1. Acquisition of Immovable Property in Cyprus.

Cypriots & E.U. citizens living in Cyprus

Under Cyprus Law, Cypriots or persons of Cypriot origin as well as E.U. citizens who have their permanent residence in Cyprus are allowed to acquire any property without any restrictions.

The residential status is ascertained by the District office and is obtained when a person resides in Cyprus for a total period of 185 days or year or more. 

 E.U. citizens not permanently living in Cyprus & Non E.U. citizens.

 E.U. citizens who are not permanent residents of Cyprus and none E.U. residents, wishing to purchase immovable property in Cyprus are obliged to adhere to special formalities and restricted by certain regulations.

 A restriction to the type and size of the property is applied. E.U. citizens not permanently living in Cyprus and non E U citizens are given permission to buy only one apartment or one house or a building plot or land. In the case of E U citizens the property size can be unlimited and in the case of non E.U. citizens it can be up to 4,014 square meters (the equivalent of three donums).

 The restrictions applied for E.U. citizens not residing in Cyprus will seize after 2009 and all citizens of the E.U. will be treated as equal to Cypriot citizens, regardless of their residential status.

 After the permission has been obtained (see point 3 below) and the property has been registered in the name of the purchaser, there are no other restrictions for foreigners who are the owners of immovable property as they wish. The foreigner owner of immovable property can sell it and buy another and as any bona fide repeat purchaser will be granted a subsequent permit.

 Table 1

E U citizens NOT permanently living in Cyprus

The restrictions applied for E.U. citizens not residing in Cyprus will seize after 2009 and all citizens of the E.U. will be treated equally with Cypriot citizens regardless of their residential status.

 Table 2

Non E.U. citizens

2. Making an offer

Buying a property in Cyprus is very similar to buying property in the UK. You make and offer and if it is accepted, it is normal to gibe nominal deposit (between CYP 1,000 and CYP 2,000) to reserve the property, bind the owner, have the property taken off the market and secure it at that day’s price.

This is Cyprus, unlike the UK is legally binding and so “guzumping” does not exist. Contacts are consequently drawn up and this process takes only a few days. Upon signing of the contract, the buyer must pay at least 20%-30% of the value of the property. The remaining sum is paid according to the terms agreed with the seller which usually include periodic installments until delivery.

3. approval by the council of ministers

According to Cyprus Law, foreigners must obtain permission of the Council of Ministers prior to the acquisition of real estate property. Recently these powers have been assigned to the pertinent Authorities of every district, in order for the procedure to become speedier.

A foreigner – the law uses the term “alien” – is any person who is not a citizen of the Republic, including al alien controlled company. The term does not include foreigners of Cypriot origin or non Cypriot spouses of citizens of the republic.

Acquisition of real estate property in Cyprus includes:

• Transfer of title deed
• Long lease for periods of more than 33 years
• The acquisition of shares in a company that owns immovable property, if such acquisition results in the company becoming controlled by foreigners.
• The establishment of a trust or any type of set-up, which is connected with ownership of real estate, for the benefit of a foreigner, including tax benefits

Although the proceedings for the obtaining of the permission might need a considerable amount of time to be fulfilled, purchasers are entitled to occupy their properties until then.

Furthermore, any contract for the purchase or lease of property is valid even if the Pertinent Authority rejects the foreigner’s request for permit. As such, when purchasing a property, it is advisable for the relevant contract to include provisions for such an event so as to secure a refund of any money paid or any other remedy.

The application to the Pertinent Authority requires information about the personal details and financial standing of the applicant and particulars of the property and its present owner. Also it must be accompanied by a number of legal documents.

As a general rule, permission is granted to bona fide applicants provided they have:

• No criminal record in their country or in Cyprus
• The financial means to support themselves in Cyprus. (An income of CYP 12,000 per annum between the  couple is considered satisfactory)

As of 1 May, 2004, citizens of the E.U. residing in Cyprus or Cyprus based companies controlled by citizens of a Member State are not considered to be foreigners. As for Citizens of the E.U. not residing in Cyprus, there is a transitional period until May, 2009, after which, they will be treated as equal to Cypriot citizens, regardless of their residential status.

4. Specific Performance – Safeguard for the buyer

 Specific Performance Law safeguards a purchaser of immovable property from a transaction between a seller and a purchaser, especially when the purchaser is not allowed to immediately transfer the acquired property onto his/her name even though payment of the consideration has been effected.

According to the provisions of Specific Performance Law, the purchaser of immovable property may secure the transfer of the acquired property onto his/her name by depositing a duly signed and stamped copy of the contract at the Land Registry, within two(2) months from the signing of the contract.

By depositing the contract in the Land Registry, the purchaser prevents the owner from the transferring the property elsewhere or changing it, for as long as the contract is valid and legally effective. No burdens, charges or encumbrances can affect the right of specific performance after the contract has been deposited with the Land Registry.

