CYPRUS PROPERTY ACQUISITION

CONTENTS (DOWNLOAD PDF)

PART A -INTRODUCTION

1.   LEGAL SYSTEM

2.   LAND REGISTRY SYSTEM 

3.   REGISTRATION 

4.   PROPERTY RIGHTS 

PART B - ACQUISITION OF IMMOVABLE PROPERTY – REGULATIONS

5.   ACQUISITION OF IMMOVABLE PROPERTY BY EU CITIZENS

6.   ACQUISITION OF IMMOVABLE PROPERTY BY ALIENS (NON EUCITIZENS)

PART C - TAXATION

7.   STAMP DUTY

8.   TRANSFER OF PROPERTY THROUGH THE DISTRICT LAND REGISTRY OFFICE

9.   VAT ON PROPERTY 

9.1 POSITION OF THE REDUCED RATE OF 5% ON THE ACQUISITION AND/OR CONSTRUCTION OF RESIDENCES FOR USE AS  THE PRIMARY AND PERMANENT   PLACE OF RESIDENCE

9.2 IMPOSITION OF THE REDUCED RATE OF 5% ON THE RENOVATION AND REPAIR OF PRIVATE RESIDENCES

10.  ANNUAL PROPERTY TAXES

10.1 IMMOVABLE PROPERTY TAX

10.1.1 TAX RATES

10.1.2 EXEMPTIONS

10.2 LOCAL AUTHORITY RATES

10.3 MUNICIPALITY TAX

10.4 SEWERAGE TAX

11. INHERITANCE TAX – ESTATE DUTY 

12. CAPITAL GAINS TAX

12.1 INTRODUCTION

 12.1.1 EXEMPTIONS

 12.1.2 DETERMINATION OF CAPITAL GAIN

 12.1.3 LIFETIME EXEMPTIONS

 13. DOUBLE TAXATION TREATIES

PART D - USEFUL ADVICE BEFORE ACQUIRING A PROPERTY

PART A - INTRODUCTION


1. LEGAL SYSTEM

The legal system in Cyprus is modelled on the British system. In addition, after its accession to the EU, Cyprus has harmonized its laws and regulations in line with the Acquis Communautaire.

 2. LAND REGISTRY SYSTEM

The Land Registry system is one of the most advanced and reliable systems in the world, being based on the British equivalent. The Cyprus Department of Land and Surveys is the oldest governmental department of the public sector, established in 1858. Through the years it has been updated, making it one of the most efficient and effective land registry systems in the world.

 3. REGISTRATION

The Immovable Property (Tenure Registration and Valuation) Law Cap 224, embraces a sound system of registration and all transactions of immovable property must be registered. Certificates of Registration can be proved in the District Lands Offices in the first instance. The registrations of transfer by sale, gift, exchange, mortgage, lease and land charges is a matter of a few hours on a scientific system of conveyancy, based on modern requirements, which by virtue of Sec. 40(1) makes sure that No transfer of, or change on any immovable property shall be valid unless registered in the District Land Office.

4. PROPERTY RIGHTS

Cyprus is an open real estate market. Real Estate Ownership is based to a great extent on a freehold basis although, under the existing law, long leases can be granted for periods up to 999 years. The rights of property in Cyprus are protected by the Government as the sovereign power which is vested with both the authority and ability to protect the rights of its subjects.

PART B - ACQUISITION OF IMMOVABLE PROPERTY - REGULATIONS

5. ACQUISITION OF IMMOVABLE PROPERTY BY EU CITIZENS

Following Cyprus accession to the EU (May 2004), restrictions on real estate acquisitions have been lifted in accordance with EU directions. EU citizens that are permanent citizens in Cyprus and legal entities, established in EU countries that have their headquarters and registered office in Cyprus do not require permission to buy immovable property. EU citizens are treated as local residents enabling them to purchase property as they do in their homeland without any restrictions and can register as many properties as they wish in their name.

