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Law & Taxes

Transfer Fees

Real Estate Transfer fees are imposed by the Lands Registry in order to transfer FREEHOLD ownership to the name of the purchaser. The transfer fees are due for payment when the transfer of the title deed in the name of the purchaser takes place. The Purchaser is solely responsible for the payment of the transfer fees. The rates are on a graduated scale.

Value of property (€)

Transfer fee rate (%)

up to 85.430,07

3

from 85.430,08 to 170.860,14

5

from 170.860,15 and over

8

If the property is in joint names e.g. of a couple (husband and wife) or two individuals, then the purchase value is divided into two parts which results in reduced transfer fees.

The following example clearly illustrates this:

For property purchased for € 200.000 in one name, the fees payable are € 9.165,59.

For Property in one name

Up to € 85.430,07

@ 3%

= € 2.562,90

from € 85.430,08 to € 170.860,14

@ 5%

= € 4.271,50

The remaining € 29.139,86

@ 8%

= € 2.331,19

Total fees payable

= € 9.165,59

For property purchased for € 200.000 in the names of two persons, the fees payable are € 6.582,80.

For property in the names of two persons

First € 85.430,07

@ 3%

= € 2.562,90 (Share of husband)

Second € 85.430,07

@ 3%

= € 2.562,90 (share of wife)

The remaining of First, € 14.569,93

@ 5%

= € 728,50 (Share of husband)

The remaining of Second, € 14.569,93

@ 5%

= € 728,50 (Share of husband)

Total fees payable

= € 6.582,80

Transfer title fees calculator

Property Taxes, Fees, Rates

Immovable Property Tax

From 01.01.2017 the immovable property tax was abolished. 

Previosly the annual immovable property tax was calculated on the market value of the property as at 1st January 1980 and applies to the immovable property owned by the taxpayer on 1st January each year.

Market value of property (1/1/1980)(€)

Annual Property tax (‰)

up to 120,000

0

120,001 to 170,000

0.4

170,001 to 300,000

0.5

300,001 to 500,000

0.6

500,001 to 800,000

0.7

Over 800,000

0.8

Capital Gains Tax

On gains from disposal of immovable property situated in Cyprus, capital gains tax will be imposed at the rate of 20% with the first € 17,086 being exempt for each person. The gain is the difference between the sales proceeds and the original cost of the property. In the case of a property which was purchased before 1/1/1980, the gains are the difference between the sales proceeds and the market value of the property as of 1/1/1980.

The seller is entitled to a further allowance regarding the transfer fees paid, inflation rate per year and the cost of any additions made to the house.

Gains from the disposal of a private residence are exempt up to € 85,430 in total if the owner resides in it continuously for at least five years prior to disposal.

Gains from the disposal of a dwelling house are exempt up to € 85,430 in total if the owner resides in it continuously for at least five years prior to disposal.

Stamp Duty on Contracts

The purchaser is liable for the payment of stamp duty on the purchase price of the property at the rate of € 1.5 per thousand up to € 170.860 and thereafter at the rate of € 2.0 per thousand.

This should be paid within 30 days from signing of the contract of sale.

For example if the purchase price is € 256,290

first € 170,860

1.5‰

€ 256.29

next € 85,430

2.0‰

€ 170.86

Total

€ 427.15

Estate Duty

Estate Duty tax has been abolished as from the first of January 2000
(Statute No.78(1)/2000).

Local Authority Taxes & Rates

A rough guide could be approximately € 85 - € 260 per year depending on the size of your property.

This tax is for refuse collection, street lighting, sewerage, etc.

The basic utilities, electricity, water and telephone are payable individually in accordance with the consumption and based on a meter reading.

VAT

Since 01/05/2004 a new statute in respect of VAT on properties has been introduced. Disposals of newly-constructed properties for which a proper application for planning permit has been submitted with the relevant authorities after 01/05/2004 are subject to VAT at standard rate (currently 19%).

Since 08/06/2012 any person that is buying his/her first permanent residence in Cyprus can apply for a reduced VAT rate (defined at 5%).

It is no longer required (as was previously) to become a permanent resident first, and then to apply for the special rate of 5% VAT. The purchaser must complete a form at the VAT Authorities (like all Cypriot nationals) declaring his/her intention and commitment to use the house that he/she is purchasing, as the permanent residence for himself and /or his family in Cyprus. The same procedure and set of documents, as before, need to be provided in order to secure the certificate from VAT.  (This process is the same procedure followed by all Cypriot nationals).   

Please note the following important parameters:

- The house must be used only for personal and /or family living of the purchaser.
- It is not permitted to generate any income such as rental, or to utilise the property as an investment or any other type of business.
- The VAT Authorities maintain the right, and most probably at a later stage after possession (6-12 months), to investigate each case to ensure that the purchaser has honoured the above requirements.
- In the event that the purchaser has ceased to use the property as his permanent residence in Cyprus, including resale of the property, within a period less than 10 years from possession, then the purchaser must pay to the VAT Authorities the remaining VAT of 12% (17% less 5%) on the purchase price.

Tax Advantages

Cyprus is unique when it comes to the taxation aspects of living on the island.