Depositing a copy of the contract 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 onto the purchaser’s name, even though the owner may not be willing to accommodate such procedures.

5. Fees, charges and Property Taxes

Transfer Fees

The transfer of immovable property into a purchaser’s name can be effected once permission to acquire the property has been granted from the Council of Ministers/Pertinent Authority (where that is necessary – see point 3 above)

When registering the property under his/her name at the District Land Office, the purchaser will be liable to pay the following transfer fees, calculated according to the property’s market value at the time of the signing of the contracts:

Example 1:

On the transfer of a property at the Land Registry Office, which was purchased for CYP 110,000 a purchaser will pay CYP 4,800 in transfer fees:

Example 2:

If the property is bought and registered in the names of two individuals (i.e. husband and wife), then the market value of the property is divided in two parts resulting in reduced transfer fees.

On the transfer of a property at the Land Registry Office, which as purchased for CYP 110,000, and will be transferred in the name of two individuals, the purchasers will pay CYP 3,500 in transfer fees:

 Stamp duty  

Unless otherwise stipulated in the contract, the purchaser is liable for the payment of stamp duty at the rate of 0,15% of the value of the property up to CYP 100,000 and 0,20% for over CYP 100,000

Example

The stamp duty on a contract for CYP110,000 will be CYP 170 (CYP 150 for the first CYP 100,000 @ 0,15% and CYP 20 for the remaining 10,000 @0,20%)

The contract should be stamped within a period of (30) days from signing.

Although the absence of the revenue stamp on a contract does not render it void, the revenue stamp must be paid before depositing the contract to the Land Registry for the specific Performance purposes (see point 4 above).

The stamp duty plus a fine will be payable when the documents is produced to the Land Office for the transfer of ownership of property, to any Government department or to the court. In order to avoid the payment of a fine, which could be substantial, the documents should be stamped within 30 days of their signing.

Mortgage fees

The registration fee of a mortgage is one 1 per cent (1%) of the amount secured, plus the relevant stamps

Immovable Property Tax

The registered owner of a property is liable to an annual immovable property tax calculated on the market value of the property as on 1^st of January, 1980.

Immovable Property (Towns) Tax  

The registered owner of immovable property is also subject to minor taxation under other laws, such as municipal or village regulations. These taxes are calculated according to the area and the size of the property and cover sewerage, refuse collection, street lights. The charges range in total from CYP to CYP 100 per annum.

Capital Gains Tax

Capital Gains Tax is levied at the rate of 20% of gains arising from the disposal of immovable property or the disposal of shares of companies the assets of which consist mainly on immobile property.

As a general rule, the gain is calculated as a difference between the sales proceeds and the original cost of the property. Interest on payments paid for the acquisition, additions to the property and inflation rate, as published yearly by the Government, are deducted form fees.

Capital Gains Tax as a whole has minimal effect, since the appreciation of values, coupled with the following allowances and inflation, tend to leave little excess.

Individuals are entitled to the following lifetime allowances on Capital Gains Tax:

• The first CYP 10,000 of gains arising from the disposal of any property is exempted.
• The first CYP 15,000 of gains arising from the disposal of agricultural land by the farmer is exempted (subject to certain conditions).
• The first CYP 50,000 of gains arising from the disposal of a house used by the owner for his/her own habitation are exempted (subject to certain conditions).

The above allowances are not available separately and an individual claiming a combination of the above allowances is only allowed a maximum lifetime allowance of CYP 50,000.

Cyprus residents and companies registered in Cyprus are subject to Capital Gains Tax when disposing their property, wherever it is, in Cyprus or overseas. However, under certain conditions, Capital Gains Tax be reduced significantly if the purchase of the immovable property is effected through a Cyprus registered company.

Non-residents are only taxed when selling property situated in Cyprus but they can be completely exempt from Capital Gains Tax if they can prove that the purchase consideration was paid with foreign funds imported between 1 August 1980 and 13 July 1990.

The following categories of immovable property disposals are exempted from the Capital Gains Tax:

1. Transfers by reason of death
2. Gifts between relatives up to third degree of kindred
3. Gifts to limited liability companies when, at the time of transfer and for a period of five years following the transfer, all the shareholders of the company are members of the family of the donor
4. Gifts by family companies to their members, but only in cases where the property transferred, was obtained by the company as a gift
5. Exchanges of immovable properties
6. Compulsory acquisitions
7. Gifts to charitable institutions
8. Gifts to charitable institutions or the Republic of Cyprus

Estate Duty

Estate Duty was abolished as from 1^st of January 2000.

Communal Expenses

Communal expenses are usually payable monthly or quarterly, in advance, and vary from development to development depending on the area and type of the property. They cover an immovable property’s owner share of the cost of cleaning and maintaining common areas and gardens, communal swimming pool expenses, electricity in common areas, management fees and repairs.