Useful information about buying in Cyprus

Buying Property in Cyprus. Cyprus has proved to be an increasing popular place for retirement and for acquisition of holiday homes by foreigners. Demand is forthcoming mainly from European countries, with the bulk, approximately 70%, comprising of UK citizens.

With Cyprus now a member of the EU, most of the procedural restrictions on property purchased by EU members will eventually be lifted, after April 2009. Until then, EU and non-EU citizens are entitled to freehold ownership of one property or piece of land of up to 4,000 square meters.
As the law stands now, EU nationals who live or work in Cyprus still need a permit to own any kind of immovable property. EU nationals who do not live or work in Cyprus need a permit to own a house or apartment, but they do not need a permit to own land.

The upsurge of demand for property by foreigners is attributed to many factors, including the relative low cost of living and the high quality of lifestyle available. In addition, the unique hospitality of the local population, the attractive climate and the increasingly important role of safety and security, have played an important role.
Demand and market activity has caused local property values to show a steady and, at times, sharp appreciation, but the trend has now decreased to a slower pace. Good properties, especially re-sales are still abundant, and local property prices are still much lower than those of other counties. Prices of holiday homes in Cyprus are on average 20% lower than Portugal, 30% lower then Spain and 50% lower than Italy or France.

Buying Property as an Investment

Local property values have shown a steady upward movement over the years with property, especially near the beach, showing a considerable appreciation. Local property is believed to offer good value for money, as average holiday home developments are priced 20-30% lower than comparable properties in Spain or Portugal.
As a general rule we could say that property income returns are in the region of up to 6% a year on the current value. In addition, the annual appreciation on real estate values is in the region of up to 10% a year.

Legal Safeguards

The legal system in Cyprus is largely based on the British equivalent and safeguards the purchaser's right in many ways. Above all, for the purchaser's protection, once the sales agreement 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, once held by the Land Registry, cannot be withdrawn by anyone, and therefore the property cannot be leased, sold, transferred or mortgaged, as only the purchaser is able to alter this status.

Banking Standards

The banking system in Cyprus is modelled on the international system, with banks having many convenient high-street branches. Foreign persons retiring to Cyprus may open an external deposit account. International banks have branches throughout the island and all major credit cards are widely used. Most local banks provide finance for foreigners in the major currencies when acquiring real estate. The usual requirement is up to 30% own contribution and up to 10 years repayment.

Stamp Duty

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.

Transfer Fees

The purchaser will be liable to pay the following transfer fees for the property acquired, when this is registered in his name at the Land Registry Office. The fees are charged on the property's market value at the date of purchase.

Immovable Property Tax

The registered owner is liable for this annual tax, which is based on the value of the property as of 1 January 1980. Property with a value of up to £ 100,000 is exempt from property tax. For property values exceeding this amount, the rates are:

Capital Gains Tax

This tax is levied at the rate of 20% on gains arising from the disposal of immovable property. The first £10,000, or £50,000 in the case of sale of a private residence, is exempt and there is also an indexation allowance. However, there is no tax if the property was acquired between 1 August 1980 and 13 July
1990 with foreign exchange imported into Cyprus.

Inheritance Tax

This tax was abolished as of 1 January 2000, and is no longer imposed.

Local Authority Tax

Property taxes levied by the local authorities are in the range of £30.00 to £100.00 a year, depending on the size of the property. The tax covers the cost of refuse disposal, street lighting, etc.

Communal Expenses

Communal expenses cover an owner's share towards the cost of cleaning and maintaining a project's communal areas, gardens, swimming pool, management fees and repairs. These are payable at fixed intervals throughout the year and vary from development to development.

Allowances

The following allowances are available to individuals:
The first £10,000 of gains arising from the disposal of any property.

The first £50.000 of gains arising from the disposal of a house used by the owner for their own habitation.

An individual claiming a combination of the above allowances is only allowed a maximum allowance of £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.

Non-residents are only taxed when selling property situated in Cyprus. They can be totally exempt from this tax if they can prove that they acquired the property in question by importing foreign currency between 1st August 1980 and 13th July 1990.

Duty Free

Foreigners residing in Cyprus enjoy the benefit of acquiring motor vehicles at duty free prices, with allowances of up to £7,000. These items do not have to be imported from abroad but can be purchased locally. In most cases, the import of personal effects from abroad, household items and cars, which are less than four years old, is also duty free.

Tax on pensions

Pensioners who become residents in Cyprus are taxed on their pensions from abroad at the rate of 5% for amounts exceeding £2.000 annually. No tax is paid in the country of origin if a double taxation treaty exists, or on investment income, such as dividends and interest, brought into Cyprus.

Double taxation treaties

Double taxation treaties are made in order to avoid paying income tax in two countries. This gives foreigners the option of taking advantage of the low tax rate in Cyprus.
Countries that Cyprus has double taxation treaties are:
United Kingdom, United States, Austria, Bulgaria, Canada, China, Czech Republic, Denmark, Egypt, France, Germany, Greece, Hungary, India, Ireland, Italy, Kuwait, Malta, Norway, Poland, Romania, Russia, Slovakia, South Africa, Sweden, Syria, Serbia and Montenegro.

Work Permits

As from April 2004, EU citizens are not required to obtain either a residential or working permit. Non-EU members, according to the Aliens and Immigration Laws and relevant regulations, must attain a permit from the Migration Officer. The foreign national seeking employment must secure a local employer through personal efforts while being abroad. This employer should submit an application to the Migration Officer on his behalf.

Residence Permit

Buying property in Cyprus does not mean that a residence permit or a work permit, for non-EU members, will be issued as well. However, a Council of Ministers' permission for acquiring property has to be given to a foreigner when making an application for a residence permit, which will be looked upon more favourably by the Immigration Control Board.
To obtain a Cypriot citizenship, a written application must be submitted to the Immigration Department. Successful applications are usually the ones made by foreigners married for over five years with persons of Cypriot origin, and people residing in Cyprus for a total of 10 years.

Looking Ahead - Property Resale

Due to the fact that Cyprus is the choice destination for people purchasing a home abroad and a secure investment option, property can easily be resold. A number of estate agents and developers are on hand to assist in the resale of any property. After concluding the sale, the original purchase amount, as well as any profits, can be repatriated without restriction, provided purchasers show that the money to pay for the property was sent from abroad. EU citizens are excluded, as they can pay with funds raised in Cyprus.

Information correct at time of print 03/06/05

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