Cyprus has proved to be an increasingly popular destination by foreigners for the acquisition of real estate for a plethora of reasons.
The island of Cyprus has always been considered to be one of the top property destinations by foreign buyers. Despite the recent economic downturn that Cyprus had experienced as a result of the global economic recession, there is still a very strong interest for the real estate sector, especially from the Russian market, Middle East and Asia. The continuing demand for property by foreigners is attributed to many factors, including the relatively low cost of living, the high quality of lifestyle, the favourable policy to obtain a permanent residence through the acquisition of real estate and the fact that Cyprus is one of the top destinations for retirement.
In addition, the unique hospitality of the local population, the attractive climate, the increasingly important role of safety (Cyprus is one of the safest countries in Europe with crime at a very low level) and security, have all played an important role. Demand and market activity has caused local property values to show a steady and at times sharp appreciation, but this trend has now a slower pace. Good properties are still abundant, and local property prices are still much lower than those of other European countries such as France, Portugal and Spain.
The legal system is Cyprus is largely based on the British equivalent and safeguards the purchaser’s rights in many ways. For the purchaser’s protection, once the agreement of property sale has been signed and a deposit paid, the Land Registry in Cyprus provides a simple and effective legal instrument called the “Specific Performance”. This procedure protects the purchaser’s ownership rights until the title deeds are issued and transferred to their name. The contract in the hands of the Land Registry cannot be withdrawn by anyone; and therefore the property cannot be leased, sold, transferred or mortgaged. This status can only be altered by the purchaser himself.
The protection of ownership is safeguarded by the provisions of the Constitution, the ultimate Law of Cyprus, which establishes the equality of all persons and the respect for human rights, including the right to ownership, without discrimination.
According to Cyprus Law, Cypriots as well as foreigners can enjoy all rights relating to ownership of their property without any interference either from the State or from individuals.
Under Cyprus law, Cyprus citizens as well as EU 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 offices and is obtained when a person resides in Cyprus for a total period of 185 days per year or more.
Foreigners and E.U. citizens who are not permanent residents in Cyprus, wishing to purchase immovable property in Cyprus, are obliged to adhere to special formalities and are restricted by certain regulations.
For foreigners living or working in Cyprus for a long period of time a permit to acquire a second house can be granted.
After the permission has been obtained and the property is registered in the name of the purchaser there are no other restrictions for the foreigner who is the owner of immovable property in Cyprus and he or she may sell or dispose of the property as they wish. The foreign owner of the immovable property can sell it and buy another as any bona fide repeat purchaser will be granted a subsequent permit.
Furthermore, the legal heirs of the said owner are not required to obtain a permit from the Council of Ministers in order to transfer the property on to their name.
According to Cyprus law foreigners must obtain the 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 the citizen of the Republic, including an alien controlled company. The term does not include the non Cypriot spouses of the citizens of the Republic.
Acquisition of real estate property 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 an acquisition results in the company becoming controlled by foreigners;
- The establishment of a trust or any type of set-up which is connected with the ownership of the 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.
In addition to that, any contract for the purchase or lease of property is valid even if the pertinent authority rejects the foreigner’s request for a 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.
- For registering the property under his/her name the purchaser is liable to pay the following transfer fees, calculated according to the property market’s value:
The purchaser will be liable to pay the following transfer fees for the property acquired, when this is registered in his/her name at the Land Registry Office. The fees are charged on the property’s market value at the date of purchase.
Property Value in € – %
Up to 85,000 – 3%
85,001 – 170,000 – 5%
Over 170,000 – 8%
(The rates above apply per person)
Hint: The more buyers are included in a contract of sale, the less transfer fees are being charged. For example, if 2 persons are jointly set as the buyers in a contract of sale, then the transfer fees are charged in half; if the joint buyers are 3, then the transfer fees are ⅓ and so on.
Important Note: The Cyprus Parliament announced the abolishment or reduction of property transfer fees, this offer applies until the end of 2016 and the following will apply:
1. Exemption from transfer fees if the transfer relates to a transaction that is subject to VAT. VAT is charged at the standard rate of 19% where a reduced rate of VAT (5%) has been introduced for properties purchased by permanent residents of Cyprus, provided that the property will be used as the main residence of the purchaser for a minimum of 10 years.
2. In case a transaction is not subject to VAT, the legislation provides for an exemption of 50% of the transfer fees. This applies to transactions where transfer fees apply or are due and the transfer relates to plots of land, buildings or interests in land or indivisible interests that are sold for the ﬁrst time from the date of issue of the relevant building permit and the relevant contract is prepared and submitted for the ﬁrst time to the local District Land Registry during the period of application of the law.
A one-off stamp duty is levied on the purchase of property in Cyprus. The rates are dependent on the contractual purchase amounts and payment is due within 30 days of signing the Sale Agreement. The amount is payable by the purchaser to the tax authorities.
Purchase Price in € – Stamp Duty in %
Up to 5,000 – 0%
5,001 – 170,000 – 0.15%
Over 170,000 – 0.20%
Note: Maximum Duty €20,000
Since Cyprus’ accession to the EU in 2004, VAT must be paid when buying a new build property. In cases where an application for a town permit was filed before the 1st of May 2004, VAT will not be charged.
If the town planning application has been filed after the 1st of May 2004, VAT is charged on the sales price at a rate of 19%. First-time buyers can apply for VAT reimbursement in cases where they paid the full amount of VAT on single properties purchased after the 1st May 2004.
No VAT is charged on the purchase of land.
Important note for the reduction of VAT to 5%
A reduced rate of VAT (5%) has been introduced for properties purchased by permanent residents of Cyprus, provided that the property will be used as the main residence of the purchaser for 10 years (minimum). This is applicable only to contracts of sale which are conducted from October 1st 2011 onwards. The rate will apply for the first 200 m2 of residences of total covered area of up to 275 m2.
Each registered owner is liable for this annual currant imposed tax calculated on the market value of the property as at 1st of January 1980.
Up to €40,000 – 0.60%
€40,001 – €120,000 – 0.80%
€120,001 – €170,000 – 0.90%
€170,001 – €300,000 – 1.10%
€300,001 – €500,000 – 1.30%
€500,001 – €800,000 – 1.50%
€800,001 – €3,000,000 – 1.70%
Over €3,000,001 – 1.90%
(with minimum tax €75)
Capital Gains Tax is levied at 20% on gains arising from the disposal of property by each individual person.The gain is reduced by an indexation allowance that takes into account the inflationary increase over the years the property was owned. Non-residents are only taxed when selling property situated in Cyprus. The following allowances are available to individuals:
The first €17,086 of gains arising from the first disposal of any property in Cyprus. The first €85,430 of gains arising from the disposal of a house used by the owner for his/her own habitation. This allowance can only be claimed once. An individual claiming a combination of the above allowances in only allowed a maximum allowance of €85,430.
Inheritance Tax has been abolished with effect 1 January 2000, and is no longer imposed.
Property taxes levied by the local authorities are payable annually and may vary, depending on the size of the property. The tax covers the cost of garbage disposal, street lighting, etc.