the need for an up to date valuation of properties in cyprus

Conference and Plenary Meeting of the PCC in Cyprus

The need for an up to date Valuation of Properties in Cyprus

Speaker: Kyriakos TsolakisLimassol District Lands Officer and

Coordinator of Valuation and Management of State Land Branches

www.dls.moi.gov.cy, [email protected] [email protected]

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http://www.dls.moi.gov.cy/


TABLE OF CONTENTS

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1. Introduction2. Purpose of General Valuation3. Historical background4. Major Provisions of General Valuation Law5. The CAMAS in the Valuation Section6. The Proposed Project7. Current issues and externalities8. Benefits to the Society


1. Introduction

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Area:9,252 KMArea:9,252 KM22

Population: 877,800Population: 877,800

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Introduction (cont.)

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MILESTONES OF THE CYPRUS REPUBLICMILESTONES OF THE CYPRUS REPUBLIC

1960 – Independent State1960 – Independent State1974 – Invasion and occupation of 36% of the territory 1974 – Invasion and occupation of 36% of the territory of Cyprus by Turkeyof Cyprus by Turkey

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Introduction (cont.)

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1.5.2004 Member of the European Union1.5.2004 Member of the European Union

1.1.2008 Accession to EURO Currency1.1.2008 Accession to EURO Currency

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2. Purpose of General Valuation2. Purpose of General Valuation

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THE BASIS FOR ALL PROPERTY TAXES IN CYPRUS

Immovable Property Tax Municipal Tax Communal Tax Sewage Tax Capital Gains Tax Grants and Benefits

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3. Historical Background

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11stst General Valuation General Valuation • Initiated in 1909 after the introduction of the

Immovable Property Tax Law No. 12/1907

• The Law provided the General Surveys, Registration and Valuation in 20 yrs time

• Completed in 1929 with a Special Law No. 227/1926)

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Historical Background (cont.)

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22ndnd General Valuation General Valuation – – Based on Based on 1.1.19801.1.1980

• Implemented and based on the Immovable Property (Tenure, Registration and Valuation) Law, Cap. 224, 1.9.1946

• Order issued by the Council of Ministers- P.I.N 2/1982

• Completed in 12 years

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4. Major Provisions of General Valuation Law

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Immovable Property Law {S.2 (1)}

land

Buildings and other erections

Water rights

Undivided shares

Privileges

Liberties

Easements

Rights restricting the use

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Major Provisions of General Valuation (G.V) Law (cont.)

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Part VII – General Valuation, Cap. 224Part VII – General Valuation, Cap. 224Section Section 66 – 66 – Valuation of Imm. PropertyValuation of Imm. Property • Valuation can be conducted when decided by the

Director or when requested by the registered owner• Determine provisional value for taxes and fees

purposes. The Director has the right to revise the value

• The valuer shall comply with the values situated in the same, neighboring or similar area

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Major Provisions of (G.V) Law (cont.)

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Section Section 67 - 67 - RevaluationRevaluation After 5 years from the 1After 5 years from the 1stst Valuation, it can be conducted Valuation, it can be conducted a)a)When decided by the Director or through an When decided by the Director or through an

application of the registered ownerapplication of the registered ownerb)b)Revaluation can be conducted in less than 5 yrs if :Revaluation can be conducted in less than 5 yrs if : There is substantial reconstruction Erection of Building Demolition of Building that affects substantially the value of the propertyc)or a new G.V is Ordered under Section 69new G.V is Ordered under Section 69

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Section Section 68 - 68 - ValuersValuers (1)Valuation or Revaluation – conducted by valuers

who are appointed by the Council of Ministers(2) Shall take an Oath in Court

Section Section 69 - 69 - G.V of Imm. Property G.V of Imm. Property (1) The Council of Ministers may Order a G.V for the

purpose of securing up –to –date Uniform Valuations29/11/2012


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Section Section 72 – 72 – Undivided Shares Undivided Shares a) Value is based on the whole share

b) Property can be valued through an application of any one or more co owners

c) Objections by one or more co owners d) The Director’s decision or the Court is decision for any co

owner, is applicable for the whole share


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Section 73 – – Valuation/Revaluation is valid until it is changed

Section 74 – – Written objection to the value of any property against the Director’s decision, indicates a fee of €17.

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The CAMAS in the Valuation Section

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(i) Computer Integrated Land Information System

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The CAMAS in the Valuation SectionValuation Models

Direct Comparison Method Direct Rental comparison Method and Income

capitalization Land Models (residential, Commercial, Industrial,

undeveloped land, agricultural land) Unit Models (residential, tourist establishments,

schools, hospitals/clinics, livestock) Base Cost Models ( commercial, industrial)

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6. The Proposed G.V. Project

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Medium Term Plan (2 - 4 years)Medium Term Plan (2 - 4 years)I. Property field data captureII. Data input into CAMASIII. Continues updating of dataIV. Mass Appraisal of propertiesV. Notification to the taxpayers and right of objection

through the DLS websiteVI. Interchange of data with all relevant central and local

authorities

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The Proposed G.V. Project (cont.)

