Cyprus property Guide

Cyprus Property Guide

Buying Cyprus Property Guide

The Cyprus House of Representatives has passed and amended the Law of Value Added Tax on the 29^th April 2004 in order to harmonize with the EU legislation except in the cases where Cyprus has received derogations during the accession negotiations.

As from the 1^st May 2004 VAT is imposed at a rate of 15% on the purchase of a newly built second home (apartments, houses) or a newly built commercial or industrial building. This includes both the purchase of a house or an apartment and it covers the construction costs and the cost of Land. For the first time house buyers it will be 5%.

No VAT is paid if the application for the planning permit was filed with the appropriate authority before May the 1^st 2004. The sale of Land continues to be exempted until 31^st December 2007.

Cyprus

Located in a beautiful Mediterranean setting, Cyprus is within easy reach of the pyramids of Egypt and Israel as well as Southern Europe. This island state represents a unique blend of old and new, modern and traditional. For centuries, it has served as a crossroads for trade in this part of the world. Today it is a modern financial centre as well as a centre of "Greek Island" tourism. Economically, the island is closely associated with the European Union and accepted as an applicant for full membership in that organisation.

The Cyprus landscape is one of infinite contracts, from its fertile central plain to the cool, vine clad foothills; the majesty of the cedar valley in which wild indigenous moufflon roam, mile after mile of sandy shores with secluded beaches to seek out, and hundreds of villages to explore, each with its own tradition and charm.

TIME: The islands time zone is exactly seven hours behind Tokyo and two hours ahead of London. Financial institutions here can therefore deal with organisations in both of these parts of the world on the same day.

Cyprus is third largest island in the Mediterranean, stretching 240 kms east to west and covering an area of 9300 sq kms, with a population of about 700,000. It is an island of contrasts, from sandy beaches, vine clad slopes to cedar-covered hilltops. The climate is sub tropical and temperatures in the summer can reach over 40 degrees, whilst it’s even possible to ski in the Troodos Mountains in winter.

It has long been popular as a holiday destination and retirement choice for UK residents, and offers particularly attractive tax rates on pension/investment income brought into the country by non-Cypriot residents. Compared to other countries such as Spain, the process of purchasing property in Cyprus is relatively simple.

The legal framework is largely based on the British system and land registry is an advanced and reliable process, ensuring security with regard to the title deeds when purchasing a property.

Foreign buyers are entitled to freehold ownership of a villa, an apartment or a piece of land up to a maximum of 3 Donums (1 Donum = 1,338 m2).

After locating your chosen property and the vendor has accepted your verbal offer, the procedure will typically be as follows. Firstly, a preliminary contract is signed. This binds both the vendor and the purchaser to buy and sell the property on terms and conditions that have been mutually agreed. This is subject to the purchaser being able to receive good title to the property and obtaining the necessary permits from the Cypriot government.

At this stage, a deposit is lodged with a lawyer or a notary. The purchaser’s lawyer will now carry out the searches at the District Land Registry to ensure that the vendor of the property is indeed, the owner and ensures that the purchaser obtains good title to the property.

Non-Cypriot citizens require permission from the Council of Ministers to purchase property in Cyprus. If this has not been yet obtained then the purchase should now apply to the council for the permission. This normally takes between six and nine months to be granted, and without this the Title Deeds of the property cannot be made available to the purchaser.

The final contract is only entered into when the searches have proved satisfactory. The contract is then lodged with the Land Registry within two months of being signed, which will prevent the vendor from selling the property on a second time, and there will be a charge on the property pending completion. The following information has been complied to give an outline of the additional costs associated with buying a property in Cyprus.

Real Estate Transfer Tax-Fees
Real Estate Transfer Tax-Fees are necessary in order to transfer freehold ownership to the names of the purchaser. This can be done as soon as the relevant Government Authority has issued the title deed and the purchase has been completed. The Transferee is responsible for the tax payment. The rates are on a graduated scale.

For example if the purchase price is CYP 90,000

The first CYP 50,000	3% = CYP 1,500
The next CYP 40,000	5% = CYP 2,000
Total	= CYP 3,500

Should the purchase be made in joint names (provided the price is more than CYP 50,000) the effective value for calculation is halved.

For example if the purchase price is CYP 90,000

Transfer of ownership takes place by a simple process of registration at the Land Registry Office and the issuing of a title deed after completion and delivery. This can be done either by you personally or by a Power of Attorney to your Solicitor. A prerequisite for registration, in the case of aliens, is evidence that the property has been paid for with foreign exchange and approval by the Council of Ministers of purchaser’s application to buy a property Cyprus. However, before the registration of the completed property, the purchase should pay the transfer fees to the Land Registry office.

Stamp Duty

The purchaser is liable for the payment of stamp duty at the rate of CYP 1.50 per thousand up to the value of CYP 100,000. Thereafter the rate is
CYP 2.00 per thousand. This should be paid within 30 days of signing the contract.

For example if the purchase price is CYP 150,000

Immovable Property Tax
With regard to the purchase of immovable property in Cyprus, Central Bank approval is required on the transfer of property to aliens. Such approval is granted if it can be proved by the applicant that funds for the purchase were imported from abroad. Note that without the approval, on a subsequent sale, permission to remit the proceeds out of Cyprus will not be allowed.

The annual immovable property ownership tax is based upon the value of the property. Every registered owner whose property exceeds CYP 100,000 must submit a declaration of immovable property and pay the respective tax every year before 30 September.

Local Authority Taxes and Rates

A rough guide could be approximately CYP 50 –150 per year depending on the size of your property. This tax is for refuse collection, street lighting, sewerage, etc. The basic utilities, electricity, water and telephone are payable individually in accordance with the consumption and based on a meter reading.

Capital Gains Tax

On disposal of a property, capital gains tax will be payable at the rate of 20% on the gain with the first CYP10,000 being exempt for each person.

On top of this allowance, 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 room the disposal of a dwelling house are exempt up to CYP 50,000 in total if the owner resides in it continuously for at least five year prior to disposal.

Income Tax

There are two groups of taxed income, as follows:

• Those that have income from other sources other than pension, are entitled to pay 5% income tax, exempt the first CYP 2,000
• Those that have income from their pensions are entitled to pay 5% income tax, exempt the first CYP 6,000

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