How easy is to buy a property in Cyprus?
It is not difficult to buy property in Cyprus. Foreigners are permitted to own one property in Cyprus and are able to hold land freehold. However, there is a maximum restriction of three donums on land ownership for non-citizens (4,014 sq m).
Permission from the government is required in order to register a property. However, this may be quickly secured via the assistance of a lawyer.
The housing/property industry has been slated for deregulation since Cyprus' entry into the EU on May 1, 2004, according to the European Commission. The proposals aim to make it possible to own unencumbered real estate by 2011.
Prior to the EU negotiations, foreigners were not permitted to rent out the property. Even now, non-EU property owners are unable to rent out their properties.
Here is a comprehensive guide to purchasing property for sale in Cyprus, which includes all you need to know about the process.
Step-by-Step Guide on Buying Property in Cyprus
Cyprus's mix of good quality of life and cheap cost of doing business makes it a particularly appealing destination for investors.
The energetic and cosmopolitan Limassol, the picturesque and archaeologically rich Paphos, the historic and transportation center Larnaca, and the bustling and cultural Nicosia are just a few of the local regions.
Property acquisition in Cyprus is a basic procedure that follows the steps outlined below:
The reservation fee is based on the purchase price and is normally between €1,000 and €10,000, depending on the situation. The reservation amount is held in trust by your agent or lawyer until the purchase agreement is finalized.
The reservation fee removes the property from the market and locks in the sale price for the duration of the reservation. If the transaction goes through, the reservation charge is applied to the purchase price of the property.
In addition to due diligence, contract negotiation, contract exchange/completion, contract registration at the Land Registry Office (LRO), representation at the LRO in connection with the title transfer, application to the Tax Authorities for a reduced VAT rate, and application for permission to purchase immovable property in Cyprus are all examples of legal services that may be provided.
Legal expenses for due diligence and conveyancing (from contract review to contract signing) are normally between €2,000 and €5,000, or around 1 percent of the acquisition price, depending on the circumstances.
A thorough due diligence process should be undertaken prior to the signing of any contracts. Your lawyer will conduct a search of the LRO to discover if the seller is the lawful owner of the property and whether the title is subject to any legal encumbrances that might potentially prevent the transaction from proceeding.
In the event that the property is a plot of land, the lawyer might do a search and check the appropriate zone, building capacity, and permissible construction density.
In the case of properties that do not yet have separate title deeds, your lawyer can check with the appropriate authorities to ensure that the required planning and building permissions have been obtained. If the seller is a corporation, your attorney can do the necessary search at the Registrar of Corporations.
A contract of sale (CoS) is a private agreement between the buyer and the seller. Typically, the seller will send you (and your attorney) a copy of the CoS for your perusal.
It is possible that the buyer's attorney will be required to prepare the CoS. The CoS is written in English. In the event that a translation is required, your attorney might make the arrangements.
Reduced VAT Rate Application
All new properties are subject to a regular VAT rate of 19 percent, which is in conformity with and in compliance with EU legislation. The purchase of a principal house, on the other hand, is subject to a reduced VAT rate of 5 percent, subject to the following conditions:
- Only physical individuals who are 18 years old or older are eligible to apply.
- For the next ten years, the property must be utilized as the primary and permanent residence of the owner.
- The lower VAT rate has not been utilized by the same individual in the previous year.
- Only the first 200 square meters are subject to the lower VAT rate. On the remaining square meters, the usual rate is applied.
Registration of CoS at LRO
Following the completion and stamping of contracts, and provided that the purchaser pays the first installment (which is typically 30 percent to 40% of the total purchase price), the contract of sale (CoS) can be filed with the Land Registry Office (LRO) for specific performance' (within six months of signing).
This is the point at which the LRO is effectively informed about the purchaser's information. In the case of a sale of immovable property (Specific Performance), the law protects the buyer by prohibiting the vendor from reselling or transferring the property to another party, as well as from encumbering the property in any other way, for as long as the contract of sale is valid and legally effective.
The buyer will be able to sell his property as soon as the registration is complete, even before a separate title document is issued.
Permission to Acquire Property in Cyprus
Cypriots and EU nationals are free to purchase real estate in any part of the country with no limitations. Non-EU nationals are permitted to purchase real estate, but they must first get approval from the Council of Ministers.
There are several factors at play here; the application must be filed with the signed CoS, and approval is normally given within a month. The permission of the Council of Ministers is not required before the property can be taken into possession.
Transfer of Title Deeds
Following the completion of a development, the process of issuing individual title deeds for each unit in the development often takes many years.
Transfer of ownership of a title deed occurs at the Land Registry Office if the buyer has paid any outstanding amounts to the seller, has paid all relevant transfer fees and taxes to the government, and has obtained the requisite authorization from the Council of Ministers, if applicable.
It is a straightforward procedure, and attorneys can act on behalf of buyers in accordance with a Power of Attorney.
Transfer costs are based on the value of the property per buyer; therefore, if a property is purchased in joint names, the total transfer fees on the transaction might be decreased.
A 50 percent discount is now being applied to the aforesaid prices, and properties entitled to VAT are free from paying any transfer fees in all circumstances.
Property Taxes and Fees
Property Tax On Immovable Property
There is no taxable immovable property. As of the first day of January 2017, the institution was abolished.
Tax On Municipalities
They are calculated on the basis of the most recent government valuation (currently as of 01/01/2018) of the property. Taxes are imposed by the municipality and are normally between 0.1 percent and 0.2 percent per annum on an annual basis.
Tax On Sewerage
It is calculated on the basis of the most recent government valuation (currently as of 01/01/2018) of the property. The municipal sewage board sets the rates, which are normally between 0.05 percent and 0.3 percent per annum.
Fees For Refusing To Collect
Regular garbage collection is charged at a flat rate by municipalities and local bodies on an annual basis. The amount of the fee is determined by the size of the property and the municipality in which it is located.
For example, for a 3-bed vacation property in Protaras, Famagusta, the garbage collection price is c.€140 p.a.
Tax On Capital Gains
It is necessary to pay capital gains tax on the profit made from the sale of the property, which is 20 percent.
The Estate Tax On Inheritance
Because the estate duty was removed in 2001, there is no inheritance tax to pay.
In addition to having a pleasant environment throughout the year, Cyprus's inhabitants are friendly toward the British, as a consequence of the long-standing friendly connections between the two countries. It is particularly enticing to retirees because of its favorable taxes policies.
If you want to purchase a piece of real estate in Cyprus that is currently for rent, you must first get a legal contract of sale. After that, it should be submitted to the District Lands Office within two months of being signed by the two parties involved.
In addition, the buyer is required to pay a deposit of around 10% of the total purchase price. It is only when the title deed has been lawfully transferred that the funds may be confirmed and the approval of the government has been granted.
The property can be registered in the name of the owner if you have a real estate lawyer in Cyprus handling your issues for you.