Do IPT 1980 valuations vary year to year??

[rlbenson]

Hello;
We've just returned from the tax office to get our IPT tax clearance forms in prep for receiving title deeds. And we got a nasty surprise that we'd appreciate some input on.

In 2014 and 2015 when we've gone to pay our IPT we have fallen under the 12,500 threshold (two co-owners each under that threshold) and had no payment due. Since 2016 IPT was supposed to be based on 2015 we expected the same outcome. Instead we were told that now we both have a responsibility for 14,250 so need to pay. So the 1980 valuation was different than 2015. But in addition, they said that this also applied retroactively for 2014 and 2015 and that we had to pay those years also, plus penalties and interest! Since our title deeds are imminent and we know that a new valuation has recently been done by the Land Registry, we guessed this was the reason, even though we've never come across anything hinting at this re-evalutaion affect previous years retroactively. So we went down and paid the total so as to get our necessary tax clearance.

Now after being able to sort through all the papers and receipts we (a) wonder why the 1980 valuations in 2014, 2015 and now 2016 are different, and (b) absolutely feel the penalties and interest are completely wrong since they themselves said there was no obligation for 2014 and 2015. We plan to go back next week when things are less hectic to double check this at the Tax Office and hopefully at least get back the penalties and interest. It wasn't all that much in the greater scheme of things, but it just seems wrong.

In any case I would very much appreciate to hear if any others here have had a similar experience ala retroactive increase in 1980 valuations and/or advice in such a situation.

For the record, each of the three years had exactly the same IPT due. So it seems that from their computer's point of view, we had simply not paid any IPT so owed for three years (based on this somewhat higher 1980 valuation), hence penalties and interest for 14 and 15. For 2014 we have a signed valuation form saying 'no obligation'. For 2015 we only have our own notes - they just shooed us away from the window saying we owed nothing (long queues!).


~rlbenson

[Maramike]

Similar thing happened with us. IPT for both 2014 and 2015 was assessed by the Revenue as below the threshhold, so 'nil' to pay. Our Developer in the meantime submitted an updated 1980 value prior to release of deeds.
Went to pay for 2016 and lo and behold the increased 1980 value magically appeared. I was required to pay retrospectively for 2014 and 2015 on the 'new' value plus late payment and interest charges! I also paid 2016 on the 'new' value with the 75% discount.
The only consolation is that I will not have to worry about it in the future - unless of course a new Bill is passed!

[Nigel-Howarth]

Hi rlbenson

The 1980 value of your property shouldn't vary.

Buyers without deeds were first required to pay IPT directly to the Tax Dept in 2014. At that time the Tax Dept assessed the 1980 value of a property based on its physical characteristics - size, location, etc. - and purchasers paid IPT based on the Tax Dept's assessment.

The Tax Dept created a file for each taxpayer so that any under/over payments could be resolved when the Title Deeds were finally issued at which time the Land Registry would assess a property's 1980 value based on its historic data.

Unfortunately it seems that you've lost out on this.

What type of property do you have?

Regards,

[rlbenson]

@Maramike – That's exactly the same experience, alright. Thanks for letting us know.
Our values are actually different for all three years. The 2014 form came from our developer and it was probably their estimate of the value. The 2015 form cam from the tax office via the developer and we've been told that this one has a value set by the tax office at that time. So I can understand that being a bit different. And for 2016 we see yet another value, this time kicking us just over the limit.

I can understand and accept the value fluctuations given the incredible turmoil around taxes/finances here the past few years. But the retroactive bit resulting in penalties and interest is simply wrong in my book. Adjusting value, maybe, being penalised for it when we've complied top to bottom is very hard to accept. Like I said, it is not that much money – its the unfairness.

@Nigel – We've got a 3-bed townhouse in a large development about 8 years old. New (market?) value on the clearance form is very close to max we could expect to sell it for....if we were lucky.

[Nigel-Howarth]

@Nigel – We've got a 3-bed townhouse in a large development about 8 years old. New (market?) value on the clearance form is very close to max we could expect to sell it for....if we were lucky.

I don't think the 1980 value of your property from the Land Registry is unreasonable - and I agree that you shouldn't be fined. The value of the clearance form will be the taxable value, not the market value.

Regards,

[rlbenson]

Thanks Nigel. There are two values on the clearance form - one listed as 1980 and one as 2013. So I guess that both are tax values. Some countries have a rough formula that the valuation for tax purposes is ± a given % of market value. Any such rule of thumb here now that new values are being done?

[Nigel-Howarth]

Hi ribenson

Yes - they are both tax values although the Department of Lands & Surveys refers to them as 'general values':

"New General Valuation Methodology at 01.01.2013 Values

1. VALUATION METHODS

The new General Valuation has been based on the internationally recognized valuation methods, which are used across Cyprus, i.e. the "Comparative Method," the "Development Method" and the "Cost Method". The said methods are recognized by various standards, such as the European Valuation Standards, the International Valuation Standards and the RICS Valuation - Professional Standards. The publication "Guidelines for International Mass Valuations and relevant Taxation Policy" of the International Association of Assessing Officers – IAAO has also been taken into consideration.

