What are the rules for buying a property in Cyprus
You may find yourself asking this question if you have begun looking into acquiring an overseas home. It is a genuine and crucial inquiry that has a great deal to do with your financial and economic situation.
It is quite simple to just plunge into dangerous decisions such as purchasing a property in the hopes of making a financial benefit without thoroughly researching or understanding the advantages and disadvantages of the decision.
Cyprus is a member of the European Union and the Eurozone, and it is also a member of the World Trade Organization. It has a tax structure that is adaptable.
It has a world-class infrastructure as well as a variety of entertainment alternatives to choose from.
A nice temperature, entertainment parks, an abundance of grapes in the island's mountainous regions, unique natural features, and distinctive architecture are just a few of the alternatives.
Cyprus's mix of good quality of life and inexpensive cost of doing business makes it a particularly appealing destination for investors.
Local regions include the busy and cosmopolitan Limassol, the lovely and archaeologically rich Paphos, the historical and key transit center Larnaca, and the bustling and cultural Nicosia, among others.
Rules for buying a property in Cyprus
Purchasing real estate in Cyprus is a basic procedure that involves the stages outlined below:
Reservation of a property
An offer to acquire a piece of real estate at a predetermined price. In exchange for the payment of a non-refundable reservation fee, the vendor agrees to remove the property from the market for a predetermined amount of time.
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 it at the sale price for the duration of the reservation. If the transaction goes through, the reservation fee will be charged to the purchase price of the home.
Appointment with a lawyer
Although it is not required by law, it is highly suggested that you retain the services of an independent lawyer.
In addition to due diligence, contract negotiation, contract exchange/completion, contract registration at the LRO, representation at the LRO in connection with the title transfer, application to 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.
In most cases, legal expenses for due diligence and conveyancing (which includes everything from contract review through contract execution) are less than one percent of the acquisition price (minimum and maximum fees may apply).
The buyer's attorney does all of the necessary investigations to determine ownership and whether or not a freely transferable title exists.
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.
Contract preparation and negotiation
It is the buyer's attorney's responsibility to evaluate (or create) contracts of sale, assist with negotiations, and verify that the deal is properly signed.
A contract of sale (CoS) is a private agreement between a buyer and a 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 majority of CoS are written in English.
Application for a lower VAT rate
New homes are subject to a standard VAT rate of 19 percent, which is the highest rate available. Subject to certain rules and circumstances, you may be entitled to apply for a lower VAT rate of 5 percent for your principal place of residence.
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.
- The lower VAT rate is only applicable to the first 200 square meters of space. On the remaining square meters, the usual rate is applied.
Registration of the Contract of Sale (CoS) with the Land Registry Office (LRO)
The registration process ensures that the buyer receives the greatest amount of legal protection. After completing this stage, purchasers will be able to legally sell the property even before separate title documents in their names are issued to them.
Providing that the contracts are properly executed and officially stamped, as well as ensuring that the purchaser pays the first payment (which is typically 30-40 percent of the purchase price), the CoS can be registered with LRO for the purpose of "particular performance" (within six months of signing).
This is the point at which the LRO is effectively informed about the purchaser's information.
As long as the CoS is valid and legally effective, the buyer is protected by the "Sale of Immovable Property (Specific Performance) Law," which prohibits the vendor from reselling or transferring the property to another party or from otherwise encumbering the property until the CoS is terminated.
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 Real Estate in the Republic of Cyprus
This is only applicable to non-EU nationals and must be completed prior to the transfer of the title deed.
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.
The method is straightforward; the application and signed CoS are submitted together, and approval is normally given within a month of submission. The permission of the Council of Ministers is not required before the property can be taken into possession.
Transfer of Ownership Deeds
Once the buyer and seller have completed their individual title documents, they must appear in person at the LRO to effectuate the transfer. The buyer is responsible for any transfer costs that may be incurred.
Following the completion of a development, the process of issuing individual title deeds for each unit in the development often takes many years.
A title deed transfer may only be completed at the LRO if the buyer has paid all outstanding amounts to the seller, has paid all applicable transfer fees and taxes to the government, and has obtained the requisite authorization from the Council of Ministers if necessary.
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.
Why should you choose Cyprus?
The primary incentive for residents to choose to acquire property in Cyprus is the economic citizenship it provides.
Houses in Cyprus are still far less expensive than in the majority of American and European cities. It is simple to locate a home that fits within your budget. This is one of the reasons why more international buyers are interested in purchasing property in Cyprus.
Second, it has excellent infrastructure, including excellent airports, excellent hospitals, excellent retail malls, and excellent schools.
Cyprus has a well-developed infrastructure, and anyone considering relocating to the nation need not be concerned about the amenities that they will be able to provide for themselves and their children.
Despite the fact that it is a small nation, it does not let this prevent it from providing everything to its citizens in order to raise their living standards. It provides a sufficient market for small businesses wishing to establish themselves in the city.