Legal Info
REAL ESTATE AND PROPERTY IN CYPRUS
A valuable legal guide for the buyer
INTRODUCTION:
The favourable location of Cyprus at the crossroads of Europe, Asia, the
Middle East and Africa, together with the fact that Cyprus is a full member
of the E.U. as of May 1st, 2004, its safe and protective legal system, the
excellent infrastructure the high standard of legal, banking and accounting
services provided, the continuing development of the island, the extensive
use of the English language, the excellent climate and the hospitality and
friendliness of the locals, are some of the reasons that established Cyprus
as an ideal centre for both business and pleasure and thus attracted to
the island a considerable number of individuals and foreign investors interested
in immovable property.
LEGAL SYSTEM:
The legal system in Cyprus is generally based on common law and our legislation
is, to a large extent, modelled on the respective English legislation. However,
in the field of Immovable Property Cyprus legislation and the legal system
in general is considerably different than the one applied in the U.K.
First of all, 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 individuals.
ACQUISITION OF IMMOVABLE PROPERTY:
Cypriots & E.U. citizens living in Cyprus:
Under Cyprus Law, Cypriots or persons of Cypriot origin as well as E.U.
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 & other E. U. citizens:
Foreigners and E.U. citizens who are not permanent residents of Cyprus,
wishing to purchase immovable property in Cyprus are obliged to adhere to
special formalities and are restricted by certain regulations.
Firstly, a restriction as to the type and size of the property is applied
and they are given permission to buy only one apartment or one house or
a building plot or land, which in the case of E.U. citizens can be unlimited
and in the case of all other foreigners up to 4,014 square metres (the equivalent
of three donums).
In the case of persons who are living or working in Cyprus for a long period
of time a permit to buy a second house may be granted.
After the permission has been obtained and the property registered in the
name of the purchaser, there are no other restrictions for the foreign who
is the owner of immovable property in Cyprus and he or she may sell or dispose
of the property as they wish. The foreigner owner of immovable property
can sell it and buy another, as any bona fide repeat purchaser will be granted
a subsequent permit.
Furthermore, the legal heir/s of the said owner is not required to obtain
a permit from the Council of Ministers in order to transfer the property
on to their name.
The restriction applied for E.U. citizens not residing in Cyprus will cease
after May, 2009, and all citizens of the E.U. will be treated equally with
Cypriot citizens regardless of their residential status.
APPROVAL BY THE COUNCIL OF MINISTERS / PERTINENT AUTHORITY:
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 a citizen of the Republic, including an alien controlled company.
The term does not include foreigners of Cypriot origin, or the non Cypriot
spouses of 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 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.
Also, any contract for the purchase or lease of property is valid even
if the Pertinent Authority rejects the foreigner’s request for 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. (An income of CY£12.000
per annum between the couple is considered satisfactory).
As of 1st May, 2004, citizens of the EU residing in Cyprus or Cyprus based
companies, controlled by citizens of a Member State are not considered
to be foreigners. As for citizens of the EU not residing in Cyprus, there
is a transitional period until May, 2009, after which they will be treated
equally with Cypriot citizens regardless of their residential status.
SPECIFIC PERFORMANCE:
One can wonder about the safeguards of a transaction between a seller
and a purchaser, especially when the purchaser is not allowed to transfer
the acquired property onto his/her name, sometimes for a long period of
time after payment of the consideration, as in the case of a foreigner
purchaser awaiting for the several formalities to be completed.
According to the provisions of Specific Performance Law, the purchaser
of immovable property may secure the transfer of the acquired property
on to his/her name by depositing a duly signed and stamped copy of the
contract at the Land Registry within two (2) months from the signing of
the contract.
By depositing the contract to the Land Registry, the purchaser prevents
the owner from transferring the property elsewhere or charging it for
as long as the contract is valid and legally effective. Note that no burdens,
charges or encumbrances can affect the right of specific performance after
the contract has been deposited with the Land Registry.
Depositing a copy of the contract to the land Registry gives the purchaser
the right to seek “specific performance” of the terms and
conditions of the contract and thus to register the property on to his/her
name, even though the owner may not be willing to accommodate such procedures.
FEES AND CHARGES:
Usually the relative fees and charges for the acquisition of Immovable
Property in Cyprus are paid by the Purchaser. These include legal fees
as well as transfer fees, stamps and other fees imposed by the Cypriot
authorities.
