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A scam in the making?

By Antonis Loizou

It is known that for the securing of a permanent residency visa, the applicant must buy a house (or an apartment) of not less than €300,000 in value, while, to satisfy the passport criteria, of not less than €500,000 in value – plus VAT.

What we have ascertained, however, is that on certain occasions recently, some agents/developers, have been telling potential applicants that they may buy a property for less (than the €300,000 or €500,000), though, in terms of value, it is worth much more!

So, in one case, in Larnaca, the agent informed the applicants that the sales price of €170,000 notwithstanding, the property’s value was worth at least €300,000, and, thus, they would be eligible to apply for a visa.

This is one example of a scam in the making, since we can understand the difference between value/sales price for small amounts, but for larger amounts?

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Unaware clients are subsequently told, that the Land Registry Office/government may not accept the declared/agreed price as representative of the property’s value, and are, thus, left high and dry, having already paid the agreed-upon sales price, as well as legal and other fees.

This is a most dangerous scenario, since it might upset the whole, till-now successful, implementation of the visa/passport measure, and, in our opinion – and before this goes further – the situation requires a direction by the Interior Minister in order to clear up such goings on.

We also understand that the “under-declared” value is an attraction for the buyers, who will be required to pay fewer transfer fees (as this is also encouraged by the sellers/agents), but then the buyers should also bear in mind the increased capital gains in the event of a re-sale (the difference between the acquisition price and sales price is charged by a 20% tax, subject to various reliefs etc.).

Another odd situation is that applications which are made for new properties will require a six-month period to be examined, whereas for used properties (re-sales) more than one year for similar examination.

We find this to be very strange, notwithstanding that we understand the reasoning behind it, which is to help the development of new projects, which in turn help the economy, as opposed to those existing.

In our opinion, this is not in accordance with our constitution, which states that all people should be treated equally.
As part of this scam, we are also witnessing various exorbitant fees, charged mainly by lawyers and accountants, as well as by selling agents.

On one occasion, a Paralimni lawyer asked for €7,500 in order to undertake the visa application of a client of ours. We duly objected and ended up with another lawyer (top brass) with a €2,500 fee. Similarly agents, especially foreign ones are asking for commission on sale in excess of 20%.

In one case which came to our attention, a beach house was sold through a Chinese agent for €1,800,000, but the owner/seller would have received €1.0 million, with the remainder of the €800,000 to be paid to the agent in a Hong Kong account! Is this acceptable to the Tax Authorities? Is it still considered a commission at this percentage? Is it, by projection, tax deductible? If the Tax Authorities do not agree that the €800,000 is commission, then the seller will pay the capital gains on the total €1.8 million, to say nothing of the danger of being accused of laundering money.

On a separate occasion, a Chinese agent asked us to buy a property in the Famagusta region for €3.0 million and to have the right to resell within six months at any price, with him getting the difference. He even asked that “his” purchase contract from the owner to be for €1.0 (one), to be deposited at the Land Registry Office and, upon transfer to the “new” buyer, to pay the €3.0 million! What a scam indeed.

So, there we have it, dear readers, with the potential for a good measure, which has, till now, provided the Cyprus economy more than €4.0 billion, running the danger of being ruined as a result of the greedy and dishonest practices that some people, both local and foreign, are engaging in.

Meanwhile, the evident con-artists notwithstanding, some people are also getting carried away by the prospect of huge future gains with, on a number of occasions, sellers agreeing, dreaming of the thousands of euros of unexpected added income.

Another shocking thing that we have came to hear about is that the Registrar of Companies, will, we are told, accept any email it receives regarding change of share ownership, without checking whether or not this is, in fact, correct, or rather a fraudulent statement, etc. (see the example of an Ayia Napa company).

As a result, some people may find that the shares they own in a company are no longer theirs! How is this possible for a country that aspires to become a financial centre? We cannot believe it.

Antonis Loizou & Associates LTD Property Valuers & Property Consultants, www.aloizou.com.cy, nicosia@aloizou.com.cy

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One comment

  1. Why is Mr Loizou upset? Scams and cheating foreignera is what keeps our economy going ! He should be happy!