The Purchase Of Real Estate
In recent years, there has been a rise in interest in owning real estate in the Republic of Cyprus. Cyprus’s mild climate, favorable tax system, strategic geographic location, EU membership, and double tax treaties with a number of other countries are just a few of the factors that have contributed to Cyprus’s status as the ideal real estate investment hub.
Cyprus Law, which is generally followed by the respective UK Laws, regulates immovable property transactions. Individuals and businesses purchasing real estate in Cyprus enjoy the same rights as natives and their ownership is guaranteed.
Non-Europeans vs. Europeans
There are a few distinctions between European and non-European nationals when purchasing real estate in Cyprus.
European residents (including corporations with European shareholders) are free to buy any residential or commercial property in Cyprus. Residents of the European Union are recognized as natives and are allowed to register for as many properties as they want in their name.
Non-EU residents who desire to purchase real estate in Cyprus must adhere to a set of rules and regulations. The sort of property and its size are both restricted. Non-EU residents are only allowed to buy one apartment, home, building, or piece of land. Aside from that, the property’s size shall not exceed 4,014 square meters.
If the real estate is purchased through a Cyprus corporation, these requirements and restrictions will not apply. Non-EU residents who own a Cyprus company can buy immovable property in Cyprus to meet their operational needs, as long as they have and maintain a full-fledged office. Non-EU residents can operate a corporation that can buy real property for their foreign staff to live in. In such instances, the employee’s residence must be registered in his or her name. Non-EU residents must apply to the Council of Ministers for authorisation to purchase property by submitting a written application after the sales agreement has been signed.
Procedures And Recommendations Prior To Property Acquisition
A due diligence exercise should be carried out prior to the purchase of immovable property. The following are some important guidelines:
The buyer must check for encumbrances such as notes or mortgages on the property. This can be done by going to the District Lands office and conducting a search;
The buyer should double-check that the title deeds match the information on the property.
The buyer must also secure and submit all necessary building licenses, planning permits, and final approval certificates to the appropriate authorities.
The developer’s reputation and legal status should also be considered by the buyer.
When purchasing land, the buyer must ensure that the land is suitable for construction.
To ensure that the process proceeds well, make sure that both the stamp duty on the agreement and the title deed transfer costs are paid on time.
The ideal practice is to create a sale agreement that includes all of the transaction’s terms and conditions and is signed by both parties.
The following are the principal taxes and charges that apply to both persons and entities when purchasing, owning, and selling immovable property in Cyprus:
Duty on Stamps
When purchasing immovable property in Cyprus, the sales agreement must be stamped at the Tax Office and then presented with the District Lands and Surveys office within 30 days. The Inland Revenue collects stamp duty.
Fees for Transfers
When the title deed is registered in the buyer’s name, the purchase of immovable property in Cyprus is complete. The registration of a change of ownership with the District Land Registry Office is a simple process. The Land Registry Office will evaluate the market worth of the property at the time of contract signing and levy transfer costs appropriately when the title registration is finalised.
If the transfer is related to a transaction that is not subject to VAT, there is now a 50% discount on the above prices. There are no transfer costs in circumstances when the transaction is subject to VAT.
VAT stands for Value Added Tax (VAT)
Whether or not a property is subject to VAT, as well as the applicable VAT rate, are two issues that must be addressed in the sales contract.
Only the purchase price of new and unused properties is subject to a 19 percent value added tax.
If the following criteria are met, an individual can request for a preferential reduced VAT rate of 5% to be imposed on the acquisition or construction of their home:
An eligible person must submit an application. A Cyprus resident, as well as residents of the EU and non-EU Member States, are all eligible. Individuals must be at least 18 years old. Legal entities are not allowed to participate.
For the next ten years, the property must be used as the primary and permanent residence;
In the previous ten years, the buyer must not have purchased another property with a lower VAT rate.
Only the first 200m2 of the property are subject to a reduced VAT rate of 5%. A normal rate of 19 percent is applied to the remaining square meters.
A reduced VAT rate application must be submitted prior to the acquisition of a residence or, in the case of building, at any stage of construction. In addition to the application, the qualified person must provide suitable documentation and evidence demonstrating ownership and that the property will be used for a long-term stay. Property purchased from individuals who do not ordinarily dwell in Cyprus but want to use it as their primary house while in Cyprus is eligible for the reduced rate.
Tax on Immovable Property
As of 2017, the Inland Revenue has removed the immovable property tax.
Tax on Inheritance
Since the year 2000, Cyprus has had no inheritance tax.
Rates And Taxes In Your Neighborhood
Local taxes and fees vary depending on which municipality/council the property is in. Taxes typically vary from EUR 100 to EUR 300 each year. These fees are mainly for garbage collection, sewage, and other communal services and are based on the size of the property.
In Cyprus, you can sell your mobile property.
The capital gains tax in Cyprus is levied at a flat rate of 20% on the sale of immovable property in the country. Individuals can, however, claim lifetime exemptions, which will be reduced from the taxable capital gain from the sale. The following are exceptions:
The first EUR 17,086 of taxable gain from the sale of property in the Republic of Cyprus is tax-free.
The first EUR 25,629 in taxable gain from the sale of agricultural land will be excluded if the individual’s main occupation is agriculture.
The first EUR 85,430 taxable gain on the sale of the owner’s residential residence. There are certain restrictions.
There are a few deductions from the profits received from the sale that must be taken into account when calculating income from the sale of immovable property. These are the following:
The fair market value of the immovable property as of January 1, 1980, or the cost of acquisition if the date is later, adjusted for inflation until the date of disposal;
Expenses directly associated to the purchase or property of real estate, such as transfer fees, estate agency commissions, legal fees, and so on;
Any additions made after the acquisition date, up to the date of disposal, adjusted for inflation;