 6. ACQUISITION OF IMMOVABLE PROPERTY BY ALIENS (NON EU CITIZENS)

Non-EU citizens are entitled to freehold ownership of properties. Offshore entities may buy premises for their businesses or residence for their foreign employees. Permission to buy property must be sought from the Council of Ministers by written application, which must be submitted by the non-EU citizen purchaser after the contract of sale is signed. However, purchasers may take possession of their property without restriction. It should be noted that permission is granted more or less as a matter of course to all bona fide purchasers.

Buying property in Cyprus is a straightforward procedure. The legal framework regulating this procedure is briefly explained below. The acquisition of immovable property in Cyprus by non-Cypriots is regulated by the Immovable Property Acquisition (Aliens) Law and the Directives of the Central Bank of Cyprus.

According to the current Rules and Regulations, acquisition of property by aliens (non-Cypriot citizens by nationality) is allowed with some restrictions/conditions as follows:

  • An apartment or a house.

  • A villa on a building site or a plot of land not exceeding 4,014sq.metres.

  • A piece of land not exceeding 4,014sq.metres provided that a residence will be erected for owner occupation soon.

  • Offshore may also acquire premises for their business or for residence of their foreign employees.

  • A second home may be allowed depending on the type and use of it (i.e. a holiday home in addition to a permanent home in the capital city).

  • Acquisition of leases of more than 33 years duration has the same treatment and restrictions as buying freehold properties.

  • Permission for the acquisition of land for other types of properties (such as offices, leisure, industrial etc.) is granted under certain conditions such as the percentage of foreign participation in the scheme, the actual amount of foreign investment and other governmental policies.

It should be noted that a non-Cypriot is rarely not able to get permission to buy the property of his choice since the procedure is merely a formality. All properties can acquire title deeds issued by the Cyprus Land Registry Department only a few years after the project is completed. For properties that are under construction there is no title deed and therefore the buyer will file the contract of sale to the Land Registry to safeguard ownership until a title deed for the individual flat/villa is issued. Real estate transfer fees must be paid in order to transfer freehold ownership to the purchaser.

PART C - TAXATION

7. STAMP DUTY

After the contract of sale is signed, the purchaser is liable for the payment of stamp duty as follows:

Contracts with a fixed amount as from 1st March 2013:

The first €5.000

0

Between €5.001 – to €170.000

1.5‰

Above €170.000

2‰*

Contracts without fixed sum

€35

*Capped at a maximum of €20.000 as from March 2013.

N.B: Payment is due within 30 days of signing the contract of sale.

8. TRANSFER OF PROPERTY THROUGH THE DISTRICT LAND REGISTRY  OFFICE

The transfer of ownership is effected by a simple process of registration with the District Land Registry Office. The prescribed application form N270 should be completed for submission in person to the District Land office together with:

  • the registration certificate (title deed) of the property

  • copy of the Council of Ministers’ permission to acquire the said property.

  • Written confirmation from the Central Bank of Cyprus that purchase is done by foreign funds.

  • Evidence of payment of all property taxes to date (these taxes may include sundry municipal/local    authorities taxes and sewage tax).

  • The contract of sale duly stamped.

The purchaser and seller may give specific powers of attorney to any third party to attend and effect the transfer on their behalf. Upon transfer of the property and registration in the purchaser’s name, the District Land Registry Office will charge transfer fees, which are based on the market value of the property at the time of the purchase and are calculated as follows:

Current  Market Value   
Rate
 Fee    
Accumulated fee

€                          

   €      

   € 

First 85.000

3

2.550

2.550

85.001 - 170.000

5

4.250

6.800

Over 170.000

8

 

 

N.B i): If, however, VAT is applicable upon purchasing a property then no transfer fees are payable.

N.B ii): The above transfer fees are reduced by 50% in case the purchase of a property is not subject to VAT.

In the case of free transfers of property the transfer fees are calculated on the value of the property as at 1st January 2013 as follows:

  • from parents to children :           Nil

  • between spouses:                      0,1%

  • between third degree relatives : 0,1%

  • to trustees :                                €50

  • Mortgage registration fees are 1% of the current market value.

In the case of companies’ reorganizations, transfers of immovable property are not subject to transfer  fees or mortgage registration fees.

