Legal Safe Guards
Rights of non-Cypriot Purchasers
When non–Cypriot purchasers purchase immovable property in Cyprus, they have the same rights as Cypriot citizens.
Contract of Sale
The contract of sale signed between the Vendor and the Purchaser binds both parties to perform according to their respective obligations. The seller or one of the sellers who sign the agreement must be the registered owner of the property or the part of the property including the segmentation which is to be sold.
Upon the signing the contract, the purchaser is liable to pay stamp duty (see below), it is advisable for the contract of sale to be registered within 2 months of the contract date at the District Land and Surveys Department in the region where the property is situated.
The deposit fees are payable by the Purchaser, the amount being €50.00.
The purpose is to provide safeguards for the purchaser 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 purchaser is considered as the beneficial owner of the property until the title deed is issued.
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.
The Sale of Land (Specific Performance Law) Law 81(I)/2011 provides safeguards for sellers and buyers of property – the law requires the sale and purchase agreement to be submitted to the Cyprus Land Registry.
The deposit of the agreement to the Land Registry is considered as an encumbrance on the specific property.
If the property is part of a jointly owned property, for example, an apartment, flat or a percentage of land, then an agreement must be entered into between the joint owners which will allow the sale of the property. The joint owners of the communal areas of the property will sign a distribution statement which will be deposited to the District Land Registry, this distribution will be taken into consideration upon the issuance of the title deed. In the event of an issue or non performance arising, after the submission of the agreement an application can be brought before a competent court in Cyprus, the court could issue an order requiring the parties to the agreement to perform their respective obligations under the agreement.
The application to the competent court for the issues of an order for Specific Performance may take several forms, for instance it may be an order requiring the completion of the sale and purchase agreement and/or any clause in the agreement or it may be an order to remove a mortgage attached to the property, subject to the court being satisfied that the debt for which the mortgage is made has been satisfied.
For the avoidance of doubt, immovable property or property includes land, buildings, fixtures, cartels affixed to land, rights and easements attaching to land. The law also provides that the agreement must be made in writing and incorporate the contracting parties details, a description of the property and it must be signed by each party to the agreement.
Contrary to the risks inherent in the purchase of the property in some countries, Cyprus has never been involved in the nationalisation of any sector of the economy or in the expropriation of property owned by non–Cypriots in line with the Cyprus government’s efforts to create a favourable climate for such investments.
Immovable Property Tax
Until the end of 2016, the registered owner of the property, was 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 was payable to the Inland Revenue Department of the Republic of Cyprus.
|Market Value of Property (01.01.1980) (€)||Annual Property Tax (%)|
|up to 40,000||0.6|
|40,001 to 120,000||0.8|
|120,001 to 170,000||0.9|
|170,001 to 300,000||1.1|
|300,001 to 500,000||1.3|
|500,001 to 800,000||1.5|
|800,001 to 3,000,000||1.7|
Capital Gains Tax
On any financial gains from disposal/sale of Immovable Property situated in Cyprus, Capital Gains Tax will be imposed at the rate of 20% with the first €17,086 being exempt for each person. The gain is the difference between the sales proceeds and the original cost of the property. In the case of a property which was purchased before 1st January 1980, the gains are the difference between the sales proceeds and the market value of the property as of 1st January 1980.
The Seller is entitled to a further allowance regarding the Transfer Fees paid, Inflation Rate per year and the cost of any additions made to the house.
Gains from the disposal/sale of a private residence/dwelling house are exempt up to €85,430 in total if the owner resides in it continuously for at least five years prior to disposal/sale.
Stamp Duty on Contracts
The Purchaser is liable for the payment of Stamp Duty on the purchase price of the property at the following rates:
- First €5,000 – 0.00%
- €5,001 to €170,000 – 0.15%
- over €170,001 – 0.20%
This should be paid within 30 days from the signing of the Contract of Sale.
Inheritance tax has been abolished and is no longer imposed in Cyprus.
Local Authority Fees
Depending on the size of your property, local authorities charge between €85 – €500 per annum for regular refuse collection, street lighting, sewerage and similar community services. Communal Services fees are payable to your local municipal authority.
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% – 2%.
Municipality tax is payable to your local municipal authority.
As the registered owner of the property, you are required to pay an annual Sewerage Tax, calculated on the market value of the property as at 1st of January 1980. Rates vary from 3% – 7%.
Sewerage taxes are payable annually to your local sewerage board.
Mortgages are widely available in Cyprus and the terms are similar to those in the UK. However, you may require some help from our experts with the process of applying for your mortgage. We will gladly give independent advice and assistance with your mortgage application from a Cypriot bank.
- Mortgages in Cyprus are authorized by most commercial banks, they are able to offer mortgage facilities to locals as well as foreign nationals. Loans are based on the purchaser providing a minimum deposit of 30%.
- Repayment mortgages can be acquired in any foreign currency, eg. U.S. dollars, British pounds, Euros and Swiss francs, or in Cypriot Pounds.
- A Euro mortgage avoids capital loss through currency exchange should you rent out your property, provided you keep to the local currency. It is important to research who you will be renting your property to, what currency they will be paying in and plan your mortgage accordingly.
- For a loan in foreign currency, the maximum period of the loan is 15 years.
- Loan payments can be made in monthly or quarterly installments.
- Loan value is normally up to 70% of the property valuation. However sometimes 80-85% can be negotiated if the property is newly built.
Life insurance will be required when taking out any mortgage in Cyprus.
- Cypriot Eurozone interest rates are currently around 4%
- Should you not have a 30% deposit available for your down payment, you may apply for a loan to cover it by using an equity release option on your existing home.
Documents normally required by Cypriot banks include:
- Personal identification, including copy of your passport
- Employment contract and P60s, or business accounts from your accountant
- Documentation regarding existing debts, regular outgoings and details of any other mortgages in operation.
- Bank reference from your current bank.
- Completed personal income declaration form.
- Original of Purchase Agreement
- Copy of your bank statements for the last three months
- Copy of receipts for deposit payments made to the vendor for the property
- You must open and activate a bank account in the same bank you obtain your mortgage from.
- Acquisition Permit from the District Authorities to allow the mortgage to be released by the bank.
It often makes financial sense to buy property as a company. For legal, tax and inheritance law reasons you are recommended to review this option. Properyshowrooms.com will gladly give you expert advice as to whether this is a suitable option for your particular circumstances.
It is always worth considering the off-plan finance options offered by developers as these are sometimes preferential to the terms of a standard bank mortgage. Initial deposit and other payment terms can vary according to the construction phase of the project and rates are often competitive.
As always, before making a commitment to a property investment in Cyprus, we recommend you discuss your strategy with a lawyer, a reputable property agent with experience in the area and even a financial advisor.
Equity release is an efficient way of releasing cash from a property you already own, without having to sell up.
If you are in your mid-50s or older and own your own home, you may be able to get a cash lump sum, a regular income, or both, by using an equity release scheme based on the value of your property. These schemes can be helpful in some circumstances to raise money for a mortgage to finance your investment property in Cyprus.