The process of buying
Cyprus became part of the EU on May 1, 2004. The principle of the uniform Europe means the right to free movement of people and goods. Despite this, there are some restrictions applied concerning acquisition of real estate by aliens of Cyprus. All these restrictions were cancelled for the European citizens in 2009.
In any case, upon purchase of real estate the following procedure has to be observed:
1 . Purchase and sale contract
For the purpose of the protection of interests of the buyer the lawyer bears responsibility for a condition of the contract and introduction of terms and conditions. They will also check the title page of the real estate to be purchased, once a copy has been received from the seller or the Department of Land Possession (Land Registry Office )and will make sure that all other legal documents relating to the selected real estate meet the required standards and the buyer will be able to register property to their name with minimal effort.
The contract can be signed by the buyer, or the lawyer if a power of attorney has been received from the buyer. Also, this power of attorney can be used by the lawyer for other necessary actions in interests of the clients. For instance, the transfer of water and electric into the name of the buyer.
2 . Stamp duty
The stamp duty is paid at the signing of the contract, for legalization of acquisition of real estate. This is paid in the Department of Land Possession (Land Registry Office).
The buyer is obliged to pay the stamp duty which makes 0,15% from the cost of property not exceeding 170.860.14 EUR, and 0,20% otherwise for signing of the contract. The stamp duty must be paid no later than 30 days from the date of signing of the contract of purchase and sale.
For example, if the cost of real estate makes 256.290.22 EUR:
First €170.860.14 × 0,15% = €256.29
Following €85.430.08 × 0,20% = €170.86
3 . Contract registration in Department of Land Possession
The contract of purchase and sale will be completed in the Land Commission no later than two months from the date of its signing. The stamp is put on the contract, thus it is registered in Land chamber. This procedure is carried out for the purpose of protection of interests of the buyer for two important reasons :
First, it guarantees and confirms the buyer is now the new registered owner of the property until the title page of the real estate has be received, as the full transfer of property will not be carried out yet. Possibility of sale, purchase, rent or property mortgage without the knowledge of the buyer will now be excluded.
The second, not less important reason – the title page will pass to the buyer even if this point will be missed by the seller. The title deed is usually issued within 4 – 5 years from the date of project delivery . This is considered standard practice in Cyprus. If the purchased real estate was constructed less than 4-5 years ago, the title page can be received at once on signing of the contract.
In a case of the seller for any reasons detains or refuses to provide the title page, the buyer can submit the statement of claim and oblige the seller provide this document in a judicial order. Otherwise, the only remedy the buyer will have is a claim of compensation of damage.
4 . Obtaining preliminary permission of Council of ministers
Before the procedure of transferring the property addressed to the buyer, it is necessary to provide in Council of ministers the statement in writing. It has to be carried out after signing of the contract of purchase and sale. This procedure can last 8 – 10 months during which the buyer has the right to use and inhabit the property without any restrictions.
5 . Property transfer addressed to the buyer
Transfer of the property right happens by way of a simple registration in Department of Land Possession at once on obtaining necessary permission. By transfer of property and its registration addressed to the buyer, Department of Land Registration raises commission collecting (registration payment) the sum of which depends on the cost of the acquired property and is calculated as follows:
To €85.430 the interest rate is 3%
From €85.430 – €170.860.14 the interest rate is 5%
Over €170.860.14 the interest rate is 8%
For example, if the cost of real estate is 153.774 EUR then:
First €85.430 × 3% = €2.562
Following €68.344 × 5% = €3.417
In a case where the purchase is made by two persons, payment of expenses is made in equal shares
For example, if the cost of real estate makes 153.774 EUR then:
First €76.887 × 3% = €2.306.61
Following €76.887 × 3% = €2.306.61
6 . Legal services
Payment of legal services makes 1% from the cost of purchase plus 15% of the VAT and any other payments.
7 . Mortgage collecting
The commission for granting the credit makes 1% from the sum of the credit plus the corresponding stamps.
At registration of a mortgage loan there is the undertaking of obligatory life insurance. In cases where the company used for the insurance is a cooperating company of the bank (or recommended to them), this service will be cheaper. In other cases there will be an increase in interest rates because the bank has no data on reliability of insurance company.
8 . Tax on real estate
According to the law of January 1, 1980, the tax on real estate assesses the market cost of real estate.
Real estate cost in Euro the Annual real estate tax
0 – 170.860 0
170.861 – 427.150 0.25 %
427.151 – 854.300 0.35 %
Over 854.300 0.40%
9 . Other taxes
The registered owner of the property is obliged to pay other insignificant taxes according to municipal laws. These taxes depend on the size of real estate and include garbage removal, use of sewer system, illumination of streets, etc.
10 . VAT
From 1/05/2004 the value added tax (VAT) concerning real estate is officially imposed. The VAT is raised on a standard rate – 15%, in case of delivery of permission to planning works as appropriate authorities after 1/05/2004.
In certain cases the grant on acquisition of new real estate used for continuous accommodation is provided to certain persons.
The application for receiving a grant is submitted to the Ministry of Finance for any individual, the citizen of the Republic of Cyprus or any other EU Member State, constantly living in the territory of the Republic of Cyprus. The grant is intended on the real estate which total area doesn't exceed 250 sq.m and is limited to 130 sq.m. For obtaining more detailed information you can contact us.
11 . Tax on a capital gain
The tax on a gain of the capital equates to 20% from profit of the real estate. Profit is the difference between the market cost of real estate at the time of purchase and the real cost of real estate is considered. Besides, the seller has the right to the following discounts which in effect minimize taxes on a capital gain.
The first 17.086 EUR profits on sale of any real estate are exempted from this tax
The first 25.629 EUR profits on sale of farmlands are exempted from a tax (at observance of certain conditions)
The first 85.430 EUR profits on sale of real estate aren't assessed with this tax provided that the real estate was in private use of the owner not less than 5 years (at observance of certain conditions)
12 . Income tax
All tax residents of Cyprus are assessed with a tax on the income from all sources in Cyprus and abroad. The persons which aren't tax residents of Cyprus, are assessed with a tax on the income, received only in Cyprus. The person is considered a tax resident of Cyprus if he / she is in the territory of Cyprus more than 183 days in a year.
Income (EUR) Tax Tax (EUR) Sum Saved-up Tax (EUR) Rate
0 - 19.500 euros - 0
19,501 - 28,000 is 20% = 1,700
28,001 - 36,300 is 25% = 2,075
Over 36,301 is 30%
13 . Pensioners
The pension for the persons being residents of Cyprus, is subject to the taxation of 5% from any sum exceeding €3,417 a year.
14 . Corporate tax
All companies and tax residents of Cyprus pay a tax on the income received in Cyprus and abroad. The companies and non-residents of Cyprus pay taxes only on the income taken from Cypriot sources.
All companies taking the main place of a business management in Cyprus are considered as residents. The rate of a corporate tax on the income of the Cypriot companies makes 10%.