Purchasing property in Cyprus
Contract of sale
The lawyer responsible for drafting the contract of sale besides adding in the contract itself the fair terms and conditions for the protection and interest of the buyer will also examine the title deeds of the property sold by obtaining a copy of the title deed from the vendor or the Land Registry Office. The lawyer 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 drafted at the satisfaction and approval 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.
Once the contract is signed the purchaser is responsible for the payment of stamp duty:
For example if the contract price is €300,000.
i.e The first €5,000 – no stamp duty is imposed
i.e The next €165,000 is at the rate of 1.50 i.e 165,000 x 1.5 ÷ 1000 = €247.50
i.e The next €130,000 is at the rate of 2.00. i.e 130,000 x 2.0 ÷ 1000 = €260.00
This amount should be paid within 30 days of signing the contract in order to avoid the payment of a fine.
Lodging the sale at the Land Registry
As from the date of signing the contract of sale the buyer has the right within 6 months from that date to lodge the contract to the Land Registry Office for what is called Specific Performance purposes. This is very important for the protection of the buyer mainly for two reasons: By depositing the aforementioned contract in the Land Registry, the purchaser prevents the Vendor from transferring the immovable property in the name(s) of a third party and the Purchaser 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 Purchaser, even when the Vendor does not wish to be involved in such processes.
VAT payable on the property
Regarding property units, where an application for a town permit is filed before the 1st of May 2004, VAT will not be charged. Since the accession of Cyprus in the E.U., the VAT which is now calculated on the rate of 19% must be paid when a purchaser is buying a land or a house.
However, purchasers who are purchasing a house are entitled to reduced rate of 5% VAT according to the law if:
- The application for the planning permission has been deposited in the appropriate authority after the 1/5/2004.
- The purchaser uses the purchased property as his principal and permanent residence in the Republic and he had not acquired any other residence in the Republic.
- Reduced percentage of 5% will be imposed for the first 200 square meters ONLY.
Total Area: means the summation of the area of the cover spaces of the property including engine room storage areas and parking covered spaces and covered verandas.
The transaction is concluded with the transfer of ownership by a simple process of registration at the Land Registry Office as soon as separate title deeds for the property sold are issued by the Land Registry Office reflecting the property erected on the land. At this stage the buyer is responsible for the transfer fees.
– Purchasers who are eligible for VAT on their property purchase will be absolved of all transfer fees.
– Purchasers, who are not required to pay VAT on any immovable property, will receive a reduction of 50% on their transfer fees.
UP TO EUR 85,000 3%
EUR 85,000.01 – EUR 170,000.00 5%
EUR 170,000.01 AND OVER 8%
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.
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.
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Contact us to assist you with any questions you have regarding purchasing property in Cyprus.