Cyprus has proved to be an increasingly popular destination by 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.
Local property values have shown a steady upward movement over the years and properties, especially beach front properties, have shown a considerable appreciation. Relative to equivalent property found in other Mediterranean and Southern European countries, local property is believed to offer good value for money and the island’s increasing popularity by the international market further supports this.
The legal system is 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 The contract in the hands of the Land Registry cannot be withdrawn by anyone; and therefore the property cannot be leased, sold, transferred or mortgaged.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.
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.
Purchase Price in € Stamp Duty in %
Up to 5,000 0
5,001 - 170,000 0.15
Over 170,000 0.20
Note: Maximum Duty €20,000
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.
Property Value in €
%
Up to 85,000
3
85,001 - 170,000
5
Over 170,000
8
(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:
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.
Up to €40,000
0.60%
€40,001 - €120,000
0.80%
€120,001 - €170,000
0.90%
€170,001 - €300,000
1.10%
€300,001 - €500,000
1.30%
€500,001 - €800,000
1.50%
€800,001 - €3,000,000
1.70%
Over €3,000,001
1.90%
(with minimum tax €75)
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 inflationery increase over the years the property was owned. Non-residents are only taxed when selling 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 has been abolished with effect 1 January 2000, and is no longer imposed.
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 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.