9. VAT ON PROPERTY

Since Cyprus’ accession to the European Union in 2004, VAT is paid when buying a newly built property. In cases where the application for a town permit was filed after the 1st of May 2004, VAT is applied at 19%. For the purchase of land, no VAT is applied.

9.1 IMPOSITION OF THE REDUCED RATE OF 5% ON THE ACQUISITION AND/OR  CONSTRUCTION OF RESIDENCES FOR USE AS THE PRIMARY AND PERMANENT PLACE OF RESIDENCE

The reduced rate of 5% applies to contracts that have been concluded from 1st October 2011 onwards provided they relate to the acquisition and/ or construction of residences to be used as the primary and permanent place of residence for the next 10 years. Following a legislative amendment, the restriction that existed for the imposition of the reduced rate of VAT on the first 200m2 for private residences up to 275m2 no longer applies. Based on the amendment, the reduced rate of 5% VAT applies on the first 200m2 whereas for the remaining square meters, as determined based on the building coefficient, the standard VAT rate is imposed.

N.B: The reduced rate is imposed only after obtaining a certified confirmation from the Tax Commissioner.

The eligible person must submit an application on a special form, issued by the Tax Commissioner, which will state that the house will be used as the primary and permanent place of residence. The applicant must attach a number of documents supporting the ownership rights on the property and evidencing the fact that the property will be used as the primary and permanent place of residence. The application must be filed prior to the actual delivery of the residence to the eligible person.

As from 8th June 2012 eligible persons include residents of non EU Member States, provided that the  residence will be used as their primary and permanent place of residence in the Republic of Cyprus.

The documents supporting the ownership of the property must be submitted together with the application.    The documents supporting the fact that the residence will be used as the primary and permanent place of residence (copy of telephone, water supply or electricity bill or of municipal taxes) must be submitted within six months from the date on which the eligible person acquires possession of the residence.

A person who ceases to use the residence as his primary and permanent place of residence before the  lapse of the 10 year period must notify the Tax Commissioner within thirty days of ceasing to use the residence and pay the difference resulting from the application of the reduced and the standard rate of VAT attributable to the remaining period of 10 years for which the property will not be used as the main and primary place of residence.

The private residences must be used as the main and permanent place of residence for a period of 10 years.    In addition, based on the amendment, persons who have already acquired a residence on which the reduced VAT rate was imposed, can re – apply and acquire a new residence on which the reduced VAT rate will be imposed, irrespective of whether the 10 year prohibition period for using the residence provided or in the legislation has lapsed or not. A condition for this to apply is that in case the 10 year period of using the residence as the main and permanent place of residence has not lapsed, the persons must pay back to the Tax Department the difference in the VAT between the standard and reduced VAT rates applicable at the time of the acquisition or construction of the residence.

N.B: Persons who make a false statement to benefit from the reduced rate are required by law to pay the difference of the additional VAT due. Furthermore, the legislation provides that such persons are guilty of a criminal offence and, upon conviction, are liable to a fine, not exceeding twice the amount of the VAT due, or imprisonment up to 3 years or both.

9.2 IMPOSITION OF THE REDUCED RATE OF 5% ON THE RENOVATION AND REPAIR OF PRIVATE RESIDENCES

As from 4th December 2015 the renovation and repair of old private residences (for which a period of at least three years has elapsed from the date of their first use) is subject to VAT at the reduced rate of VAT of 5%, excluding the value of materials which constitute more than 50% of the value of the services.

In addition as from 4th December 2015 the renovation and repair of old private residences (for which a   period of at least three years has elapsed from the date of their first use) and which are used as the place of residence of vulnerable groups or residences that are used as the place of residence and which are located in remote areas are subject to VAT at the reduced rate of VAT of 5%.

