Legal and Financial
Cyprus has a sound legal system regulating the purchase of immovable property and it is harmonized with European legislation after Cyprus accession to the European Union in May 2004. The Cypriot legal system operates through a series of laws, which are regularly amended and updated to reflect the current economic and social demands and to balance competing interests in this vital sector of the economy.
Any candidate contemplating the purchase of immovable property in Cyprus, which is either complete or still under construction, should be familiar with the Cypriot legal framework dealing with the ownership and registration of property into the purchaser’s name.
Property duties and other costs with the purchase of property in Cyprus
Stamp Duty and Mortgage Fees:
A one – off stamp duty is levied on the purchase of property in Cyprus. The rates are dependent on the contractual purchase amounts and payment is due within 30 days of signing the sale agreement. The amount is payable by the purchased to the tax authorities.
Purchase Price Stamp Duty %
Up to 170.860 0.15%
Over 170.861 0.20%
The transfer of title can be effected once the Council of Ministers’ permission is obtained and the Central Bank of Cyprus confirms receipt of the foreign funds.
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:
Value up to €85.430 3%
€85.431 – €170.860 5%
Over €170.860 8%
Transfer fees are charged accumulatively and are payable at the time of title deeds (usually it is 3-5 years after delivery of property).
If the property is purchased jointly by a couple, the property purchase price is split equally into two parts and then taxed.
Purchase Price €205.032 / 2 = €102.516
1) €85.430 X 3€ = €2.563 x 2 = €5.126
2) €17.086 X 5% = €854 x 2 = €1.708
VAT Payable on Property
Since Cyprus accession to the EU, VAT must b paid when buying a house. In cases though where and application for a town permit was filed before the 1st of May 2004, VAT will not be charged.
For projects that the town planning application has been filed after the 1st of May 2004, VAT will apply on the sales price. VAT applied will have two rates, 5% for the purchase of residence by permanent residents of Cyprus and 15% for any other purchases. For the purchase of land VAT was applied at the end of the year 2007.
Capital gains tax
Should the purchaser decide to sell the property at a later date, Cyprus Law allows the full amount paid for it in foreign exchange may be transferred abroad at the time of resale. The equivalent of the full purchase price and any increase in the value of the property may be transferred immediately. Property sales in Cyprus are subject to capital gains tax at the rate of 20% on the gain.
The first €17.080 of gain are tax-exempt. If a couple jointly owns the property, €34.172 of gains are tax-exempt.
When you sell for the first time your private residence of which you were the owner for at lease 5 years, then it is tax-exempt up to €85.430.
Annual property tax
Immovable Property TaxThe registered owner of the property is liable to an annual immovable property tax calculated on the market value of the property as at 1st of January 1980.
Up to €170.860 Nil
€170.861 - €427.150 0.25%
€427.151 - €854.300 0.35%
Over € 854.301 0.40%
Other property Taxes:
There are taxes paid to the Municipality and depend on the size and value of the property. It covers refuse collection, sewerage, street lighting, etc, and it varies according to the area, approximately €150 - €200 per annum per unit per property, depending on the size of the property.
Communal expense covers an owners share towards the cost of cleaning and maintaining a projects communal areas, gardens, swimming pool, management fees and repairs. These are payable at fixed intervals throughout the year and vary from development to development and from property to property.
There is no inheritance tax in Cyprus.
Legal Safeguards for Foreign Buyers
Same as for locals, the contract of sale must be in writing and it is advisable to be registered at the District Land Registry within sixty days from the contract date. This protects the buyer’s rights to the property and provides safeguards. Also, when the title deed is issued (2 -5 years after the completion of the project), it will be registered in the name of the Developer then it will be transferred to the buyer and recorded in the government archives. The government archives are confidential and will not be published or made accessible under any circumstances.
Contrary to some other countries, where the purchase of property is linked with inherent risks, Cyprus has never been involved in the nationalization of any sector of the economy, or in the expropriation of property owned by non-Cypriots, in line with the government’s efforts to create a favourable climate for such investments.
Selling your Property
Provided that you have a valid contract and a purchaser. If the buyer wants to sell the property before the title deeds are issued, the contract between him/her and the Developer will be cancelled and a new one will be issued between the Developer and the new purchaser.
Cancellation fees are charges to the seller approximately €2.000, covering cancellation fees and expenses.
Your property insurance
Usually properties in Cyprus are insured in case of fire, theft, earthquake, natural calamity.
The mortgage market in Cyprus is well established to offer financing of a property purchase. Mortgages are widely available from a variety of high street banks and the terms and conditions vary from bank to bank. Most commercial banks in Cyprus are authorized to offer mortgage facilities to locals as well as foreign nationals and can be acquired in Euro as well as a variety of foreign currencies.
Documents Normally Required by Banks in Cyprus:
- Client Profile: Personal details, including copies of passport (page with photograph & personal information)
- Evidence of income: 3 months pay slips or confirmation of remuneration from your employer, employment contract and P60s, 3 years audited accounts from your accountant or copy of most recent tax clearance certificate.
- Debt information: Documentation regarding existing debts, regular outgoings and details of any other mortgages or loans outstanding.
- Additional income: Evidence of additional income such as tenancy agreement for rental property, Certificate of bonus etc.
- Bank reference: A reference letter from the primary bank you use in your home country
- Income declaration: Completed personal income declaration form.
- Purchase agreement: Original copy of purchase agreement/sales contract
- Statements: Copies of your bank statements from your current account for the last 3-12 months (depending on specific bank requirements).
- Deposit Proof: Copies of receipts for deposit payments made for the property and proof that deposit was paid by client(s) own funds
- Local Account: You will need to open and activate an account in the same bank you obtain your mortgage from to be able to transfer money to Cyprus and set up payment (direct debit/standing order etc).
- Application forms: Completed and signed loan application forms and declaration of personal and financial facts
Up to 40 years (maximum borrower age 70 years old)
Up to 15 years for investment purposes
Minimum deposits required are normally 30% of the purchase price of the property or 40% for investment purposes. The more security you can offer will increase the willingness of the bank to lend.
If you are ready to purchase and require mortgage finance, SVALENO PROPERTIES is able to arrange foreign currency loans for non-Cypriot citizens as well as local citizens. As we have a strong relationship with most of the local banks, we will make every effort to find you the most competitive rate available for you and loans which suit your needs. Just give us a call to find out the options available to you.