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VAT

Transfer Fees

Gain Tax

Stamp Studies

Immovable Property Tax

Other Property Tax Issues

Income Tax

Double Taxation Treaty

Below we list all types of taxes, rates and fees related to the purchase & sale of property in Cyprus.

The rate of VAT in Cyprus is currently 15%. The government has also introduced a 15 % VAT on the selling price of new properties as from the 1st of May 2004 in accordance with the “acquis communautaire”. The sales contract price is inclusive of VAT. VAT exemption is given to a property for which a valid application at Planning Permit was submitted at the Town Planning Department before the 1st of May 2004. VAT will be introduced on land approximately on the 1^st day of June 2008.

When the house/flat is the buyer's first private residence one is entitled to apply to the local authorities to claim back 10% of the 15% VAT already paid. However, you need to pay the amount in full first, and then make the claim; in effect paying only 5% VAT. All other buyers pay 15% VAT.

To be entitled to the VAT exemptions on Cyprus Property Purchases:

• You must live in the property for 10 years. If you sell the property after, say 7 years, you will be required to refund the part of the VAT.

• You must use the property for no less than 183 days per year, proving the property is your permanent residence with water, electricity and telephone invoices. In other words you must be a resident of Cyprus.

• VAT is not paid if you do not live in or rent the property. When you sell the property, as with an investment property, VAT is charged by the original buyer to the new buyer, to be paid to the government. Non EU members residing in Cyprus are no entitled to the exemptions.

VAT allowance is granted as follows:

• For erecting a house: £500/€854.41 m² up to 130 m²
• For the purchase of a 1 bedroom flat: £950/€1623.17 per m² up to 130 m²
• For the purchase of a 2 bedroom flat: £950/€1623.17 per m² up to 130 m²
• For the purchase of a 3 bedroom flat: £875/€1495.03 per m² up to 130 m²
• For the purchase of a semi detached house: £750/1281.45 per m² up to 130 m²
• For the purchase of detached house: £1000/€1708.6 per m² up to 130 m²

How is VAT calculated?

• m² up to 130 m² X standard prices as given above X 10/115

Example 1 - If someone purchases a 3 bedroom detached house of 200 m² he will receive back from the government 130 m² X £1000/€1708.6 X 10/115=£11304.35/€19314.63

Example 2 - If someone purchases a 2 bedroom flat of 90 m² he will receive back from the government 90 m² X £950/€1623.17   X 10/115=£7434.78 / €12703.08

* Please bear in mind that amendments to legislation may result in some information contained in this document to become obsolete.

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TRANSFER OF OWNERSHIP (based on The Immovable Property Transfer and Mortgage Law, No. 9/65)

Transfer fees are paid by the purchaser of a property at the time of transfer of ownership to the Land Registry Office.

The transfer fees are calculated on the purchasing price declared on the contract. If there is no contract the transfer fees will be calculated on the market value on the transfer day. The land office director has the right to reject the declared value and ask you to pay transfer fees on the outgoing market value s/he things correct at the time of purchase.

As from 19th March 1999 the transfer fees are calculated as follows:

If the property is purchased jointly by 2 or 3 or even more people the property purchase price is split equally into the no. of purchasers and this is beneficial because the cost of the transfer fees will be reduced.

Example 1 - If the Purchase Price of a property is € 350,000, 1 purchaser will pay € 21,165.59 as follows:

Example 2 - If the purchasers are 2 the purchase price of the property for each person is € 350,000 ÷ 2 = € 175,000. Each person will have to pay €7,165.59 transfer fees, total of € 14,331.18.

Example 3 - If the purchasers are 3 the purchase price of the property for each person is € 350,000 ÷ 3=116,666.67. Each person will have to pay transfer fees a total of € 12,374.19.

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The Capital Gains Tax Law, No. 52/80

Dealers in land fall under the income tax laws and non-dealers fall under the capital gains tax. The gain is calculated as the difference between the sales proceeds and the original cost of the property. As from the 1st August 1980, tax is imposed at the rate of 20% on gains realized from the disposition of property (building or land) as adjusted after the deduction of different allowances.

In other words; in order to assess the gain tax, the following must be deducted from the price received in consideration of the disposition:

• The assessed market value of the property as at 1st August 1980.
• The increase in the value of property due to inflation, which is calculated in accordance with the Retail Price Index issued every month by the Department of Statistics.
• The price paid or the consideration given for the acquisition of the property, if the property was acquired after 1/8/80.
• The cost of any improvements and additions made to the property for the sake of achieving a better sales price.
• Transfer fees, estate agent commission.
• Tax exemption up to € 85,430 applied to individuals for the disposal of agricultural land and main residence

The following allowances/exemptions are not available separately and every individual is only allowed a maximum lifetime allowance of € 85,430:

If the allowance granted has not been exhausted by the first sale, any balance will be carried forward to the next sales until used completely.

Example 1 - For a land sale by an individual who is not a farmer with a net profit of € 30,000 a gain tax of € 2,582.8 will be paid {(30,000-17086)*20%}. No allowance remains for any other sales.

Example 2 - for a sale of residence with a net profit of € 80,000, no gain tax will be paid because there is an allowance of € 85,430. The remaining € 5,430 will be carried forward on the next sale.

