1.  Cyprus Taxes on Immovable Property* *connectedthinking Panikos N Tsiailis Partner Leader Tax & Legal Services PricewaterhouseCoopers 12 April, 2010 Nicosia

2. PricewaterhouseCoopers 12 April 2010 Event organised by RICS Cyprus - CIIM - POLITIS Slide 2 Income generated by corporations and individuals is taxed under: Cyprus Taxes on Immovable Property Income Tax Law ( IT ) Special Defence Contribution ( SDC ) Capital Gains Tax Law ( CGT )

3. PricewaterhouseCoopers 12 April 2010 Event organised by RICS Cyprus - CIIM - POLITIS Slide 3 When trade exercised – Tax on trading profit Income Tax Law Corporation tax at 10% for companies Upto income tax rate of 30% for individuals Income - Expenses Profit

4. PricewaterhouseCoopers 12 April 2010 Event organised by RICS Cyprus - CIIM - POLITIS Slide 4 Special Defence Contribution Rental income also taxed for SDC at 3% on 75% of rent Dividend distributions by companies SDC at 15% - Total tax 23.5% (combination of IT + SDC)

5. PricewaterhouseCoopers 12 April 2010 Event organised by RICS Cyprus - CIIM - POLITIS Slide 5 Capital Gains Tax Corporation taxed at 20% Individual taxed at 20% Note: Dividend distributions by company SDC at 15% - Total tax 35%. When trade not exercised: - Tax on CG profit Income - Cost/value 01.01.1980 Profit - Inflation

6. PricewaterhouseCoopers 12 April 2010 Event organised by RICS Cyprus - CIIM - POLITIS Slide 6 Comment Before 2003 tax reform, the tendency was to tax transactions by companies as trading (Corporate rate 25%) After 2003 tax reform the tendency is to tax transactions by companies as capital gains (Corporate tax 10%) Note: Both approaches purely based on effort to collect more tax. Remember CGT rate is 20%.

7. PricewaterhouseCoopers 12 April 2010 Event organised by RICS Cyprus - CIIM - POLITIS Slide 7 Immovable Property Tax Property value 1.1.1980RateAccumulated tax €%o%o € Up to 170.860 - - 170.861 – 427.1502,5641 427.151 – 854.3003,52.136 Over 854.3004,0

8. PricewaterhouseCoopers 12 April 2010 Event organised by RICS Cyprus - CIIM - POLITIS Slide 8 Immovable Property Tax, continued Tax payable 30 September each year Tax payable 30 September each year Property owned on 1 January each year Property owned on 1 January each year Value of property 1 January 1980 Value of property 1 January 1980

9. PricewaterhouseCoopers 12 April 2010 Event organised by RICS Cyprus - CIIM - POLITIS Slide 9 Immovable Property Tax, continued Additions must be declared still at 1 January 1980 value. For property which existed as at 1 January 1980 in the form being purchased valuations exist so no problem for the new owner. New property coming into existence after 1 January 1980 (new plots, buildings constructed) still need to be valued at 1 January 1980. Complications

10. PricewaterhouseCoopers 12 April 2010 Event organised by RICS Cyprus - CIIM - POLITIS Slide 10 Immovable Property Tax, continued Buildings constructed after 1.1.1980 for which no building permit issued cannot be identified to be taxed. Very difficult compliance procedures.

11. PricewaterhouseCoopers 12 April 2010 Event organised by RICS Cyprus - CIIM - POLITIS Slide 11 Some ideas for simplification Capital gains tax Abolition of the tax All transactions treated/taxed under income tax (sale proceeds less cost) For individuals only some relief for the tax payable with a ceiling

12. PricewaterhouseCoopers 12 April 2010 Event organised by RICS Cyprus - CIIM - POLITIS Slide 12 Some ideas for simplification, continued Simplification for the tax payer who submits one tax return per year. Simplification for the tax authorities who receive one tax return per year. Freeing of employees at the tax office to work on more serious matters like tax evasion. Result:-

13. PricewaterhouseCoopers 12 April 2010 Event organised by RICS Cyprus - CIIM - POLITIS Slide 13 Some ideas for simplification, continued All additions for which no valuation exists to be declared at cost less the inflation since 1 January 1980. Declaration to be made with the income tax return which will be designed appropriately. Immovable property tax

14. PricewaterhouseCoopers 12 April 2010 Event organised by RICS Cyprus - CIIM - POLITIS Slide 14 Some ideas for simplification, continued Result:- Simplification for the tax payer who submits one tax return per year. Simplification for the tax authorities who receive one tax return per year. Freeing of employees at the tax office to work on more serious matters like tax evasion.

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