Your guide to buying property in Cyprus

Purchasing real estate in Cyprus is a straightforward process, below we look at some of the finer details.

The reservation fee depends on the purchase price and typically ranges between €5,000 and €10,000. Your agent or lawyer holds the reservation amount until the contract of sale is signed. The reservation fee takes the property off the market and fixes the sale price. If the sale proceeds, the reservation fee is applied towards the purchase price.

Legal services could comprise due diligence, CoS review and/or preparation, contract negotiation, contract exchange/completion, registration of the CoS at the LRO, Representation at the LRO for the title transfer, Application to the tax authorities for reduced VAT, and application for permission to buy immovable property in Cyprus. For the due diligence and conveyancing (from contract review to contract execution) legal fees are typically c. 1% of the purchase price (minimum and maximum fees may apply).

It is highly recommended that due diligence be completed prior to contract signing. Your lawyer will search the LRO to determine that the seller is the rightful owner of the property and whether the title has any legal encumbrances that could potentially inhibit a sale. In case the property is a plot of land the lawyer could search and verify the applicable zone, building capacity and allowable building density. For properties that do not yet have separate title deeds, your lawyer can check with the relevant authorities to verify that the necessary planning and building permits exist. Where the vendor is a company, your lawyer can complete the requisite search at the Registrar of Companies.

A CoS is a private agreement between the buyer and the seller. The seller will typically provide the CoS for you (and your lawyer) to review. Occasionally the buyer’s lawyer may need to draft the CoS. CoS are typically in English.

Stamp duty: Within 30 days of contract signing, the buyer must pay stamp duty on the contract value as follows:

A maximum stamp duty of €20,000 applies. 

In accordance and in compliance with EU law, all new properties are subject to a standard VAT rate of 19%. However, a reduced VAT rate of 5% applies for the acquisition of a primary residence subject to certain terms and conditions:

• Only physical persons aged 18 or older are eligible to apply
• The property must be used as the primary and permanent residence for next 10 years
• The reduced VAT rate has not been previously used by the same person
• The reduced VAT rate applies only on the first 200 sqm. The standard rate applies on the remaining sqm.

Once contracts are fully executed and duly stamped, and provided the purchaser pays the first installment (normally 30%-40% of the purchase price), the CoS can be registered at the LRO for ‘specific performance’ (within six months of signing). At this stage the LRO is essentially notified of the buyer’s details. The ‘Sale of Immovable Property (Specific Performance) Law’ protects the buyer by preventing the vendor from reselling or transferring the property elsewhere and from otherwise encumbering the property, for as long as the CoS is valid and legally effective.

Upon this registration the buyer may resell his property, even prior to separate title deed issuance.

Cypriots and EU citizens are entitled to buy immovable property without any restrictions. Non-EU citizens can buy immovable property, however, permission from the Council of Ministers is required. This is primarily a matter of procedure; the application is submitted along with the signed CoS and approval is typically granted within a month. The Council of Ministers’ approval is not a pre-condition to taking possession of the property.

The process to issue separate title deeds for each unit in a development typically takes a few years post development completion. A title deed transfer is effected at the LRO provided that the buyer has paid all outstanding balances to the seller, pays any applicable transfer fees and taxes to the government and has the necessary permit from the Council of Ministers, if applicable. It is a simple procedure and lawyers can act on buyers’ behalf, pursuant to a Power of Attorney.

Fees are calculated on the sale price accepted by the Department of Land and Surveys as follows:

Transfer fees apply to the property value per buyer hence total transfer fees on a transaction can be reduced if a property is bought on joint names. Currently a reduction of 50% applies to the above rates and properties subject to VAT are completely exempt from transfer fees.

IMMOVABLE PROPERTY TAX

No immovable property tax. Abolished as of the 1st of January 2017.

MUNICIPALITY TAX

Calculated on the property value per the latest government valuation (currently 01/01/2018). Rates are set by the municipality and are typically between 0.1% and 0.2% p.a.

SEWERAGE TAX

Calculated on the property value per the latest government valuation (currently 01/01/2018). Rates are set by the local sewerage board and are typically between 0.05% and 0.3% p.a.

REFUSE COLLECTION FEE

Municipalities / local authorities charge a per annum fee for regular refuse collection. The fee depends on the size of the property and the municipality.

For example, for a 3-bed holiday house in Protaras, Famagusta the refuse collection fee is c.€140 p.a.

CAPITAL GAINS TAX

A capital gains tax of 20% is imposed on the profit gained from the property disposal.

SALES LEVY

A sales levy of 0.4% is imposed on the sale price and is payable by the seller. The proceeds from this levy will go towards the Central Agency for Equal Distribution of Burdens.

INHERITANCE TAX

No inheritance tax applies as the estate duty was abolished in 2001.