10. ANNUAL PROPERTY TAXES

10.1 IMMOVABLE PROPERTY TAX

Property value (as at 1st January 1980)    

€ 

Rate

%

Accumulated tax

First 40.000

6

240

From 40.001 - to 120.000

8

880

From 120.001 - to 170.000

9

1.330

From 170.001 - to 300.000

11

2.760

From 300.001 - to 500.000

13

5.360

From 500.001 - to 800.000

15

9.860

From 800.001 - to 3.000.000

17

47.260

Over 3.000.000

19

 

 Immovable Property Tax has been abolished as from 1st January 2017. Until 2016 Immovable Property  Tax was imposed on the market value as at 1st January 1980 and applied to the immovable property owned by the taxpayer on 1st January of each year.

As from 1st January 2013, the bands and rates for Immovable Property Tax for properties situated in  Cyprus had been revised as per the table below which applied on a per owner basis (not per property). Property owners whose property had a total value of €12.500 or less (on the basis of 1.1.1980 values) were exempt from Immovable Property Tax.

10.1.1 TAX RATES

10.1.2 EXEMPTIONS

The following are not subject to Immovable Property Tax:

  • Schools

  • Churches and other religious buildings (partly exempt)

  • Public cemeteries

  • Public hospitals

  • Immovable property owned by the Republic

  • Common use and public places

  • Foreign embassies and consulates

  • Property under Turkish occupation

  • Buildings of charitable organizations

  • Buildings under a Preservation Order

  • Agricultural land used in farming or stock breeding, by farmer or stock breeder residing in the area.

10.2 LOCAL AUTHORITY RATES

 Local Authorities charge between €85 – €300 for regular refuse collection, street lighting, sewerage and relevant community services (Communal Services), depending on the size of the property. Communal Services’ fees are payable to the local Municipal Authority.

10.3 MUNICIPALITY TAX

The registered owner of a property is liable to an annual Municipality Tax calculated on the  market value of the property as at 1st January 1980. The rates vary from 0.1% - 0.2%. Municipality tax is payable to the local Municipal Authority. For example, for a unit bought at the price of €500.000, the Municipality Tax will be approximately €50,00 per annum.

10.4 SEWERAGE TAX

The registered owner of a property is liable to an annual Sewerage tax calculated on the market  value of the property as at 1st January 1980.The rates vary from 0.3% - 0.5%. Sewerage taxes are payable annually to the local Sewerage Board of the community. For example, for a unit bought in Limassol Municipality at the price of €500.000, the Sewerage Tax would be approximately €150 per annum.

11. INHERITANCE TAX - ESTATE DUTY

The subject tax has been abolished in June 2000 (Laws 74(I)/2000 and 78(I)/2000 for deceased persons who have died on or after 1st January 2000 and had domiciled in Cyprus. The executor/ administrator of the estate of the deceased, is required by the Deceased Persons Estate Law, to submit to the tax authorities a statement with the assets and liabilities of the deceased within six months from the date of death.

12. CAPITAL GAINS TAX

12.1 INTRODUCTION

 Capital Gains Tax (CGT)is imposed (when the disposal is not subject to income tax) at the rate of 20% on gains from the disposal of immovable property situated in Cyprus including gains from the disposal of shares in companies which own such immovable property directly , excluding shares listed on any recognized stock exchange. Furthermore as from 17.12.2015 shares of companies which indirectly own immovable property situated in Cyprus and at least 50% of the market value of the said shares derive from such immovable property are subject to CGT.

12.1.1 EXEMPTIONS

The following disposals of immovable property are not subject to Capital Gains Tax:

 • Lands or land with buildings acquired between 16th July 2015 and 31st December 2016 are exempt from CGT (subject to certain conditions) upon their disposal.

• Transfers arising on death.

• Gifts made from parent to child or between husband and wife or between up to third degree relatives.

• Transfers as a result of reorganizations.

• Gifts to charities and the Government.

• Compulsory Acquisitions.

• Exchange of properties, provided that the whole of the gain made on the exchange has been used to acquire  the other property. The gain that is not taxable is deducted from the cost of the new property, i.e. the payment of tax is deferred until the disposal of the new property.

