Nicosia - Inland Revenue is asking some 2,000 individuals and companies owning luxury homes of more than 500 square metres to account for how they paid for them.
The investigation is part of the department’s on going battle against tax evasion as the government scrambles to raise cash and assuage public anger over tough austerity measures.
The probe goes back five years and relates to building permits issued from January 1, 2007 to August 31, 2012.
Letters have already started going out asking owners to submit the necessary proof that their declared income was enough to justify payment of the house.
Last October, the Department of Inland Revenue asked all the municipalities and district officers to submit a list of all the building permits for houses of more than 400 square metres.
In total, it received information about 1,000 individuals and companies with homes of 400 square metres and another 1,000 with homes of more than 500.
Because of the acute shortage of staff, the department decided to first check the bigger homes and as from last Monday has been sending letters asking owners to clarify whether the home has been finished and whether it has been sold or not.
If they have finished building they must submit a declaration of the work that has been carried out, how much it cost and how it was financed.
For homes of between 400 and 499 square metres, irrespective of whether the home has been completed or not, owners will have to submit their tax records.
Individuals who are not registered, and have therefore not paid a cent in tax, will be required to submit a capital statement – that is full details of all their assets.
Companies that have not registered with the tax authorities face legal action.
The letters are being sent by municipalities, with recipients given three months to respond.
The 1,000 owners of houses of more than 500 sq metres will also have to submit a declaration stating that the information submitted is true and correct. The letter warns that submitting inaccurate or false statements are a criminal offence. Failure to comply carries fines and possible legal action.
The current law does not allow Inland Revenue to go back further than six years, since the obligation for individuals and companies to retain records is only for that period.