Buyer's guide

Taxation

Land Transfer Fees

These are paid on transfers of immovable property and are calculated on the market value of the property as estimated by the Land Registry department.

Transfer fees paid on the transfer of property are refunded in five years provided the company still owns the property and there have not been ay changes to its shareholders. On the transfer of immovable property from a family company to its shareholders as well as on transfers by donation between spouses, spouses and children or relatives up to a third degree of kindred, transfer fees are negligible.

Immovable Property Tax

Immovable property tax is imposed on the market value of immovable property as at 1st January 1980 and is calculated on the immovable property owned by the taxpayer on 1st January of each year.

Exemptions

The following properties are exempt from immovable property tax:

• Public cemeteries
• Churches and other religious buildings
• Public hospitals
• Schools
• Immovable property owned by the Republic, foreign embassies and consulates
• Buildings under a preservation order subject to conditions
• Buildings of charitable organizations
• Agricultural; land used for agriculture or animal husbandry by a farmer

Capital Gains Tax

Capital Gains Tax is imposed on gains from disposal of immovable property situated in the Republic including shares of companies not listed on a recognized Stock Exchange which own immovable property situated in the Republic at the rate 20%.

In computing the capital gain the value of the immovable property as at 1st January 1980 (or cost if the date of acquisition is later), the cost of any additions after 1st January 1980 or the date of the acquisition if later, any expenditure incurred for the production of the gain and the indexation allowance, are deducted from the sale proceeds.

Exemptions

The following disposals of immovable property are exempt from the capital gains tax:

Deductions

Individuals are entitled to deduct from the gains the following:

Stamp Duty

Contracts for the acquisition of immovable property are subject to stamp duties at the following rates:

Estate Duty

• Estate (death) duty was abolished as from January 2000.
• The law provides for a compulsory submission of an 'assets and liabilities' statement of the deceased person to the Commissioner of Income Tax within six months from the date of death.
• Local Authority taxes & rates. There is a requirement however that before property is transferred to the beneficiaries of the estate of the deceased, or clearance is obtained from the Commissioner of Income Tax for other taxes.

Real Estate is excluded from VAT as are most food items, medicine and other essentials. As from January 2003 the VAT standard rate on goods and services is 15%.

Tax Advantages

Cyprus is unique when it comes to the taxation aspects of living on the island. Retirees who become tax residents of Cyprus are taxed on their pensions emanating from services rendered outside of Cyprus at the rate of 5% on amounts exceeding £2,000 annually. Such retirees may elect to be taxed under the standard tax rates if it is beneficial to them

Double Taxation Agreements

Cyprus has an extensive network of Double Tax Treaties with many European and other countries. For individuals becoming residents of Cyprus this may prove very beneficial as income such as dividends, capital gains or shares etc. which would be taxed at zero or low tax rates.

Duty Free Privileges

Retirees that reside in Cyprus are allowed one duty free car per person as long as the purchased car is less than five years old.

Legal Information

Individuals may acquire property in Cyprus either as a holiday home or as a residence to which the following rules and regulations apply.

Residential permit

Residential Permit is easily obtained for persons living in Cyprus, who have purchased property.

Temporary Permit

The granting of this permit requires proof of

• A healthy bank account balance and/or a steady source of income such as pension payments, dividend from investments etc.
• Residence in Cyprus in the form of a rental or purchase agreement.

Temporary residence status in Cyprus can be granted for a period of time which may vary across individuals and can easily be renewed on expiry.

Permanent permit

All of the requirements of a temporary permit apply.

The immigration authorities must be convinced that the interested individual's source income is steady and sufficient to cover the necessary expenses required maintain a reasonable lifestyle in Cyprus.

The above listed requirements that lead to a resident status in Cyprus currently apply to both EU and non EU individuals. However, with Cyprus' induction in the EU, the requirements will gradually be eliminated for all EU residents.

Property Ownership

The following restrictions will be released following Cyprus' accession in the EU and a transitional period of approximately 5 years.

• Non-Cypriot buyers are entitled to a FREEHOLD ownership of a villa, an apartment or a piece of land whose area can not exceed 4014 m2
• Couples can only own one property between them
• No joint ownership of property is allowed either between Cypriots and foreigners or between foreigners
• Due to certain exchange control barriers, funds that go towards the purchase of a property have to originate from foreign bank accounts unless the buyer secures a loan which can be from a domestic or foreign bank
• International entities are allowed to acquire premises for their businesses and/or for the residence of their international workforce.

Mortgage Finance

• All commercial banks in Cyprus offer mortgage facilities to assist in the purchase of property.
• The loan will be in foreign currency (the loan can be in local currency as well but it is not to the customer's advantage)
• The maximum loan amount is 70% of the value of the property with 8-10 years repayment period
• Requirements for obtaining mortgage finance are:

  1. Mortgaging the house
  2. Guarantor (usually the husband or wife)
  3. House or theft insurance etc.

• Easy terms of payments and long-term in-house finance schemes are also available.

The Title Deed

The procedure undertaken to obtain a title deed is as follows:

• Sign the purchase agreement
• Apply to the Council of Ministers to secure a permit (permit may take 8-12 months to be obtained)
• If the purchase was made from a Cypriot entity and the purchase price exceeded the amount of €102,500 then proof must be presented to the Central Bank of Cyprus that the funds originated from abroad.