I am interested in purchasing my first property, what tax is due by first-time buyers?
Any document involving a transfer attracts a 5% stamp duty on the sale price of the property. Therefore, the default rate is 5%. However, there are instances where the duty is reduced to 3.5%. A purchaser is eligible for this reduced duty if (1) no Acquisition of Non-Residents permit is required, and (2) the purchaser acquires the immovable property for the purpose of establishing therein his or her sole ordinary residence. In such a case, the purchaser would be liable to pay 3.5% duty on the first €150,000 of the purchase price and the balance will attract a 5% duty.
Furthermore in accordance with 2014 Budget measure on Exemption of Duty for First Time Buyers the below applies:
First-time buyers who have never owned any immovable property, directly or indirectly, prior to the 1st January 2014 will be exempt from paying duty on the first €150,000. This one-time benefit applies to those deeds published on or after the 5th November 2013 and ends on the 31st December 2014. Purchasers may only benefit from this exemption if the promise of sale has been registered on or after the 1st July 2013.
When should the tax be paid?
A provisional payment equivalent to 20% of the total stamp duty is to be paid upon the registration of the promise of sale. The remaining 80% is to be paid upon the signing of the final deed of sale.
Should a promise of sale be registered for it to be valid?
Yes, a promise of sale is not valid unless it is registered with the Commissioner of Inland Revenue with 21 days of its signing.
What are the duties of a Notary Public during the period between the signing of the promise of sale agreement and the signing of the contract of sale?
The main duties of a Notary Public include carrying out all necessary searches, advising the potential buyer/s as to the legal title of the immovable property being purchased, ensuring that there are no hypothecs or outstanding debts on the immovable property, and also of keeping both parties informed and involved throughout the whole process. Once all the searches have been carried out, the legal title has been proved and all the conditions of the promise of sale (for instance, conditions relating to bank loans, building permits, AIP permits, and so on) fulfilled, the contract of sale is published by the purchaser’s Notary, who then has the obligation of registering the contract with the Public registry within 15 days from the date of the contract.
I intend to sell my current residence, is any tax due?
If you have owned and occupied the property as your own residence for a period of at least three consecutive years, then you are exempt from paying Property Transfer Tax (PTT). If not, you will be liable to pay PTT at a rate of 12% of the transfer value, unless there are other circumstances which would qualify the transfer for a different rate.
I intend to sell a property which I had inherited, is any tax due?
If the property was inherited after the 24th November 1992, then PTT shall be chargeable at 12% of the excess of the transfer value over the acquisition value. On the other hand if the property was inherited before the 24th November 1992, then PTT shall be chargeable at 7% of the transfer value.
I purchased a property less than 12 years ago and I intend to sell it. However, I have never resided in this property. Is any tax due?
In such a case, you may opt either to pay PTT at rate of 12% of the selling price or instead pay Capital Gains Tax. However, where there is an element of a project as defined in the law, the method of taxation of the first sale of property forming part of the project shall apply also to all subsequent transfers of the property forming part of that project, as long as they are sold within 12 years from the date of acquisition. A project is defined as a ‘property that has been developed by the owner into more than one transferable unit or divided for transfer into more than one transferable portion’. If you choose to pay Capital Gains Tax, the comparison between the selling price and the price of acquisition is required and Capital Gains Tax is charged on the gain. You would need to pay a provisional tax on the deed at 7% upon signing the final deed of sale. It would also be required to declare the gain in your yearly income tax return.
I intend to sell a property which was donated to me a few years ago, is any tax due on such transfer?
If the property was donated to you more than five years before the date of transfer, then PTT shall be chargeable at 12% of the excess of the transfer value over the acquisition value.
For any further information, please contact us by Email: info@ciliaassociates.com or Tel: +356 2166 4103