The correctness of the valuation methodology applied by the Department of Land and Surveys (DLS) in conducting the new general valuation at 01.01.2013 values, has been confirmed through a study undertaken by experts of the International Monetary Fund, who were assigned to the task following a request by the Department, and implemented through a Technical Support Team of the Troika. The report is dated January 2014 and bears the title: Implementation of the General Valuation for Immovable Property Tax.

2. DEFINITION OF "VALUE OF GENERAL VALUATION"

The new general valuation at 01.01. 2013 values has been carried out on the basis of the current legislation, i.e. on the basis of Part VII – Valuation of Immovable Property (Tenure Registration and Valuation) Chapter 224 of the Laws. The definition of "Value of General Valuation" and the definition of "value" are given in Article 2 of the law as follows:

"value of general valuation" in relation to immovable property ownership means the amount that arises from the conduct of a general valuation or re-evaluation or review of general valuation, which is the closest possible to the value.

"value" in connection with immovable property, means the amount which the immovable property if sold in the open market by a willing seller to a willing purchaser might be expected to realize

It should be stressed that the definition of "Value of General Valuation" must be construed in combination with the provisions of article 69(1), whereby the Governors in Council decides that a General Valuation be carried out for the purpose of securing an up-to-date and uniform valuation of the immovable property. A "uniform" valuation means that a group of immovable property of similar physical and legal characteristics are expected to have a similar Value of General Valuation.

The word "uniformity" is a key one revealing the difference between a General Valuation and a specialized assessment, the latter being used for specific property and for a specific purpose.

It must be noted that the General Valuation conducted by the DLS may be used only for taxation purposes. In the case where a land owner or other interested person needs a valuation for other purposes, such as for raising a loan, forced sale, investment, purchase or sale of real estate, then he/she should consult a specialized expert valuer, Member of the Cyprus Technical Chamber (E.T.E.K.).

3. GENERAL VALUATION PROCEDURE

The New General Valuation has been based on the physical and legal characteristics of the immovable property as they are concisely described below:

a) Physical and legal characteristics of immovable property

In regard to land the following characteristics have been used:

Type of Property
Area
Planning Zone
Location
Kind of access
Relation to the road
Shape

In regard to buildings the following characteristics have been used:

Type of Unit
Area of Unit
Year of construction
Year of substantial renovation
Category (luxury, etc.)
Condition
View

b) Adopting land and building value per square metre

With a view to adopting the above values, a survey and analysis have been undertaken in all geographical areas for each planning zone and type of immovable property, taking into account the following:

Comparative Sales in recent years that are being kept in the records of the DLS, with corresponding temporal modifications where necessary.

Internal valuations of the DLS at the material time, including all valuations undertaken in regard to state ownership on the basis of the Memorandum of Understanding provisions.

A market survey undertaken both as regards the sale of various buildings and the construction costs per district, in cooperation with land developers, quantity surveyors and other specialists of the construction sector.

A survey on the construction costs of buildings, carried out in cooperation with the Quantity Surveyors Sector and the Public Works Department.

Analysis of annual statistical data of construction costs for each kind of building in the last years as published in the annual report of the Statistical Service.

Taken into consideration were various surveys regarding market tendencies and the real estate price indices, such as those by the Central Bank and RICS Cyprus.​​

The General Valuation was carried out by the DLS, which is the competent state agency for the conduct of valuations for any purpose. The computer assisted mass appraisal system - CAMAS owned by the Department was utilized, preceded by all necessary analyses and market surveys. The application of similar Computer Assisted Mass Appraisal Systems is used by a number of countries worldwide, due to the advantage they offer of conducting automated mass appraisals in a very short time, thus saving time and reducing costs for the citizen.

The results of the General Valuation at 01.01.2013 values have been assessed by competent officers of the Department in respect of price uniformity and fluctuation, taking into account the current state of the real estate market. The DLS has done its best to ensure that the Values of the General Valuation at 01.01.2013 values that have been assessed are uniform and close to the market value.​"

I hope that answers your question

Cheers,

[rlbenson]

Whoa!... Thanks! (I think)
They certainly go out of there way to convince us that it is done by competent people, with competent systems, that are used by others (so they must be OK), that are fair and accurate, etc., etc. I think Shakespeare said something about this: "The lady doth protest too much, methinks."

Anyway, to close this out, we went back to the tax office today to protest the retroactive aspect and especially the penalty and interest. Needless to say, to no avail. But the person did understand when I said that we've made every effort to comply in good faith every year with our IPT which has been 'no payment due'. Now, in the computer's eyes (and in our file) it is that we are no different than a person who simply avoided paying at all - a completely unfair black mark against our name. "That's how the computer does it."

They have, probably rightly, shifted the responsibility to the developer who has (wrongly) estimated the values for '14 and '15 which showed us under the minimum – hence no payment due. And now with the absolutely accurate and computer controlled re-valutaion it turns out we are over the minimum and hence need to pay up this year and back years also. So the hidden message is that the developer should at the very least foot the penalty and interest instead of us. Riiiiight!

Never a dull moment regarding property in this part of the world.

Thanks again Nigel for all your diligence and good work helping all of us minimise bruising as we bang our way through this maze.