Calculating your Immovable Property Tax liability

Every registered owner whose immovable property value exceeds €120,000 is required to submit a Declaration of Immovable Property (IR 301 and IR 302) and pay the respective tax every year before 30 September.

In September 2013, the government revised the tax bands as follows:

^†Those owning property whose total 1980 value exceeds €12,500 will pay tax on their total 1980 value.

Buyers' contractual obligations

Due to the delay in issuing Title Deeds, some developers are the registered owners of land banks and properties whose value runs into many millions of Euros.

According to the law, it is the 'registered owner' (i.e. the developer) who is obliged to submit annual declarations of their immovable property to the authorities and pay the Immovable Property Tax, plus any penalties imposed due to late payment, until Title Deeds are issued buyers pay Property Transfer Fees to secure ownership of the property they have purchased, which will then be registered in their name.

However, in their Contracts of Sale, developers often include a clause making buyers liable for Immovable Property Tax when they take delivery of a property and will ask buyers to pay their contribution.

Some developers attempt to charge buyers outrageous sums of money based on the purchase price of the property and some will even add the penalties they have been charged by the tax authorities for late payment.

Before paying any Immovable Property Tax demanded by a developer, buyers must ask the developer to provide them with written evidence of the amount of Immovable Property Tax that has been paid to the Inland Revenue for the land on which the development has been constructed and the buyers share of that land. (E.g. If the development has been constructed on 10,000 m² of land, and the buyer's plot measures 500 m², then the buyer should only pay ¹/₂₀ or 5% of the tax bill).

Buyers are warned not to pay a developer any Immovable Property Tax unless the developer:

1. Supplies you with written evidence of the amount of Immovable Property Tax he has paid to the Inland Revenue for the land on which your development has been constructed.

2. Provides you a written statement identifying your share of that land (see above).

3. Supplies you with a written invoice on the company's letterhead for the agreed amount to be paid.

4. Provides a written company receipt for the amount paid.

Please refer to this letter from the Interior Ministry and print a copy and give it to your developer if he attempts to overcharge. 

Reclaiming Immovable Property Tax from the Inland Revenue

Once buyers receive their Title Deed they may apply to the Inland Revenue, using Form IR 314, to reclaim any overpayment of Immovable Property Tax paid by the developer on their behalf to the Inland Revenue. Buyers should take the completed Form IR 314, together with:

1. Copy of the Title Deed of the property.

2. Receipt issued by the Land Registry when the Contract of Sale/Sale Agreement was deposited for Specific Performance.

3. Copy of the Contract of Sale/Sale Agreement.

4. Receipt(s) issued by the property developer confirming the Immovable Property Tax paid.

to their local Inland Revenue Office.

Buyers should note that the 1980 value of their property (the value on which Immovable Property Tax is calculated) will be assessed by the 'Valuations Desk' at the Land Registry at the time their Title Deeds are issued.

Severe wealth warning

There have been many reported instances of property developers demanding their version of 'Immovable Property Tax' from property buyers. But rather than being based on the 1980 value of the property as prescribed by the Inland Revenue, these property developers base their calculation on the price the buyer has paid for a property (the contract sum) as shown in their Contract of Sale.

Typically, the annual charge demanded is 0.4% of 50% of the contract sum. (E.g. For a property costing € 200,000 the annual amount demand is calculated at: € 200,000 / 2 x 0.4% = € 400).

However, some developers demand even higher annual payments and some even add interest to their bill.

Some do nothing until the Title Deeds are issued. They then demand all the 'unpaid' taxes (plus interest) dating back to the time that the buyer purchased the property, often extorting money from buyers by using the threat of withholding Title Deeds to elicit payment.

In one case in which I was recently involved, these 'unpaid' taxes amounted to 50% of the property's purchase price. Imagine buying a property for € 350,000 and then, some years later, receiving a demand from the developer for a further € 175,000 before he'll transfer Title!

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