The real estate sector in Cyprus is an important 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 5 years, the improvements noticed in the economics of the country were also seen in the real estate sector. Especially the last years the interest for Cyprus real estate has been steadily increasing and thus many projects are under construction and present an interesting sector for investments for foreigners and locals.
Introduction to Cyprus property law
The Cyprus legal system is based on the British laws as Cyprus was a British colony until 1960. Further, with EU membership, Cyprus property law, real estate laws and regulations were harmonized in line with the European Union laws and regulations.
Main legislation: the Cyprus immovable property law (tenure, registration and valuation)
Cyprus immovable property law was enacted in 1946, and 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.
Land Registry Department
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 land 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 and thus to register the property and title deed into the purchaser’s name once the title deed will be issued.
Cyprus property law & regulations – the number of properties allowed for foreigners
Purchase of Cyprus property by EU citizens
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 and can register as many properties as they want in their name.
Purchase of Cyprus property by foreigners (non-EU citizens)
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:
- Apartment or house.
- A villa on a plot of land up to 4014 m2.
- A plotland up to 4,014 m2 provided that a residence is going to be constructed soon.
- For the acquisition of bigger plots of land or for other property types (offices, commercial, industrial etc.) permission might be granted under certain conditions.
Cyprus real estate purchase procedure
Step 1. Due diligence
After selecting a property to buy, it is very important that the lawyer performs a due diligence check for the property which mainly involve the following:
- Confirming with the Land Registry office if there are any mortgages or burdens on the property and if there are the lawyer arranges for the so-called waiver which is a very important document that makes your sales contract prevail any existing liabilities of the seller to the bank with regards to the property.
- Negotiate the payment terms.
- In the case of a property under construction, all the required planning and building permits have been obtained; and to make sure architecture plans & specifications are attached to the contract.
- In the case of a land purchase, to verify the building Zones (how many square meters you can build on) and that the intended use, of any planned buildings, are permitted and verify that utilities can be connected to the property.
Step 2. Reservation deposit & Agreement
- Upon signing the reservation agreement, and payment of a reservation deposit, the property is taken off the market for a specific period of time until the contract of sale is prepared, and the parties are ready to finalise the transaction.
- Reservation deposits vary depending on the price of the property and are normally 1-2% of the purchasing price.
Step 3. Contract of sale
- Once all the preliminary steps above are made, the buyer and the seller sign a contract of sale.
- If the Purchaser is abroad all the procedure can be done through Power of attorney which can be signed and certified in Cyprus or abroad at Cyprus Embassy or Consulate or be certified by Notary Public and bear the Apostille Stamp.
- Upon signing the contract, the lawyer applies to the so-called Council of Ministers to obtain a permit to purchase the property (it’s required for non-Cypriot buyers and is a simple formality, as mentioned above).
Step 4. Registration of Contract of sale in the Land Registry
- When contracts have been signed, the lawyer of the Purchaser takes the signed contracts to the Inland Revenue Department to be stamped. Stamp duties are payable on each contract for the purchase of real estate depending on the purchase price (as below).
- When the signed contracts have been stamped then be taken by the Purchaser (or his lawyer or representative) to the Land Registry Department to be lodged/registered for Specific Performance purposes.
- The Lands Office stamps the contract and records it in the Land Registry. This secures the buyer’s ownership rights until a separate title deed is issued.
Step 5. Transfer of title deed
- If the seller has got a title deed (ownership certificate) for the property, the transfer of the title deed on the name of the new owner can be done immediately. Typically, this is the case when buying a resale.
- If the property is brand new, in most cases the seller (developer) doesn’t have a separate title deed for the property. Until that time, the ownership rights of the buyer are guaranteed by the registration of the sales contract at the Lands Office.
Taxes & Duties
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.
The reduced VAT rate of 5% on the acquisition of primary and permanent place of residence in Cyprus
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 areas).
It is required that the property is to be used as the primary place of residence in Cyprus for the next 10 years, rental of it is not allowed.
VAT on plots – Building land
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
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:
- Lands or land with buildings acquired between 16th July 2015 and 31st December 2016 are exempt from CGT (subject to certain conditions) upon their disposal.
- Transfers arising on death.
- Gifts made from parent to child or between husband and wife or between up to third-degree relatives. Gifts to a company where the company’s shareholders are members of the donor’s family.
- Gifts by a family company to its shareholders.
Calculations of Cyprus 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 on the basis of 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.
Exemptions from Capital Gains Tax
Individuals can deduct from the capital gain the following:
- Sale of a private residence (subject to certain conditions) €85.430
- Sale of agricultural land by a farmer €25.629
- Any other sale €17.086
N.B: The above exemptions are lifetime exemptions with a total lifetime limit of €85.430.
Cyprus Inheritance Tax
There is no Cyprus Inheritance Tax as it has been abolished from the 1st of January 2000.
Limassol property lawyers
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 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.
Areas of work include:
- Due Diligence prior to Property Purchase
- Drafting Property Reservation Agreements, Advice on the procedure to be followed
- Real Estate Sale Agreements Draft or Review
- Power of Attorney Preparation for Purchase or sale of Real Estate
- Permission for Acquisition of property by foreigners
- Land Registry Services
- Real Estate Gift Transfers between family members
- Rental agreements advice and preparation
Contact us to receive a free personal consultation and learn about our competitive fee services.