Cyprus Property Buying Guide

Cyprus has proved to be an increasingly popular destination for foreigners for the acquisition of real estate for a plethora of reasons.

The island of Cyprus has always been considered to be one of the top property destinations by foreign buyers.  Despite the recent economic downturn that Cyprus had experienced as a result of the global economic recession, there is still a very strong interest for the real estate sector, especially from the Russian market, Middle East, and Asia. The continuing demand for property by foreigners is attributed to many factors, including the relatively low cost of living, the high quality of lifestyle, the favorable policy to obtain a permanent residence through the acquisition of real estate and the fact that Cyprus is one of the top destinations for retirement.

In addition, the unique hospitality of the local population, the attractive climate, the increasingly important role of safety (Cyprus is one of the safest countries in Europe with crime at a very low level) and security, have all played an important role. Demand and market activity has caused local property values to show a steady and at times sharp appreciation, but this trend has now a slower pace. Good properties are still abundant, and local property prices are still much lower than those of other European countries such as France, Portugal, and Spain.

Buying Cyprus property as an investment

Local property values have shown a steady upward movement over the years and properties, especially beachfront properties, have shown a considerable appreciation. Relative to equivalent property found in the other Mediterranean and Southern European countries, the local property is believed to offer good value for money and the island’s increasing popularity by the international market further supports this.

Legal Safeguards

The legal system in Cyprus is largely based on the British equivalent and safeguards the purchaser’s rights in many ways. For the purchaser’s protection, once the agreement of property sale has been signed and a deposit paid, the Land Registry in Cyprus provides a simple and effective legal instrument called the “Specific Performance”. This procedure protects the purchaser’s ownership rights until the title deeds are issued and transferred to their name. The contract in the hands of the Land Registry cannot be withdrawn by anyone; and therefore the property cannot be leased, sold, transferred or mortgaged. This status can only be altered by the purchaser himself.

Stamp Duty

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 purchaser to the tax authorities.

Note: Maximum Duty €20,000

Transfer Fees

The purchaser will be liable to pay the following transfer fees for the property acquired when this is registered in his/her name at the Land Registry Office. The fees are charged on the property’s market value at the date of purchase.

 (The rates above apply per person)

Important Note: The Cyprus Parliament  announced the abolishment or reduction of property transfer fees, this offer applies until the end of 2016 and the following will apply:

1. Exemption from transfer fees if the transfer relates to a transaction that is subject to VAT. VAT is charged at the standard rate of 19% where a reduced rate of VAT (5%) has been introduced for properties purchased by permanent residents of Cyprus, provided that the property will be used as the main residence of the purchaser for a minimum of 10 years.

2. In case a transaction is not subject to VAT, the legislation provides for an exemption of 50% of the transfer fees. This applies to transactions where transfer fees apply or are due and the transfer relates to plots of land, buildings or interests in land or indivisible interests that are sold for the first time from the date of issue of the relevant building permit and the relevant contract is prepared and submitted for the first time to the local District Land Registry during the period of application of the law.

Cyprus Immovable Property Tax

Each registered owner is liable for this annual currant imposed tax calculated on the market value of the property as at 1st of January 1980.

(with minimum tax €75)

Capital Gains Tax

Capital Gains Tax is levied at 20% on gains arising from the disposal of property by each individual person. The gain is reduced by an indexation allowance that takes into account the inflationary increase over the years the property was owned. Non-residents are only taxed when selling the property situated in Cyprus. The following allowances are available to individuals:

The first €17,086 of gains arising from the first disposal of any property in Cyprus. The first  €85,430 of gains arising from the disposal of a house used by the owner for his/her own habitation. This allowance can only be claimed once. An individual claiming a combination of the above allowances in only allowed a maximum allowance of €85,430.

Inheritance Tax

Inheritance Tax has been abolished with effect 1 January 2000 and is no longer imposed.

Local Authority Tax

Property taxes levied by the local authorities are payable annually and may vary, depending on the size of the property. The tax covers the cost of garbage disposal, street lighting, etc.

Communal Expenses

Communal expenses cover an owner’s share towards the cost of cleaning and maintaining a project’s 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.