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Existing statistical data for data capture

Approx. 1.664.740 registrations, or 2.100.000 subproperties

Approx. 645.000 residential units, 100.000 commercial and tourist establishments units

Existing human resource is inadequate to implement this project

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Data Capture Strategy

Methodologies: From internal and external sources of information of the Department and 3D aerial photography

Data capture of vacant land

(600.000)

Data capture of buildings(750.000)

The data capture of properties can be divided into two subprojects

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Field Data Capture using latest technologies

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http://www.google.com/imgres?imgurl=http://www.southernmapping.com/Images/Methodology/lidar_tech.gif&imgrefurl=http://www.southernmapping.com/methodology.php&h=194&w=200&sz=10&tbnid=IIbYl1JQxsltiM:&tbnh=100&tbnw=103&prev=/search?q=LIDAR+technology+photos&tbm=isch&tbo=u&zoom=1&q=LIDAR+technology+photos&usg=__CIJmDTk7b3vuUVhGPed4J2kGgXE=&docid=0ruiky5HgFrfNM&sa=X&ei=DzOiUNrSM_SQ4gT8w4CYDQ&ved=0CC8Q9QEwAA&dur=1795


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The Proposed G.V. Project (cont.)Required Resources for Data Capture

Temporary staff (400 persons), Cost € 12m Permanent staff for maintaining new buildings (40 persons), Annual cost € 700.000 Ancillary Costs: Rents, equipment, peripherals etc. €

2mRequired Resources for General Valuation

Permanent staff (60 persons), Cost € 8m Ancillary Costs: Rents, equipment, peripherals etc. € 2m

Time HorizonData Capture: 2 Yrs General Valuation: 2 Yrs

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Cost/Benefit Analysis

Income versus Costs: Net Present Value €30m after the completion of the new General Valuation in 4 yrs timePayback period of loan 4yrs

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• The project of General Valuation requires effective and The project of General Valuation requires effective and efficient management of resources to be successfulefficient management of resources to be successful

PlanningPlanning OrganizingOrganizing LeadingLeading Staffing Staffing ControllingControlling

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7. Current Issues and Externalities

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The existing basis of property taxation on 1.1.1980 prices is out of date (32 yrs old)

It produces injustice between the citizens The current system is outdated compared with modern

best practices of advanced economies Inefficient and ineffective to support new kind of taxes

(e.g Development land tax, Environmental tax, Wealth tax, Grants and benefits)

Incapable of supporting decision making in central and local government finance and tax policy matters

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Current Issues and Externalities (cont.)

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Incapable of supporting effective Land Policy and promoting transparency and efficiency in the Property Market

Tax Rates The tables below, display how property tax on 1.1.1980

prices has changed to increase revenue:

Scale of Property Taxon 1.1.1980 prices

Tax Rate

€1– €170.860 0‰

€170.861- €427.150 2,5‰

€427.151 – €854.300 3,5‰

€8543001 και άνω 4‰

Historical Scale of Property Tax

on 1.1.1980 pricesTax Rate

€1– €120.000 0‰

€120.000 – €170.000 4‰

€170.001 – €300.000 5‰

€300.000 – €500.000 6‰

€500.000 – €800.000 7‰

€800.001 =< 8‰

Expected Revenue 27,7 m

Existing (as at 1.1.2012) Scale of Property Tax

on 1.1.1980 pricesTax Rate

€1– €40.000 0‰

€40.001 - €120.000 3‰

€120.001 – €170.000 4‰

€170.001 - €300.000 9‰

€300.001 - €500.000 10‰

€500.001 - €800.000 11%

€800.001 =< 12%

Expected Revenue 56,7

Proposal

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8. Benefits to the Society

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1. Budget Effects Increase revenue at Central and Local Level

2. Market Effects Improve information and minimise inefficiencies of the

Property Market Secure transparent and efficient investment property

markets Administrative tool in monitoring trends of the property

market, exposure to mortgage risks and overheated markets

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Benefits to the Society (cont.)

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3. Fiscal Policies Assist government in planning and implementing fiscal

policies Assist government in implementing Property Indices

and Performance Measurements Assist in promoting new and effective Tax Policies.

4. Fairness and Equity Secure Uniform Tone of the Valuations and achieve

just and fair Property Tax for each citizen

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Benefits to the Society (cont.)

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5. Administrative Effects Administration cost of property tax system can be

minimized The Property tax system can be simplified and made

more flexible to meet the needs of the changing environment

Achieving certainty of property tax payments by the taxpayers

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Thank you for Your Attention

2929/11/2012

the need for an up to date valuation of properties in cyprus

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