Due to the relatively low tax rates, Cyprus is considered a tax heaven for foreign investors. The attractive tax system together with its EU accession has helped Cyprus establish itself as an ideal holding company location in the EU. There are over 17,000 foreign companies (named International Business Companies IBC’s) that have headquarters in Cyprus.
INCOME TAX RATES
Retirees who become residents in Cyprus are taxed on their pensions from abroad at the rate of 5% per annum, while an annual exception for the first €3,420 is granted.
IMMOVABLE PROPERTY TAX
Immovable Property Tax Is abolished as from 1 January 2017
The annual immovable property tax is calculated on the market value of the property as at 1st January 1980 and on average, it is 1/10 of the current market price. The size of the tax depends on the value of the property.
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 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 was abolished as from 1/01/2000.
The local council property tax is usually paid annually to the Council at which the property is listed. The tax collected by the municipality covers for garbage collection, street lighting etc. Fees vary depending on the size of the property and at which council your property is listed.
STAMP DUTY FEES
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 basic utilities, electricity, water and telephone charges are payable individually depending on the consumption and based on a meter reading.
The legal fees are of the approximate percentage of 2% to 2.5% of the purchase price all inclusive.
This includes the legal fees of the approximate percentage of 1.25% plus the VAT 15% plus the real expenses of the amount of 0.75% which includes stamp duty on contracts and power of attorneys, postage and administration and 0.5% for a mortgage arrangement fee.