Transfer Fees:
When registering the property under his / her name, the purchaser will
be liable to pay the following transfer fees, calculated according to
the property’s market value:
Market Value CY£ Fees Rate
Up to CY£50.000 3 %
From CY£50.000 – CY£100.000 5 %
Over CY£100.000 8 %
Stamp Duty:
The purchaser is also liable for the payment of stamp duty at the rate
of 0.15 % of the market value of the property up to CY£100.000 and
0.20 % for over CY£100.000.
The contract should be stamped within a period of thirty (30) days from
signing.
Although the absence of the revenue stamp on a contract does not render
it void, the stamp must be paid before depositing the contract to the
Land Registry for specific Performance purposes (see SPECIFIC PERFORMANCE
above).
The stamp duty plus a fine will be payable when the contract is produced
to the Land Registry for the transfer of ownership or to any Government
department and the court.
CAPITAL GAINS TAX:
Capital gains tax is levied at the rate of 20% on gains realised from
the disposal of immovable property or the disposal of shares of companies
the assets of which consist mainly on immovable property.
The gain is calculated as the difference between the sales proceeds and
the original cost of the property. Interest on payments paid for the acquisition,
additions to the property and inflation rate, as published yearly by the
Government, are deducted from gains.
Individuals are entitled to the following lifetime allowances on Capital
Gains Tax:
ü The first CY£10.000 of gains arising from the disposal of
any property are exempted.
ü The first CY£15.000 of gains arising from the disposal of
agricultural land by farmers are exempted (subject to conditions).
ü The first CY£50.000 of gains arising from the disposal of
a house used by the owner for his / her own habitation are exempted (subject
to conditions).
The following allowances are not available separately and every individual
is only allowed a maximum lifetime allowance of CY£50.000.
Non residents are only charged when selling property in Cyprus, but they
can be totally exempt from Capital Gains Tax if they can prove that the
purchase consideration was paid with foreign funds imported between August
1st, 1980, and July 13th, 1990.
The following categories of immovable property disposals are exempted
from the Capital Gains Tax:
i. Transfers by reason of death.
ii. Gifts between relatives up to third degree of kindred.
iii. Gifts to limited liability companies when, at the time of transfer
and for a period of five years following the transfer, all the shareholders
of the company are members of the family of the donor.
iv. Gifts by family companies to their members, but only in cases where
the property transferred was obtained by the company as a gift.
v. Exchanges of immovable properties.
vi. Compulsory acquisitions.
vii. Gifts to charitable institutions or the Republic of Cyprus.
OTHER TAXES
VAT
As of May 1st, 2004, the supply of immovable property is subject to VAT
(Value Added Tax), which is calculated at a rate of 15 % of the value
of the property.
However, VAT is only levied on property before its first use, as well
as on the land on which such property is built.
Also for buyers of a first residence the VAT is levied at a rate of 5
%.
Transitional provisions provide the exemption of buildings for which a
valid application for planning permission was submitted before May 1st,
2004.
For more information visit the official website of the Ministry of Finance
of Cyprus at: http://www.mof.gov.cy
Immovable Property (Towns) Tax:
The registered owner of immovable property is also subject to minor taxation
under other laws, imposed by municipal or other authorities. These taxes
are levied according to the area and the size of the property and cover
sewerage, refuse collection, street lights and other similar expenses.
The charges range in total from approximately CY£50 to CY£100
per annum.
DOUBLE TAXATION TREATIES:
Cyprus has signed double taxation treaties with a considerably large number
of countries and more are under negotiation. These treaties may affect
favourably the ownership of immovable property in Cyprus and also groups
of people who decide to relocate to Cyprus, such as retired residents,
employees and business investors.
Some of the countries with which Cyprus has entered into double taxation
treaties are: U.K., Ireland, Greece, U.S.A., Canada, France, Germany,
Italy, Russia, Belarus, Romania, China, Austria, Belgium, South Africa,
Yugoslavia and many others.
.
For foreigners wishing to invest in immovable property in Cyprus it is
advisable to seek and obtain professional legal advice and guidance, to
help you through the complex proceedings and formalities and also to avoid
any unpleasant consequences.
The lawyers we deal with in Cyprus has vast experience on Real Estate
and Property Law, offering a wide range of services including:
- Search at the Land Registry Office to ascertain the property is free
from any burdens, charges or encumbrances.
- Negotiating and Drafting of Contracts.
- Introduction to banking organisations and negotiating and advising on
loan and other financing arrangements.
- Stamping of contract.
- Depositing of contract at the Land Registry for Specific Performance
purposes.
- Submitting of Application and all relevant documentation to the Pertinent
Authority for obtaining the approval to acquire immovable property.
- Representation at the Land Registry and / or any other proper authorities
for the title deed formalities.
- All other relevant services.
Should you need any further information, please contact us for more information.
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