There is also capital gain tax from the disposition of shares in private companies which own immovable property at the rate of 10%.

Capital gains tax does not apply to profits from the sale of overseas real estate by residents who were not resident when they purchased the asset

Losses are calculated in the same way as gains and can be set off against capital gains tax in the current year and future years.

The following categories of dispositions are exempted from Capital Gains Tax:

• Transfer due to death
• Gift between spouses, parent to child, relatives up to 3^rd degree of kindred
• Gifts by family companies to their members, but only in cases where the property transferred was obtained by the company as a gift.
• Gifts to ltd companies, all the shareholders of which are members, and continue for 5 years after the donation to be members, of the family of the donor.
• Gifts from family companies to their shareholders, but only in cases where the property gifted was originally acquired by the company also by way of a gift.
• Donations to Charitable Institutions or to the Republic of Cyprus.
• Exchanges of immovable properties, Compulsory acquisitions.
• Aliens are only charged when selling property in Cyprus, but can be totally exempt from Capital Gains Tax if can prove that the purchase price was paid with foreign funds imported between August 1^st 1980 and July 13^th 1990.

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The Stamp Law Cap. 228

We highly recommend that all purchasers submit the sale contract to the Land Registry. This is to secure the property is registered in your name until the official transfer of ownership takes place. Non EU members need to receive a permit from the Council of Ministers before they can proceed to transfer any ownership in their name. Until the permit is ready they can lodge a sales contract with the Land Registry Office.

The contract submitted to the Land Registry need to be stamped by the Official Authorities (the Inland Revenue office). The Stamp Law defines the revenue stamps payable on contracts in accordance with the purchase price and is payable by the purchaser as follows:

• 1.5 € for every 1,000 € up to 170,860.14 €
• 2.0 € for every 1,000 € for over 170,860.14 €

Example - Contract with sale price of € 185,000 shall pay:

The sale contract has to be stamped within 30 days from the date of the signing of the sale agreement. Failure to pay revenue stamp duty on time a penalty fine is then imposed according to the value and the date of execution of the relevant contract. There is a standard excess fee of € 34.17 plus a 10% fee on the total cost of stamp duties minus a € 34.17 discount to be paid.

For Example, if the contract for the property of the € 185,000 was signed on the 1/10/2009 and the purchaser attends to the inland office on the 1/11/2009 to pay the stamp duties, he will have to pay the following amount:

If there is a 6 month delay the excess fees will double thus one will pay a standard fee of € 68.34 (€34.17 X 2) & 20% penalty on the original stamp duties (€ 50.08). The duties after 6 months or 1 year etc. will be € 68.34 € 50.08 € 284.57 = € 402.99

If no revenue stamped duties are paid, this does not render the contract null or void. However without the payment of the revenue stamp duty, a party may not use the agreement at the Land Registry nor in the court / legal proceedings.

Very important: All stamped sale agreements need to be submitted to the Land Registry office within 2 months from the date of signing of the sale agreement or they will lose any right to deposit the agreement to the Registry.

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The Immovable Property Ownership Tax Law 24/80 Cap. 322

This tax is imposed annually by the government on the market value as assessed on the 1st January 1980 on every registered owner whose immovable property exceeds ₤100,000 / € 170,860.14. One must submit a declaration of immovable property (IR 301 and IR 302) and pay the respective tax every year before the 30 September. Physical and legal persons are both liable to Immovable Property Tax based on the following rates / thousand:

Example 1 - If the excess value is € 500,000 on the first € 170,860.14 there will be no fee for the remaining € 329,139.86 there will be a tax to be paid at 0.25% which equals to € 329,139.86 x 0.0025 = € 822.85.

Example 2 - If the excess value is € 1,025,160.86 (£ 600,000):

he following properties are exempt from immovable property tax:

• Public cemeteries, public hospitals, schools, churches and other religious buildings
• Immovable property owned by the Republic, foreign embassies and consulates buildings under a preservation order subject to conditions, buildings of charitable org.
• Agricultural land used for agriculture or animal husbandry by a farmer
• Immovable properly situated in inaccessible or depressed areas, Property of a missing person under administration.

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• The Estate Duty/Inheritance Tax, Cap. 319 was abolished as of 1st January, 2000, but you may be liable to UK tax.

• Property Tax was abolished in 2002

• Miscellaneous Charges/Rates: A registered owner of a property is subject to other minor charges under other laws imposed by the municipality or other authorities such as:

• Municipal/Town Rate: Tax charged annually by the municipality to properties of physical & legal persons within the town boarders based on the estimated value of the property 0.0015 X Market Value (Around € 25 to € 100 per annum
• Village rate: Tax charged annually by the muktar of the village to properties of physical & legal persons within the village boarders based on the estimated value of the property (Around €25 to €150 per annum)
• Refuse collection charge: Charged by the municipality to properties to properties within the town boarders (Around € 111)
• Betterment Charge: Annual tax charged on physical & legal person’s properties in the areas where there are community boards based on the estimated improvement value of the property due to works on those areas carried out by the government & is calculated by the Council of Ministry
• Sewerage rate: Charged by the Sewerage Board on properties within the town boarders that are included in the sewerage scheme. (Amount €25 - €200). The total cost of the rates/charges depend on the size & value of the property ranging from €25 to €400 per annum

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The following income tax rates apply to individuals:

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