Property Taxation in Cyprus

Folks from Western countries are increasingly interested in purchasing properties in the Caribbean, the Mediterranean, and other warm locales.

Ever since Cyprus has joined the European Union, interest has increased about this island nation. The other benefit that people see is that English is widely spoken across Cyprus. So what is making people flock to Cyprus to buy real estate and properties?

Cyprus is almost like a tax haven within the European Community. There is no inheritance tax or gift tax. Pensions from abroad are taxed at a flat rate of 5% while interest earned from foreign capital brought into Cyprus is exempted from taxes, and investment income remitted to Cyprus by foreign nationals is taxed at flat rate of 5%. Cyprus has signed double taxation agreements with many countries.

Today properties in Cyprus are of great demand from people from the Middle Eat, Russia and even the United States. So what is the property taxation scene in Cyprus? Let me try and explain it to you.

Property Tax
Whether you are a resident or non-resident and you have let out your property, you would have to pay taxes on that income at standard income tax rates. This means you have include any income from property in your annual tax declaration.

However, a 20% deduction is allowed on income from properties. This is also true for interest on loans taken for purchase of a property. Residents in Cyprus pay an additional tax at 3% on 75% of their total income from their properties. This tax is known as Special Contribution for Defence.

Property Tax rates on immovable property in Cyprus are as follows:

This property tax is payable annually by all property owners irrespective of their residence status. Property Tax in Cyprus is very low as compared to other countries.

Value Added Tax (VAT)
Cyprus also charges VAT on new properties. This was introduced on May 1, 2004. The current rate of VAT in Cyprus is 15%, at the rate of 5% for a property that is the principle place of residence, and 15% for secondary properties. For projects, VAT is payable on the selling price of the property and land and building cannot be split. No VAT is payable in cases where an application for a Planning Permit was submitted before May 1, 2004. As a result, there is a huge demand for all properties that are not affected by the VAT addition.

Capital Gains Tax
From VAT, let’s take a look at Capital Gains Tax. This tax is payable if you sell your property. When you sell or dispose your property, capital gains tax is payable at the rate of 20% on the gain with an exemption on the first CYP 10.000. The gains are the difference between the sales proceeds and the original cost of the property. In the case of a property, which was purchased before January 1, 1980, the gains are the difference between the sales proceeds and the market value of the property as of January 1, 1980.

On top of this allowance, the seller is entitled a further allowance regarding the transfer fees paid, inflation rate per year and the cost of any additions made to the house.

Gains from the disposal of a dwelling house are exempt up to CYP 50.000 in total if the owner resides in it continuously for at least five years before selling it.

Non-Cypriot Investors have no obligation to pay Capital Gains tax.

Inheritance Tax

Inheritance tax in Cyprus was abolished in 2000.

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.

Purchase Price in CYP	Stamp Duty in %
Up to 100.000	0.15
Over 100.000	0.20

Transfer Fees
Supposing you buy a property in Cyprus, you need to pay a transfer fee to the Land Office to acquire the title deed of the property.

The Transfer Fee is the most expense you will incur after the purchase of your property. Transfer fees range from 5% to 8% depending on the purchase price. The amount of Transfer Fee payable is as follows:

From CYP 1.00 to CYP 50.000 is 3%
From CYP 50.000.01 to CYP 100.000 is 5%
From CYP 100.000.01 and above is 8%

However, if two persons buy one property, each person will end up paying less transfer fees since the amount will get divided between the two.

Local Authority Tax
Property taxes levied by the local authorities are in the range of CYP 30.00 - CYP 100.00 per annum, depending on the size of the property. The tax covers the cost of refuse disposal, street lighting, etc.

In conclusion, Cyprus has an exceptional growth in the real estate sector and foreigners are allowed to purchase real estate on a freehold basis. The process is straightforward when compared to other European countries. Besides, Cyprus is a tax efficient location with numerous tax advantages it offers to its residents.