The following income tax rates apply to individuals:

Chargeable income (€)

Tax Rate (%)

Accumulated tax (€)

0 – 19,500

-

0

19,501 – 28,000

20

1,700

28,001 – 36,300

25

3,775

36,301 – 60,000

30

10,885 

over 60,000

35

 

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.

Additionally, Cyprus has established Double Taxation treaties with the majority of European and non-European countries, safe-guarding that its residents will avoid paying tax in both countries. This gives the option to the citizens of these countries to take advantage of the very low rates in Cyprus.

Amendment of VAT legislation for Property purposes 

18/01/2018 The House of Representatives of Cyprus, for the purposes of harmonizing the legislation with the EU Value Added Tax (“VAT”) Directive, voted on 30/11/2017 a new VAT Law which amends the main VAT Law N.95(I)/2000.

A. VAT on the sale of building land (apply as from 02/01/2018)

The supply of undeveloped building land, in the course of a business activity, is subject to VAT at the standard VAT rate of 19%.

Business activity should be based on the facts of each case separately. The supply of land is not taxed when it is done as an isolated transaction.

Criteria should be taken into consideration to determine whether the supply of undeveloped building land is in the course of a business activity:

* Is the activity a serious undertaking earnestly pursued? 

* Is the activity an occupation or function, which is actively pursued with reasonable or recognisable continuity? 

* Does the activity have a certain measure of substance in terms of the quarterly or annual value of taxable supplies made (bearing in mind that exempt supplies can also be a business)? 

* Is the activity conducted in a regular manner and on a sound and recognised business principles? 

* Is the activity predominantly concerned with the making of taxable supplies for a consideration? 

* Are the taxable supplies that are being made of a kind which, subject to differences of detail, are commonly made by those who seek to profit from them? 

Examples

Sale of undeveloped land by a person who inherited the land and who does not carry out a business activity and this transaction took place after seven (7) or ten (10) years followed up by a transaction for another plot of land, then this is a strong indication that it relates to an isolated transaction. 

If the plot of land is company’s asset, its disposal will be a taxable(vatable) transaction, irrespective of the type of economic activity that the company carries out. 

Supply of two (2) plots of land on 2017 and three (3) plots of land on 2018. These transactions are indication of business activity. No VAT will be imposed on the supply of land located in livestock zone or areas which are not intended for development such as zones/areas of environmental protection, archaeological and agricultural.

B.VAT on the rental of properties (apply as from 13/11/2017)

The lease or rental of immovable property to a taxable person for business premises (all properties other than residential properties) is considered as a taxable transaction and is taxed at a rate of 19%.

The lessor will have the right to elect for such transactions to continue to be exempt by notified the Commissioner. If this right exercise it cannot be retracted a later stage.

Based on the new legislation:

* the lease or rental of immovable property to a taxable person for furtherance of the business is considered as a taxable transaction and is taxed at a rate of 19%, unless the building is used as a dwelling 

* the above applies provided that the commencement of the lease or rental agreement was on or after the coming into effect of the amending law 

* the value of the supplies in the period of one year has to exceeded €15.600 

* the lessor may opt for the exemption from VAT of the lease or rental of immovable property (subject to terms and conditions which will be determined by notification in the Official Gazette of the Republic), provided the lessor informs the Tax Commissioner of this decision 

* the lessor cannot subsequently change the decision for the exemption from VAT of the lease or rental

 Existing contracts for the lease or rental of real estate (except residential properties), remain in force and are not affected by the above amendment. Therefore, the lease/rental is deemed to be an exempt transaction and is not taxable.

In case of termination and conclusion of a new agreement after 13 November 2017, the lease/rental will be a taxable transaction.

VAT refund

For a property that the lease/rent was made as an exempt transaction before 13 November 2017, the lessor is entitled to deduct the VAT on the construction costs of the building, provided that (i) 10 years have not elapsed since the date of construction/ purchase, and (ii) the lessor concluded a new lease/rental agreement after 13 November 2017 (i.e. a taxable transaction).

In case which the property falls within the 10-year timeframe, the VAT on construction costs is adjusted for the remaining years, starting from the year of its initial use. The initial use is deemed to be the time of acquisition of the building or its first use whichever comes first, and whether the owner was a VAT registered person or not.

C. The reverse charge is imposed on the transfer of property in the context of loan restructuring (apply as from 02/01/2018)

Its apply when a property is transferred from the borrower in the course of a loan restructuring process as well as under a compulsory transfer procedure to the lender.

This provision was enacted in order to facilitate the payment of VAT in cases where the taxpayer is no longer in a sustainable financial position, with a bank having to take possession of the property which was held as a guarantee against the loans provided.

The above supplies are deemed to be taxable transactions for both the recipient and the person who makes them, provided that the recipient receives the goods

in furtherance of the business.

The VAT deduction on the above-mentioned transactions based on the reverse charge method is possible, if:

* the taxable person supplies the property to the recipient 

* the recipient is a taxable person at the time of the transaction and receives the Property for furtherance of the business 

* input tax is deductible by the taxable person, provided that VAT is accounted for by the recipient


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