What you need to know when you buy a property in Cyprus

The legal system in Cyprus is heavily influenced from the British legal system and strongly safeguards the buyer’s rights.

As from the date of signing the sale agreement (contract of sale) the buyer has the right within 6-months from that date to deposit the contract at the Land Registry Office. The deposit of the contract sale to the Land Registry provides a simple and effective legal instrument called “Specific Performance”.  This instrument is very important for the protection of the buyer mainly for two reasons: By depositing the aforementioned contract in the Land Registry, the buyer prevents the seller from transferring the immovable property in the name(s) of a third party and the buyer acquires the right to seek “specific performance” of the terms and conditions of the contract of sale and secure the transfer of title of the immovable property in the name of the buyer, even when the seller does not wish to be involved in such processes.

When issued, the title deed will be registered in the name of the buyer, and will be recorded in the Government archives. The Government archives are confidential and will not be published or made accessible under any circumstances.

At any time after the purchase, the buyer may sell or dispose of the property at will, provided that he/she has a valid contract. 

Stamp Duty Tax

In the case of a sales agreement, you, as the buyer, are liable for the payment of a one-off Stamp Duty Tax in the rate of 0.15% on the value of your purchase that spans between 5,000 and 170,000. Thereafter, the rate becomes 0.20%. Stamp Duty is payable within 30-days of signing the sale agreement.

Example: Purchase Value of 300,000

Value of Property

Rate

Tax Amount

Up to €5,000

0%

0

From €5,000 to €170,000

0.15%

€255

From €170,000 to €300,000

0.2%

€260

TOTAL Stamp Duty payable

€515

 

Transfer Fee Tax

Upon transfer of the property and registration in the buyer’s name, the District Registry Office will charge transfer fees. These are based on the market value of the property at the time of purchase and are calculated as follows:

Value of Property

Rate

Up to €85,000

3%

From €85,000 to €170,000

5%

From €170,000 to €300,000

8%

Abolition of Transfer Fees for properties purchased until December 31st 2016

Take advantage of the abolition of transfer fees for new properties purchased until December 31st 2016 and save thousands on the purchase of your new luxury home in Cyprus.

It was announced recently by the Cyprus Parliament that:

1.     Home buyers who are eligible for VAT on their property purchase will be absolved of all transfer fees. This offer is valid until December 31st 2016.

2.     Home buyers, who are not required to pay VAT on their property, will receive a reduction of 50% on their transfer fees.

Example 1: No transfer fees payable for properties with VAT

 

Example 2: 50% transfer fees payable for properties without VAT

Property Price

€2,500,000

 

Property Price

€500,000

Transfer fee

€193,200

 

Transfer fee

€25,166

Transfer fee now

€0

 

Transfer fee now

€12,583

Saving

€193,200

 

Saving

€12,583

Note: After December 31, 2016 the transfer fees are expected to be as before.

Value-added Tax (VAT) Payable on Property

Since Cyprus’ accession to the EU in 2004, VAT must be paid when buying a new build property.

In cases where an application for a town permit was filed before the 1st of May 2004, VAT will not be charged.

If the town planning application has been filed after the 1st of May 2004, VAT is charged on the sales price at a rate of 19%. First-time buyers can apply for VAT reimbursement in cases where they paid the full amount of VAT on single properties purchased after the 1st May 2004.

No VAT is charged on the purchase of land.

A reduced rate of VAT (5%) has been introduced for properties purchased by permanent residents of Cyprus, provided that the property will be used as the main residence of the purchaser for 10 years (minimum). This is applicable only to sale agreements which are conducted from October 1st 2011 onwards. The rate will apply for the first 200 m2 of residences of total covered area of up to 275 m2. In case the property is rented or disposed of before the period of 10 years expire, a prorate computation is made so that a percentage of the above benefit is returned. If the Department of Taxation is not informed of the change in the use of the property and the proper amount of money is not returned then a criminal offense is considered to have been occurred.

