Eligibility of EU Citizens and Non-EU citizens to acquire property in Cyprus
EU citizens are entitled to acquire property in Cyprus without any restrictions.
Non-EU citizens who do not permanently reside in Cyprus may only purchase one apartment, house or land after having received the approval of the Council of Ministers, with the property size not exceeding 4,014 square meters.
The involvement of a real estate agent is not mandatory, nevertheless most parties looking to acquire real estate often tend to do so in order to ensure that they will be presented with a large pool of properties that match their requirements. Real Estate Agents in Cyprus are regulated as per the provisions of Real Estate Agent Law N71(I).2010 and have to be licensed. The fee of a real estate agent is typically evenly split between the Vendor and Purchaser, and ranges between 2-5% of the property’s purchase price.
Once the desired property has been identified, a Cyprus lawyer should be retained in order to perform the necessary due diligence on the property.
Typically, one of the first things a lawyer would inspect is the title of the sought property from within the records of the Department of Lands and Surveys (“DLS”). Prior to entering into a transaction, it is imperative to verify that the Vendor is the rightful owner of the property as well as to ensure that no encumbrances such as easements, mortgages, caveats or leases, are registered on the title, as that could subsequently hinder the successful completion of the transaction.
Once the due diligence on the property has been completed, and the two sides have negotiated and signed the contract for the purchase of land, the agreement must be stamped and filed at the DLS within two months from the date of its signing. Failure to do so makes the Purchaser ineligible from exploiting the rights and safeguards granted by the Specific Performance Law.
Transfer of Title to the Purchaser
If a title for the sought property exists, then the transfer onto the Purchaser’s name can take place imminently and upon full settlement of the purchase price. An additional proviso for the transfer is that the Vendor has settled all fees, charges and taxes that burden the immovable property.
Such fees, charges and taxes may be one or more of the following: (i) immovable property tax; (ii) urban immovable property tax; (iii) capital gains tax; and (iv) inheritance tax (if applicable). Also, a certificate of payment of liabilities must be issued by the Sewage Board, Municipal fees and Community fees.
On the contrary, the issuance of a title regarding the property of a new development may take some time, as certain steps are required from the developer before, during and after the project is completed. In such cases, the Purchaser may occupy the property before the transfer of the title.
Specific Performance – Safeguard for the Purchaser
Specific Performance Law safeguards a Purchaser in the event where the Purchaser is not allowed to immediately transfer the acquired property onto his/her name even though payment of the consideration has been effected.
According to the provisions of Specific Performance Law, the Purchaser of immovable property may enforce the specific performance of the terms of the contract and secure the transfer of the acquired property onto his/her name, as long as a duly signed and stamped copy of the contract has been deposited at the DLS, within two (2) months from the date of signing of the contract.
By depositing the contract in the DLS, the Purchaser prevents the Vendor from transferring the property elsewhere, for as long as the contract is valid and legally effective. It should also be noted that no burdens, charges or encumbrances can affect the right of specific performance after the contract has been deposited with the Land Registry.
Finance and Banking
Mortgages are widely available across the island regarding the financing of the immovable property acquisition. As a rule of thumb, up to 70% of the value of the property to be purchased may be financed.
While assessing the financing application of the Customer, in a process called “know your customer (KYC)”, the bank will look into the Purchaser’s identity, the origin of the funds used to purchase the property, and the kinds of transactions in which the customer is likely to engage in, in the future. The aforementioned process enables financial institutions to identify unusual or suspicious behavior, termed anomalies, which may be an indication of money laundering.
TRANSACTION COSTS: Fees, Charges and Property Taxes
The total amount of tax depends on the value of the acquired property and is typically paid by the Purchaser. The Transfer Fee is calculated as follows:
- Up to €85,000 of the property value – 3%
- From €85,001 to €170,000 of the property value – 5%
- From €170,001 of the property value – 8%.
Unless otherwise stipulated in the contract, the purchaser is liable for the payment of stamp duty as follows:
- Up to €5,000: 0%
- From €5,001 – €170,000: 15%
- Over €170,000: 2%
Although the absence of the revenue stamp on a contract does not render it void, the revenue stamp must be paid before depositing the contract to the Land Registry for specific Performance purposes (see point 4 above). The stamp duty plus a fine will be payable when the document is produced to the Land Office for the transfer of ownership of property, to any Government department or to the court.
Immovable Property Tax
There is no immovable property tax. The tax was abolished 1st if January 2017.
Immovable Property (Towns) Tax
The registered owner of immovable property is also subject to minor taxation under other laws, such as municipal or village regulations. These taxes are calculated according to the property’s size and the area it is located in, and cover sewerage, refuse collection, streetlights. The charges range in total from €80 to €170 per annum.
Capital Gains Tax
Capital Gains tax is levied at the rate of 20% on profits arising from the disposal of immovable property, or on profits arising from the disposal of shares of a company, the assets of which consists mainly of immovable property.
Estate duty was abolished on 1st January 2000.
Disclaimer: The above is intended to provide a brief guide only. It is therefore essential that appropriate professional advise is obtained. N.V. Panayiotou Legal LLC is happy to assist you in this respect.