In her recent UK Budget, Rachel Reeves announced a new “mansion tax,” officially named the High Value Council Tax Surcharge, targeting residential properties in England valued at over £2 million.
This annual charge will be added to existing council tax bills, starting from April 2028, and is designed to address wealth inequality in the property tax system.
A Mansion Tax in Cyprus?
The government will consider introducing a Mansion Tax on immovable property worth €3 million or more. Now the broader tax reform package has been completed, it’s expected the draft bill will be discussed in the New Year when MPs return from their Christmas break.
The tax has been proposed by AKEL MP Stefanos Stefanou. In the explanatory memorandum, which accompanies his proposed bill, the MP noted that:
The purpose of this bill is to introduce a yearly tax of 1‰ (one per thousand) on immovable property worth €3,000,000 and above.
This measure is intended to help create a fairer, more modern, and socially responsible tax system. Taxing very high-value property will bring in important revenue for the state. This money will help support vulnerable people and small and medium-sized businesses, promoting social cohesion and sustainable development.
This bill is part of a wider set of laws aimed at making the tax system fairer and improving its social impact. The overall goal is to reduce the financial burden on households, correct existing inequalities, and create a more effective and socially sensitive tax framework that better supports society.
According to Mr Stefanou’s proposal: If someone does not pay the tax on time, they must pay an extra charge of 10% of the tax owed. If someone pays at least 30 days before the deadline, they will receive a 10% discount. Payments will be made electronically and if the tax owed is €10 or less, it will not be collected.
(Apparently, a similar recommendation was put forward by the Economics Research Centre but was not taken up by the government.)
It appears this ‘mansion tax’ is a replacement for the old Immovable Property Tax (IPT) that was abolished in 2017.
Problems for home buyers?
Many homebuyers faced problems with nefarious developers, who did not pay IPT by the due date. They demanded that buyers paid the IPT they owed plus the interest plus late payment penalties imposed by the Tax Department. Their demands came when Title Deeds were eventually issued and in some cases nefarious developers demanded many thousands of Euros before they would transfer title to the buyers.
This problem was overcome to a degree (with the help of the Troika) when Cyprus changed that law making those buying property responsible for IPT when they took delivery of a property. But there are still legacy issues to resolve.
Hopefully, if the proposed mansion tax is adopted, the law will make similar arrangements for property buyers avoiding issues they faced in the past..