Immovable Property Ownership Tax

As the registered owner of the property, you are liable to an annual Immovable Property Ownership tax calculated on the market value of the property as at 1st of January 1980 (paid by the 30th of September in the year). Immovable Property Tax is payable to the Inland Revenue Department of the Republic of Cyprus.

Annual Immovable Property Tax Rates are as follows:

Value of Property (as of 1/1/1980)

Rate

Up to €12,500

0%

From €12,500 to €40,000

0.6%

From €40,000 to €120,000

0.8%

From €120,000 to €170,000

0.9%

From €170,000 to €300,000

1,1%

From €300,000 to €500,000

1.3%

From €500,000 to €800,000

1.5%

From €800,000 to €3,000,000

1.7%

More than €3,000,000

1.9%

Capital Gains Tax

Capital Gains Tax is imposed at the rate of 20% on gains from the disposal of immovable property situated in Cyprus including gains from the disposal of shares in companies which own such immovable property excluding shares listed in any recognised stock exchange.

Individuals can deduct the first €85,430 of capital gain arising from the disposal of a residence that is used by the owner for his/her own habitation. This allowance can only be claimed once.

Inheritance Tax

There is no inheritance tax in Cyprus.

Local Authority Fees
Depending on the size of your property, local authorities charge fees that span between €85 and €256 per annum. These fees cover the cost for regular garbage collection, street lighting, sewerage and other community services.  

Municipality Tax 
As the registered owner of the property, you are required to pay an annual Municipality Tax, calculated on the market value of the property as at 1st of January 1980. Rates vary from 1% to 2%.

Legal Property Advice for Buying in Cyprus

Typically, fees for advice on the contract of sale from an experienced property advocate is 1%+ VAT, payable on signing the contract. Our legal associates (law firms) have handled thousands of such cases in the past.

It is important to highlight that the legal counsel responsible for drafting the contract of sale besides adding the fair terms and conditions for the protection and interest of the buyer will also examine the deeds of the property sold by obtaining a copy from the vendor or the Land Registry Office and he will make sure that all the details correspond to the property in question and that it can be sold to the prospective buyer. When the contract is ready at the satisfaction of the buyer it can be signed by the buyer himself or by his lawyer by virtue of a power of attorney that can also be used for all other necessary acts and documents until the completion of the transaction.

For more information, feel free to contact us.


News

Cyprus property prices point to an accelerating growth, according to the THIRTIETH edition of the RICS (Cyprus) Property Price Index.

Cyprus property prices point to an accelerating growth, according to the THIRTIETH edition of the RICS (Cyprus) Property Price Index.

Cyprus residential and commercial real estate prices point to a continuous rapid growth according to THE THIRTIETH publication of the RICS Cyprus Property Price Index...

Demand for Real Estate Keeps Trending up in Cyprus

Demand for Real Estate Keeps Trending up in Cyprus

Real Estate Demand in Cyprus Keeps Becoming Stronger...

Strong Growth in Cyprus Property Sales

Strong Growth in Cyprus Property Sales

Strong growth in Cyprus property sales

CYPRUS’ GOLDEN VISA PROGRAM RAISES 4 BILLION EURO

CYPRUS’ GOLDEN VISA PROGRAM RAISES 4 BILLION EURO

CYPRUS’ GOLDEN Visa Program that gives foreigners residency permit or citizenship in exchange of investment in real estate has fetched €4 billion in revenue to Cyprus in the past one year.

Company Profile

A&R Cyprus-Greece Fine Properties, Ltd (A&R CGFP) is a diversified real estate services provider, exclusively representing overseas buyers and investors who are looking to buy fine residential or income producing commercial real estate properties in Cyprus and Greece. Our team has over 70-years of combined experience in the global capital markets and a deep understanding of the local real estate and financial markets of Cyprus and Greece.

Read more ...