears to be a successor to the defunct Immovable Property Tax (IPT), which was abolished in 2017.
Mechanism and Compliance
The proposed mechanism for the new tax is designed for efficiency, incorporating both penalties and incentives:
-
Tax Rate: 1‰ (one per thousand) on the property value exceeding €3,000,000.
-
Payment Incentives: A 10% discount would be offered to those who pay the tax at least 30 days before the stipulated deadline.
-
Penalties: Late payments would incur a 10% surcharge on the tax owed.
-
Collection Threshold: The tax would not be collected if the owed amount is €10 or less.
-
Method: All payments would be made electronically.
Addressing Past Property Tax Issues
The article notes that any new property tax must proactively address legacy issues that plagued the former IPT system. Previously, unscrupulous developers often failed to pay the IPT on time, subsequently demanding that homebuyers cover the tax, plus interest and penalties, before transferring title deeds.
Should the new Mansion Tax be adopted, it is hoped that the legislation will incorporate safeguards, similar to those introduced with the help of the Troika, which shifted the responsibility for paying IPT to buyers upon taking delivery of the property, thus protecting consumers from being held hostage by delinquent developers.
Source: Property News Cyprus