Buying Property In Cyprus

Courtesy of Alpha Panareti Ltd 

Buying new property in Cyprus is a remarkably simple and fast process, by comparison with the UK.

All Alpha Panaretis properties are sold as Freehold with Title Deeds and, with no previous owners involved, matters are straightforward.

Agreeing the price and payment terms

Once you have agreed a purchase price with the developer, it is usual to give an immediate initial deposit of CYP 2,000 to secure the property.  This can normally be paid by Credit Card.  This makes the agreement legally binding, so that no gazumping can take place.

A schedule will then be agreed concerning the method of payment.  This is usually based on progress payments throughout the building process of your property, although it may be possible to negotiate other terms with your developer.  It is, however, standard for the developer to request payment of between 20% and 30% at the time of Contract signature.

A Contract of Sale will then be drawn up, including the method of payment mentioned above.

You will be required by law to pay for your property from external funds, i.e. from outside Cyprus.  Please see notes below about banking.

Solicitors

You must have a solicitor in Cyprus in order to complete a purchase and you will probably want to consult with one before going ahead.

In general, solicitors will offer you a free consultation meeting in order to meet you, establish a relationship and give you general information about their services and the process of house buying in Cyprus.  They will then charge a fixed rate for your property purchase, agreed in advance.

The solicitor will do any necessary searches on your property, draw up the contract and carry out the Specific Performance and Council of Ministers application.  (Please see information below).

The solicitor will also be able to take your Power of Attorney if you do not intend to live permanently in Cyprus, in order to carry out official business with banks or government authorities.

Please ensure that the solicitor you choose is independent of the company from which you are purchasing.

Banks

You will need a bank account in Cyprus in order to complete your purchase, probably with both a Sterling account and a Cyprus Pounds account.  This will allow you to transfer funds from the UK and then make your progress payments on the new property.  You can also use it for transferring pension, investment or other income out to Cyprus.

Banks in Cyprus have very modern, up to date systems and provide a wide variety of services, including Internet banking that can be accessed from the UK.  Opening accounts is a simple process.

All banks offer mortgage schemes (there are no Building Societies in Cyprus).

Specific Performance

This process prevents the seller/developer from re-selling a property to another buyer and provides an absolute safeguard to the buyer until the application to the Council of Ministers has been made and approved.

The Contract of Sale must be deposited at the Land Registry within two months of being signed and stamped.  Your solicitor will do this as part of his duties.

Approval of the Council of Ministers

Once you Contract has been agreed and signed, it is necessary for you to make an application to the Council of Ministers to grant its approval for a non-Cypriot to acquire what is known as immovable property.  Your solicitor will make this application on your behalf.

At this date, no UK citizen has ever been refused this approval.

This is a routine procedure that can take up to 12 months to complete, but there is no restriction on you taking full possession of your property pending the granting of the approval.

The system provides for the following:

1. You can live in your property from the moment you take delivery of it, prior to the Council of Ministers granting approval.
2. You can re-sell your property during this time and inheritance rights are not affected by the process.
3. Should approval not be granted, you can re-apply.
4. Should approval not be granted, you will have seventeen (17) years in which to sell your house.

Selling your property

You may sell your property at any time after the Contract to purchase has been signed.  You may then immediately repatriate all proceeds, provided the initial purchase was paid for in properly imported foreign currency.

Neither the State nor Alpha Panareti places any restrictions upon whom you may sell your property to.

Capital Gains Tax

Capital Gains Tax is levied at 25% on profits arising from the sale of a property.

However, when foreign owned property is sold, there are generous allowances and exemptions from the tax.  The gain also takes inflation into account.  Remember to keep evidence of improvements to your property after taking possession of it, such as invoices, as these will be useful when the gain is calculated.

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Property Transfer Tax

The payment of Property Transfer Tax is required in order to transfer the Freehold ownership to your name and is payable once the property is registered in your name at the Land Registry Office.  This process cannot be completed until after the Council of Ministers approval has been received.  In reality, this means that it will up to three years from purchasing your property before you actually pay the tax.

The tax is payable once only to the Land Registry and is calculated as follows:

Value of Property (CYP )        Transfer fee rate %

Up to 50,000                               3%
From 50,001 to 100,000              5%
Above 100,000                            8%

Method of charging:  if a property has been bought jointly by two or more people i.e. if their names are on the Contract of Sale, then the cost of the property may be divided equally between those owners.  The tax will then be charged to each owner for their portion, meaning that the individual cost will fall into a lower price band.  The grand total will then be less.

For example:

Property purchase price: CYP 120,000

With 1 owner

 50,000 at 3% -  1,500
 50,000 at 5% -  1,500
 20,000 at 8% -  1,600 = Total  5,600

With 2 owners

 50,000 at 3% -  1,500
 10,000 at 5% -     500  =  2,000 each   Total  4,000

Stamp Duty

The purchaser is liable for Stamp Duty.  This is charged at the rate of  1.50 per thousand up to the value of CYP  100,000 and thereafter at the rate of  2 per thousand.  This duty should be paid within 30 days of signing the contract and your solicitor or the property developer will help you deal with it.

On-going expenses

Immovable Property Tax

The registered owner of a property is liable for an annual tax, based on the value of the property.

Value CYP                          Annual tax  CYPs per thousand

Up to 100,000                             exempt
100,001 to 250,000                    2.00
250,001 to 500,000                    3.00
Over 500,000                              3.50

However, the charges are based on the current market value of the property as at 1st January 1980.  In practice therefore, this means that you are unlikely to be liable for much tax as the law stands at present.

Local authority tax

Your local authority will make an annual charge to cover such services as street lighting, refuse collection etc.  The amount depends upon the area and the size of the property and ranges between about CYP  50 and  180 per annum at present.

Home insurance

You will need, of course, to take out full house and contents insurance on your property, once you have taken delivery of it.  There are many, many schemes available.  As a guideline, you should anticipate paying between CYP  1 and  2 per thousand pounds insured.

Living expenses

The utilities - electricity, water and telephone - are all billed every two months by the relevant authorities, based on metered usage.

Costs will vary widely depending on the amount of equipment in use and the time of year, but  average  bills for a permanent household may be:

         Electricity   CYP  30 every two months
         Water   CYP  10 -  20 every two months 

PERSONAL TAXATION

The following are very brief notes about the most obvious forms of taxation   you are advised to seek professional advice to confirm this information and for more complicated personal situations, including self-employment or running a company.

Double taxation agreements exist between Cyprus and most European countries.

Individuals permanently resident in Cyprus are taxed here on the following types of income:

• Employment income for work performed in Cyprus.
• Profits from a business activity, which is carried out though a permanent establishment in Cyprus.
• Pensions in respect of employments exercised in Cyprus (except for pensions paid from a fund established by the Cypriot Government or any local authority.)

Retirees

Alien retirees are taxed at a flat 5% per annum on pension and investment income brought into Cyprus, with exemptions totalling CYP  4,000 per person.

Income tax and NI

A person living and working permanently in Cyprus will have their income taxed as follows:

Taxable income                 Rate

Up to  10,000                    Nil
 10,001 to  15,000           20%
 15,001 to  20,000           25%
above  20,000                   30%

Employers and employees are required to make National Insurance Contributions at the rate of 6.3%.