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Buying Procedure

 

Acquisition of Property in Cyprus         

General

 

Cyprus is a popular place for the acquisition of immovable property by foreigners. This popularity is attributed to many factors such as the high standard of living, the hospitable and secure environment, the superb quality of real estate projects, a most attractive tax and business regime as well as the island’s strategic location at the crossroad of three continents.

Foreigners wishing to acquire Cyprus property can choose from a variety of residential or commercial properties.


Legal framework  

Immovable property transactions are regulated by a number of Cyprus Laws that generally follow respective UK laws. Foreigners who purchase property in Cyprus have the same rights as locals and can be rest assured that their property rights and ownership are secured.


Acquisition of Cyprus property by Europeans       

Since Cyprus accession to the EU, European nationals are allowed to purchase any type of Cyprus property without any restrictions.


Acquisition of Cyprus property by non-Europeans          

Non-Europeans wishing to acquire property in Cyprus may freely do so as per below. However, before transferring the title deed to their name, they will need to obtain the prior permission of the Council of Ministers through the local District Office.

Non-Europeans are restricted to acquire one of the following:

  • apartment
  • house
  • building plot or land up to approximately 4,014 square meters
     

In certain cases, however, the Council of Ministers may grant the approval for the acquisition of more than one property if the particular project is considered to help the Cyprus economy in general (e.g. in terms of tourism or employment).

A company owned by non-Europeans may also acquire premises for their operations (with no limit on the extent) and for the residence of their foreign employees, provided they maintain a fully-fledged office and the residence to be registered on the name of the employee.


Application to the District Office       

For the application to the Local District Office there are certain documents required. However, there is no restriction in taking possession of the property until approval.


Exchange Control Regulations            

On a future disposal of the property the whole amount of the sale proceeds can be exported from Cyprus (after the tax obligations have been settled) and no exchange controls will be applicable.


Taxes and charges applicable to Cyprus immovable property

 

The following are the main taxes arising on the acquisition, ownership, and disposal of Cyprus situated immovable property. The taxes described apply to both natural persons and entities.

 

A. Taxes arising on acquisition and disposal of properties

  • Transfer Fees

If the transfer of immovable properties relates to a transaction that is subject to VAT, then these properties are exempt from transfer fees. In cases where transactions are not subject to VAT, the legislation provides for an exemption of 50% of the transfer fees.

Value of Property €

Transfer fees

Accumulated Tax €

50% Reduction

0 – 85.000

3%

2.550

1.275

85.000 – 170.000

5%

6.800

3.400

over 170.000

8%

-

-

 

  • Stamp Duty 

Value of contract €

Stamp Duty

0 - 5.000

0

5.001 - 170.000

0,15%

Over 170.000

0,20% (capped at a maximum of €20.000)

  • Value Added Tax (VAT)

Newly erected buildings (and the associated land) are subject to the standard VAT rate of 19%. The transfer of land on its own and used buildings are not subject to VAT.

Reduced VAT rate of 5%

A reduced VAT rate of 5% is applied on the purchase or construction of a house or flat to be used as a private main residence, provided the area of the property does not exceed 200 sq.m. If the area of the property exceeds 200 sqm, then the reduced rate of 5% applies on the first 200 sq.m and the rest of the sqm are subject to 19% VAT.

The reduced rate also applies to properties acquired by individuals who do not ordinarily reside in Cyprus, but acquire property to be used as their residence while in Cyprus.

  • Capital Gains Tax

Capital gains tax is payable by the seller. Properties purchased between 16/7/2015 to 31/12/2016 are exempt from future capital gains tax. Otherwise, the capital gains tax is imposed at the rate of 20% on companies and individuals on gains arising from the disposal of immovable property situated in Cyprus including gains from the sale of shares in a company which owns immovable property situated in Cyprus (excluding shares listed on any recognized stock exchange).

The net profit is the sale price less the greater of the cost or the market value on 1st January 1980 as adjusted for indexation allowance and after allowing for certain expenses.

 

Lifetime exemptions for individuals on Capital Gains Tax

Disposal of private residence (provided used as such for at least 5 years)

85.430

Disposal of Agricultural land by a farmer

25.629

Any other disposal

17.086

 

The above exemptions are given once only and not for every disposal.  There is a maximum of €85.430 if an individual claims a combination of the above.
 

B. Taxes during ownership of property

  • Immovable Property Tax (* This tax will be abolished from 1/1/2017)
     

This annual tax is imposed on the market value of immovable property based on calculated values as at 1st January 1980 and applies to the total value of Cyprus immovable properties held by the owner of properties on 1 January of each year. This tax is payable on 30 September each year and there is interest due and penalties for non-compliance.

Market Value as at 1st January 1980

Rate

%

Tax

Accumulated Tax

* 0 - 40.000

0,60

240

240

40.001 - 120.000

0,80

640

860

120.000 - 170.000

0,90

450

1.310

170.001 - 300.000

1,10

1.430

2.740

300.001 - 500.000

1,30

2.600

5.340

500.001 - 800.000

1,50

4.500

9.840

800.001 - 3.000.000

1,70

37.400

47.240

Over 3.000.001

1,90

-

-

 

  • If the total value of Cyprus immovable property held by the owner is less than €12.500, no tax liability arises.

 

  1. Other taxes

Cyprus does not have any wealth tax nor any succession taxes such as inheritance tax.


Taxation of rental income         

Rental income earned from immovable property situated in Cyprus, received by a non- Cyprus tax resident person (company or individual), is subject to Income Tax as follows:

Individual: The gross rental income earned from Cyprus properties, after a 20% exemption and certain allowable deductions, is pooled along with all other Cyprus taxable incomes (if any) and taxed in accordance with the Cyprus personal income tax progressive band rates.

Company: Gross rental income earned from Cyprus properties is pooled along with all other Cyprus taxable incomes (if any) and after deduction of tax allowable expenses the resulting profit is taxed at the flat rate of 12,5%

 

NOTE: For Cyprus tax resident individuals and companies there is an additional tax on rental income, being the Special Defence Contribution tax, imposed at the rate of 3% on the gross amount of the rental income after allowing for a 25% exemption on this income.

 

 

 

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