Cyprus can be called a rapidly developing and investment-attractive destination for foreign buyers. The country came out from the 2013 financial crisis very quickly despite international forecasts. The Republic regains the status of a state with a promising economy and financial policy, attracting investors and just individuals who are interested to live in a prosperous European zone.
Buying Cyprus property as an investment
Cyprus has been of an outstanding historical significance due to its favorable geographic location in the Mediterranean. The natural beauty, attractions, curative climate and low prices – comparing to European standards, make Cyprus the optimum destination for holidays or permanent residence. Cyprus is considered as one of the most top property destinations for the real estate sector. Local property is believed to offer good value for money and the island’s increasing popularity by the international market further supports this as well as due to the favorable policy to obtain a permanent residence or citizenship through the purchasing of real estate.
The low cost of living, high quality of lifestyle, the increasingly important role of safety and security, also make it an ideal destination for retirement.
The legal system in Cyprus is based on the British equivalent and protects the purchaser’s rights in many ways. Once the agreement of the property sale has been signed and deposit has been paid, the land registry provides a simple and effective legal instrument called the ”Specific Performance” which protects the purchaser’s ownership rights until the title deeds are issued and transferred to their name; the property therefore cannot be leased, sold, mortgaged and this status can only be altered by the purchaser himself.
A one-off stamp duty is imposed on the purchase of property in Cyprus paid to the tax authorities by the buyer. Payment is due within 30 days of signing the Sale Agreement and the rates are dependent on the contractual purchase amounts. A fee of 0.15% is imposed on the purchase price of € 5,001 -170,000 and 0.20% for purchases over €170,000.
Tax of registration of the ownership or so called transfer fee is a one-off payment paid to the land registry office after the property transfer takes place and all settlements have been made between seller and buyer. The fees are charged on the property’s market value at the date of purchase and are between 3 – 8% depending on property value. New properties, which are subject to VAT, have no transfer fee.
New properties, which are not subject to VAT, have a 50% reduction of the transfer fee.
The usual VAT rate is 19%.
If the buyer has no other property in Cyprus or has never enjoyed the VAT refund in the past and the property that he/she is buying is new and it will be used as the primary residence in Cyprus, then the first 200 sq.m. of the areas of the property are subject to the reduced VAT rate of 5%. The VAT reduction is only applicable to properties smaller than 275 sq.m.
Cyprus Immovable Property Tax
After receiving the title deeds for the property, the purchaser becomes the legal owner of the property. From that moment on, the purchaser has to pay the annual property tax. The size of the tax depends on the value of the property.
The base for the calculation is the value of the property as if it was sold in January 1, 1980. On average, it is 1/10 of the current market price.
Capital Gains Tax
Capital Gains Tax is charged at 20% on profits arising from the sale of property by each individual person. The profit is reduced by an indexation allowance that takes into account the inflationary increase over the years that the property was owned and are as follows:
The first €17,086 of profits arising from the first sale of any property in Cyprus. The first €85,430 of profits arising from the sale 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.
Local Authority Tax (Council Tax)
The local council property tax is paid annually. The tax collected by the municipality covers for garbage collection, street lighting etc. Fees vary depending on the size of the property.
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 costs are payable in predetermined installments during the year and vary between developments and properties.