HOW TO BUY A PROPERTY IN SOUTH CYPRUS
01 CONTRACT OF SALE
The lawyer responsible for drafting the contract of sale besides inserting the fair terms and conditions for the protection and interest of the buyer will examine the deeds of the property sold by obtaining a copy from the vendor or the Land Registry Office and generally he will make sure that all the details correspond to the property in question and that it can be sold to the prospective buyer. When the contract is ready at the satisfaction of the buyer it can be signed by the buyer himself or by his lawyer by virtue of a power of attorney that can also be used for all other necessary acts and documents until the completion of the transaction.
02 STAMP DUTY
Once the contract is signed the purchaser is responsible for the payment of stamp duty:
• The first €5,000 ……………………………. no stamp duty is imposed
• €5,001 – €170,000……………………………..is at the rate of 1.5 0/00
• €170,001 and more…………………………….is at the rate of 2.0 0/00
This amount should be paid within 30 days of signing the contract in order to avoid the payment of a fine.
03 LODGING A COPY OF THE CONTRACT OF SALE WITH THE LAND REGISTRY OFFICE
As from the date of signing the contract of sale the buyer has the right within 6 months from that date to lodge the contract to the Land Registry Office for what is called Specific Performance purposes. This is very important for the protection of the buyer mainly for two reasons: By depositing the aforementioned contract to the Land Registry, the purchaser prevents the vendor from transferring the immovable property in the name(s) of a third party and the Purchaser acquires the right to seek “specific performance” of the terms and conditions of the Contract of Sale and secure the transfer of title of the immovable property on the name of the Purchaser, even when the Vendor does not wish to be involved in such processes.
04 PERMISSION FROM THE COUNCIL OF MINISTERS
This is applicable to the non European buyers:
Before transfer of the property sold on the name of the purchaser permission must be sought from the Council of Ministers (District Office) by written application which must be submitted by the purchaser after the agreement is signed. However, this permission is granted more or less as a matter of course to all bona fide purchasers. In the meantime, purchasers can take possession of the property without any restriction.
05 VAT PAYABLE ON PROPERTY
VAT is paid in case of new properties (under construction) except if the application for a town permit is filed before the 1st of May 2004, VAT will not be charged.
Since Cyprus accession to the E.U., the VAT which is now calculated on the rate of 19% must be paid when a purchaser is buying a house. However, purchasers are entitled to 5% according to the law if:
-The application for the planning permission has been deposited in the appropriate authority after the 1/5/2004.
-The purchaser uses the purchased property as his principal and permanent residence in the Republic and he had not acquired any other residence in the Republic.
-The total area of the property does not exceed 275 square meters; reduced percentage of 5% will be imposed for the first 200 square meters ONLY.
Total Area: means the summation of the area of the cover spaces of the property including engine room storage areas and parking covered spaces and covered verandas.
There are also some restrictions:
(a)The reduced coefficient VAT 5% is imposed for the erection or the purchase of property, with the condition that the property will be used as the main residence for the next 10 years.
(b) In case that the entitled person ceased to use the property as the main residence before the 10 years he has to within a period of 30 days from the date he ceases to use the property to inform the VAT and at the same time to give the difference in the amount within the amounts of Tax which occur from the application of the decreased and regular coefficient as they were in effect at the delivery or the erection of the property, which is for the period that the property was not used for the owners occupy. This restriction does not exist in case of transfer of property in a child and or in case of death of the purchaser.
(c) Married persons are entitled to purchase or to erect only one house.
In case the entitle person has received grants according to the Special Fund (purchase or erection of property) Law is not entitled to deposit an application for reduce coefficient VAT before the period of 10 years from the time he received the grants, unless he attach a certification from the Office of Grants from the Ministry of Finance that has returned the grant or part of it accordingly.
06 TRANSFER OF OWNERSHIP AT THE LAND REGISTRY OFFICE
The transaction is concluded with the transfer of ownership by a simple process of registration at the Land Registry Office once the necessary permissions are granted (as described above) and as soon as separate title deeds for the property sold are issued by the Land Registry Office reflecting the property erected on the land. At this stage the buyer is responsible for the transfer fees.
UP TO EUR 85,000 – 3%
EUR 85,000.001 – EUR 170,000.00 – 5%
EUR 170,000.01 AND OVER – 8%
Please note that transfer fees are calculated based on whole shares of ownership. In case of any share, you need to calculate transfer fees for each of the owners separately the corresponding amount of the share.
• No transfer fees payable for properties with VAT
• 50% transfer fees payable for properties without VAT
07 INHERITANCE TAX
There is no inheritance tax in Cyprus.
08 CAPITAL GAINS TAX
Capital Gains Tax is imposed 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 excluding shares listed in any recognised stock exchange.
Individuals can deduct from capital gain the following:
• Disposal of private residence
(Subject to certain conditions) = €85,430.07
• Disposal of agricultural land by a farmer = €25,629.02
• Any other disposal = €17,086.01
The above exemptions are given only once and not every disposal. An individual claiming a combination of the above is only allowed a maximum exemption of = €85,430.07.
Capital gains: No capital gains tax from the sale of property purchased from the 25th of July 2015 until the 31st of December 2016 irrespective of when you decide to sell the property.