The real estate sector in Cyprus is an essential aspect of the country’s economy. This is due to the high homeownership rates of the locals as traditionally Cypriots tend to prefer to own their place of residence. And there is important interest from foreigners in purchasing property for holiday or second homes and investment purposes. As for the last five years, the improvements noticed in Cypriot economics were also seen in the real estate sector. Especially the last years the interest for Cyprus real estate has been steadily increasing. Thus many projects are under construction and present an exciting industry for investments for foreigners and locals.
The Cyprus legal system is based on the British requirements as Cyprus was a British colony until 1960. Further, with EU membership, Cyprus property law, real estate laws and regulations were harmonised in line with the European Union laws and regulations.
Cyprus immovable property law was enacted in 1946. It is regarded as the cornerstone of immovable property in Cyprus, dealing with all matters concerning the tenure, registration, disposition and valuation of immovable property within the framework of the Cyprus land registration system, in which immovable property is defined, drawn, recognised, and valued.
The Land Registry Department of Cyprus was established in 1858. It is considered to be one of the most advanced, reliable and trustworthy worldwide. It was founded and is based on the British model.
Every interest or right over or affecting immovable property (land, buildings, trees, plantations, rivers, wells, and all rights relating to estate and buildings) is registered and can be traced in the Registries of the Department.
Purchasers of Cyprus property will be very secure as any information related to their potential purchase can be traced from Land Registry records prior to the completion of the transaction. Also, after the purchase, their contract of sale or title deed transfer is registered or takes place at Registry.
Depositing the contract of sale to the Land Registry gives the purchaser the right to seek specific performance of the terms and conditions of the contract. Thus to register the property and title deed into the purchaser’s name once the title deed will be issued.
As per Cyprus property law, EU citizens do not require any permission to buy Cyprus real estate property. EU citizens are treated equally as Cypriot Citizens and can purchase real estate without any limits. They can register as many properties as they want in their name.
Non-EU citizens are entitled to purchase Cyprus properties, but they should apply for permission to register it in their names. This application is submitted at the District Office of the City that the property is situated after the contract of sale is signed. The permission is given to all purchasers, and this procedure currently is just a formality. The required time for obtaining permission is about 2-4 weeks.
Permission is allowed with some limits which apply for each family (husband and wife), the limit is two units from the below:
After selecting a property to buy, it is imperative that the lawyer performs a due diligence check for the property, which mainly involve the following:
Each Sale Agreement for property in Cyprus must be stamped as follows:
From €5.001 - to €170.000
The Land Registry Department required fees to be paid by the Purchaser for transfers of immovable property. They are calculated by the Department based on the market value as estimated by them on the day of the transfer of the title deed and not based on the sales price.
The current rate at 50%
From €85.001 to €170.000
i. The above transfer fees do not apply if the transaction is subject to VAT.
ii. Currently Reduced by 50%.
VAT at the rate of 19% is payable on the sale of new real estate projects.
Resale properties are exempted from VAT.
Any person that is buying the first permanent residence in Cyprus can apply for a reduced VAT rate at 5%.
The reduced rate of 5% VAT applies on the first 200 m2 whereas for the remaining square meters, as determined based on the buildable area, the standard VAT rate is imposed.
The square meters for VAT purposes include only the internal covered areas (do not include covered verandas or other).
It is required that the property is to be used as the primary place of residence in Cyprus for the next ten years, rental of it is not allowed.
VAT at the standard rate of 19% for the supply of undeveloped building land. The VAT is imposed in cases where the supply is intended for the erection of one or more constructions, and the supply falls within the course of a person's economic or business activities.
It is noted that the supply of land is not subject to VAT in cases where the supply is an occasional transaction.
Cyprus Capital Gains Tax is imposed (when the disposal is not subject to income tax) at the rate of 20% on gains from the disposal of immovable property in Cyprus. Including gains from the disposal of shares in companies which own immovable property directly.
The following are not subject to Capital Gains Tax:
The costs that are deducted from gross proceeds on the disposal of immovable property are the cost of purchase, adjusted for inflation up to the date of disposal based on the CPI in Cyprus.
Also, construction works and improvement costs of the property are deducted.
Other expenses related to the acquisition and sale of real estate are also deducted, e.g. estate agency fees, transfer fees, legal fees.
Individuals can deduct from the capital gain the following:
N.B: The above exemptions are lifetime exemptions with a total lifetime limit of €85.430.
There is no Cyprus Inheritance Tax as it has been abolished from the 1st of January 2000.
Our law firm has extensive experience and deals with all matters related to real estate, including purchase transactions and disputes, including commercial and residential property. Cyprus’ real estate market is rapidly evolving and expanding, and the opportunities for property investment are in their peak. It is essential and highly recommended to engage the services of property lawyers who have sufficient experience and knowledge of the Cyprus real estate law and procedure.
Our law firm can assist through all the purchase procedure to make sure it is done smoothly and with maximum protection for the client’s interests. We are ready to approach each new client with extra care and attention to personal/financial needs and demands. We are Limassol property lawyers, but we offer services which cover all the other cities of Cyprus including Nicosia, Paphos, Larnaka and Ayia Napa.
Contact us to receive a free personal consultation and learn about our competitive fee services.
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