This article is a practical guide to the process of buying property in Cyprus including information with regards to the legal formalities of the procedure.
Introduction
Cyprus is an island drenched in sun with easy access to destinations in Europe, two significant plus’s when considering buying property in Cyprus. The feeling of security prevails since in a world of ever-increasing violence,Oakley Sunglasses the crime level in Cyprus is remarkably low as to be practically non-existent. Cyprus, which is the third largest island in the Mediterranean, is not over commercialized and its spectacular scenery and enviable climate makes it a popular place to visit and live. Finally Cyprus’s cost of living is very affordable and in fact is one of the cheapest places in the world to live an island lifestyle.
Acquisition of immovable property
The process of purchasing property in Cyprus by non-Cypriots is relatively simple compared to many other countries. This is because the Land Registry system (which was established in 1875 based originally in British standards) with its updates throughout the years is one of the most sophisticated in the world.
Permission to acquire immovable property
Under current legislation, any Cypriot as well as E.U citizen who have their permanent residence in Cyprus are allowed to register immovable property in their names without any restrictions. The residential status is ascertained by the District Offices when a person resides in Cyprus for a total period of 183 days per year or more.
Since Cyprus joined the European Union (as of May 2004) most of the procedural restrictions upon buying property have been lifted for EU citizens. All the restrictions will eventually be lifted after April 2009. Until then EU citizens who are not permanent residents of Cyprus as well non –EU citizens are entitled to a freehold ownership of either an apartment, a house, or a building plot or land. In the case of EU citizens the property size is unlimited contrary to non EU citizens who may acquire property up to 4.014 square meters (the equivalent of three donums).
Further, in the case of E.U citizens who are not permanent residents of Cyprus as well as non E.U citizens wishing to acquire property in Cyprus, authorisation is required from the Council of Ministers which is granted as a matter of course to all bona fide purchasers if there is proof that the purchase was with foreign funds, which were imported to Cyprus. The application must be submitted after the contract of sale is signed and it normally takes about 6-8 months to be issued. In the meantime, the purchasers can take possession of their property without restriction and live in it or rent it out as they are the legal owner of the property according to the law.
POLICE SunglassesLegal entities established in E.U. that have their headquarters and registered office in Cyprus, do not require permission to buy any immovable property. Legal entities established in Cyprus and controlled by citizens of the E.U. require permission to buy immovable property in Cyprus as well as any other legal entities.
Legal safeguards
When non - Cypriot purchasers decide to buy immovable property in Cyprus they have the same rights as the Cypriot citizens. The contract of sale signed between the Vendor and the Purchaser binds both parties to perform according to their respective obligations. On the signing of the contract the Purchaser is liable to stamp duty payment (see below) and then, it is advisable, the contract of sale to be registered, within 2 months from the contract date, at the District Land and Surveys Department of the region where the property is situated. This is because it provides additional safeguards for the Purchasers and creates the so called “right to specific performance” in favour of the purchasers. By registering the contract of sale with the District Land and Surveys Department the property is registered in the name of the Purchasers until the transfer of title deeds can occur.
When the title deeds are issued they are registered in the name of the Purchaser and filed in the Registry archives which are confidential and are not published or made public under any circumstances.
Contrary to risks inherent in the purchase of the property in some Countries, Cyprus has never been involved in the nationalization of any sector of the economy or in the expropriation of property owned by non - Cypriots in line with the Cyprus’s government efforts to create a favourable climate for such investments.
Stamp duty
On the signing of the contract of sale the purchaser is liable to pay a one off stamp duty depending on the contractual purchase price and payment is due within 30 days of signing otherwise a fine will be imposed.
PROPERTY VALUE (€) STAMP DUTY (%)
Up to €170.860,14 0.15%
Over €170.860,14 0.20%
Without fixed amount €34.17
Transfer fees
Once the Council of Minister’s permission is obtained and the Central Bank of Cyprus confirms receipt of the foreign funds then the transfer of title deed can be effected. On transfer of the title deed of the FREEHOLD property (which may be issued 3 - 5 years after completion of the property) and registration in the purchaser’s name the District Land and Surveys Department will charge transfer fees, which are based on the market value of PRADA Sunglassesthe immovable property at the time of purchase and which must be paid “once only” by the Purchaser. The rates are on a graduated scale and are calculated as follows:
PROPERTY VALUE (€) TRANSFER FEE RATE (%)
1,71 - 85.430,07 3
85.430,08 - 170.860,14 5
170.860,15 and over 8
Note: for properties owned in joint names e.g. of a couple or two individuals transfer fees are charged on the 50% of the property value for each (as the purchase value is divided into two parts) providing an advantage for any property value exceeding €85.430,07.
The following example is illustratively:
For a property purchased for €150.000 in the name of one purchaser the transfer fees payable are €5.791,39
PROPERTY VALUE €150.000 SOLE PURCHASE TRANSFER FEES
Up to €85.430,07@ 3% =€2.562,90
Remaining €64.569,93 @ 5% =€3.228,49
Total transfer fees =€5.791,39
For a property purchased for €150.000 in the names of two purchasers, the transfer fees payable are €4.500
PROPERTY VALUE €150.000 JOINT PURCHASE TRANSFER FEES
First €75.000 @ 3% =€2.250
Second €75.000 @ 3% =€2.250
Total transfer fees =€4.500
Inheritance tax
Inheritance tax has been abolished and is no longer imposed in Cyprus.
VAT payable on property
Since Cyprus accession to the E.U. (on the 01/05/04) VAT on properties was introduced. In properties where the town planning application was filed before 01/05/04 these are exempt of V.A.T.
Capital gains Tax
Should the Purchaser decide to sell the property capital gains tax will be payable at the rate of 20% on the gain. However, the first CYP10, 000 (€17.100) of gain are tax-exempt. If the property is jointly owned by a couple then CYP20, 000 (€34.170) of gain are tax-exempt.
In case where the property has been used by the Vendor as residence for at least 5 years prior to the sale then it is tax-exempt up to CYP50, 000 (€85.430).
Immovable Property Tax & Local Authority Taxes and Rates
Owners of immovable properties are subject to annual Immovable Property Tax which is based on the market value of their property as assessed on 1st January 1980. The rate of taxation is as follows:
VALUE OF PROPERTY (€) ANNUAL PROPERTY TAX (%)
Up to 170.860,14 Exempt
From 170.860,15 to 427.150,36 2.5
From 427.150,37 to 854.300,72 3.5
Over 854.300,73 4.0
The above stated rates are applicable only after separate title deeds are transferred into the names of the Purchasers through the District Land and Surveys Department and not before.
Note: as immovable property tax is based upon the value of the property in 1980 which is much lower than the current market value the immovable tax for the majority of properties in Cyprus is approximately €85 – €170 per annum.
Purchasers are also liable for minor taxes such as municipal or village taxes, refuse collection, street lighting, sewerage etc. and they vary from €85 to €256 per annum depending on the size of the property, the area etc.
Double Taxation Treaties
Givenchy SunglassesCyprus has Double Taxation Treaties with many European and other countries . The main purpose of these treaties is the avoidance of double taxation of income earned in any of these countries.
Selling of property
In case the Purchasers want to sell the Property before the title deeds are issued they have the absolute right in doing so as they are deemed to be the beneficial owners of the Property. The contract between them and the Vendor will be cancelled and a new one between the Vendor and the new purchaser will be issued.