**NICOSIA** – A scathing report released by the Audit Office has cast a long shadow over a significant property transaction, questioning the validity of a substantial price reduction and demanding accountability from the Tax Department for its apparent lack of scrutiny. The investigation, which surfaced on Tuesday, focuses on a sale conducted at a drastically diminished valuation, raising concerns about potential tax revenue losses for the government and the circumvention of established fiscal regulations.
The property in question was initially slated for sale in December 2015 with an agreed valuation of €19.35 million. However, a mere six months later, in June 2016, this initial agreement was rescinded, and a new contract was signed, slashing the property’s value to €10.85 million. This precipitous decline of €8.5 million, or approximately 44%, was reportedly left entirely undocumented. The Audit Office’s report highlights a critical absence of any independent valuation to substantiate this dramatic markdown, nor was any rationale provided to explain such a steep price adjustment, especially in the absence of any discernible, rapid shifts in the local real estate market.
Furthermore, the report criticises the Tax Department for failing to investigate the transaction at the time it occurred. The Audit Office contends that the sheer scale and peculiar nature of the price reduction presented a high-risk scenario that warranted a thorough examination by tax authorities. The implications of such a significant, unexplained price drop are manifold, potentially leading to the government forfeiting substantial amounts of anticipated tax revenue, including value-added tax. The acceptance of a sale price that deviates so markedly from prevailing market values is also an infraction, suggesting a deliberate undervaluation.
Delving deeper into the financial ramifications, the Audit Office noted that the selling entities appear to have effectively waived a sum equivalent to €8.5 million without any discernible compensatory benefit or consideration. This manoeuvre had a direct impact on the companies' financial reporting. While the original sale price would have theoretically yielded a taxable gain of €760,000, based on a recognised property value of €18.59 million, the subsequent cut-price transaction resulted in the selling party recording a considerable loss of €7.74 million against the property's value. This substantial write-down was subsequently leveraged to offset €4.45 million in taxable corporate profits for the fiscal year 2016, thereby reducing the companies' tax liabilities.
Adding another layer of disquietude, the report indicates that the payment terms stipulated in both the initial and revised agreements remained “essentially the same.” This observation further fuels suspicion, as it suggests that the fundamental financial obligations did not alter significantly, making the drastic reduction in the property’s declared worth appear even more arbitrary and lacking in genuine commercial justification. The lack of supporting documentation and the absence of any independent appraisal have left the Audit Office with considerable reservations about the integrity and transparency of the entire transaction, prompting a pointed inquiry into why the Tax Department did not intervene to ensure fiscal probity. The findings of this report are expected to prompt further scrutiny and potentially lead to a review of the Tax Department's investigative protocols.