Example

Sale price in October 2013

600.000

 

Cost of acquisition as at 1 January 1991

(90.000)

 

Indexation allowance January 1991 to October 2013             €90.000 @ 227,74/119,43)- €90.000

(81.620)

 

Capital gain

 

428.380

Legal and estate agency expenses

 

(5.000)

Taxable Capital Gain

 

423.380

Capital Gains Tax (20%)

 

84.676

12.1.2 DETERMINATION OF CAPITAL GAIN

 Liability is confined to gains accruing since 1st January 1980. The costs that are deducted from gross proceeds on the disposal of immovable property are its market value as at 1st January 1980 or, the cost of acquisition and improvements of the property if made after 1st January 1980, as adjusted for inflation up to the date of disposal on the basis of the consumer price index in Cyprus.

Expenses that are related to the acquisition and disposal of immovable property are also deducted,     subject to certain conditions e.g. estate agency fees, legal expenses etc.

12.1.3 LIFETIME EXEMPTIONS

Individuals can deduct from the capital gain the following:           €

Disposal of private residence (subject to certain conditions)    85.430

Disposal of agricultural land by a farmer                                 25.629

Any other disposal                                                                 17.086

N.B:The above exemptions are lifetime exemptions subject to an overall lifetime maximum of €85.430.

13. DOUBLE TAXATION TREATIES

Cyprus is a signatory to a Treaty for the Prevention of Double Taxation with many other countries all over the world, some of them being Russia, Ukraine, United Kingdom, Belarus, Bulgaria, United States. Double Taxation treaties avoid the payment of income tax in two countries. In comparison with other international financial centers, Cyprus offers a distinct benefit in the form of double taxation treaties and lower income tax rates. Agreements with an increasing number of countries eliminate the double taxation of income earned in any one of these countries. In practice, the tax levied by one country is credited against the tax charged in the taxpayer’s country of residence. Where different tax rates apply, the taxpayer will ultimately not pay more than the higher of the two rates of the respective countries. Such treaties combined with very favourable tax rates for international business entities in Cyprus, open the door to significant tax planning opportunities.

PART D- USEFUL ADVICE BEFORE ACQUIRING A PROPERTY

LAND OR SITE

  • Ascertain whether the site has development potentials and whether planning permission could be given for the kind of development you are seeking.

  • Ascertain from the Local Authorities the planning zone and density controls affecting the site and the availability of access to public roads, water supply, electricity, telephone and other services.

  • Ascertain whether the vendor has a valid title deed of the property and whether is free from any    encumbrances and any other charges.

APARTMENT / VILLA UNDER CONSTRUCTION

A potential purchaser should ensure that:

  • The developer/vendor has obtained the necessary planning permissions for the development.

  • The land is registered in the name of the vendor/developer.

  • The contract of sale is accompanied by architectural drawings and general specifications of the apartment/villa to be purchased which form an integral part of the purchase agreement.

For all the above transactions, whether land or apartment/villas, the purchaser should ensure that the contract of sale is duly signed and stamped and is lodged within 2 months from the date of signature with the District Land Office so as to have remedies of Specific Performance as provided by the Sale of Land (Specific Performance Law) Cap. 232 & Laws 50/72 & 96/72.

Specific Performance Law safeguards a purchaser of immovable property from a transaction between a seller and a purchaser, especially when the purchaser is not allowed to immediately transfer the acquired property in his/her name even though payment of the consideration has been made. According to the above law filing a copy of the contract to the Land Registry gives the purchaser the right to seek specific performance of the terms and conditions of the contract and thus to register the property into the purchaser’s name. Failing to do so, the purchaser cannot specifically enforce the transfer of the property in his/her name and only actual damages can be claimed through Court proceedings. The contract of sale deposited at the Land Registry can be withdrawn only with the purchaser’s consent. When the title deed of a villa /apartment is issued (3 - 5 years after the completion of a residential project), it will be registered in the name of the Developer at first and then transferred to the buyer.

DISCLAIMER:

The above facts and figures apply as at 30.1.2017 and are for guiding purposes only. Although every effort has been made to ensure that these are correct no liability is accepted by AMP ANDREAS PANTAZIS LTD or AMP ANDREAS PANTAZIS (ESTATE AGENTS) LTD. Any interested party should seek professional advice from their legal and accounting experts.

                                                                                                                                                                                                                                                                 

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