Summary
Read about the applicable Cyprus property taxes when buying, owning and selling a property in Cyprus.
Cyprus property taxes for property purchasers
1. Stamp duty
When buying property in Cyprus, the buyer typically pays for the stamp duties that must be applied to the purchase agreement and related documents. These are paid to the Inland Revenue (i.e. the Cyprus Tax Department). Stamp duties are typically paid as follows:
Potential buyers must understand the financial implications of purchasing a freehold property in Cyprus, including estimated tax liabilities and transfer fees.
Contracts of purchase. For contracts of purchase of a property in Cyprus, stamp duties are calculated on the purchase stated in the contracts on the following scale:
The first € 5000 is free and stamp duty exempt. From €5001 – €170000 of the purchase price, stamp duties are 0.15%. Any amounts over €170000 are calculated at 0.2% (each extra certified contract copy is charged €2). The maximum stamp duty applied is capped at €20,000 per agreement.
Power of attorney. Most buyers (as well as sellers) of properties give a power of attorney to the lawyers to allow them to be abroad at any moment of the transaction and to avoid multiple visits at the authorities for signing the necessary forms. A Power of Attorney needs to be stamped as well. A general power of attorney’s stamp duty is €6, and a specific power of attorney’s (also referred to as limited or special power of attorney) stamp duty is €2
2. Transfer fees
A property purchase in Cyprus is completed when the title deed is registered on the buyer. On the day of title registration, the Land Registry will estimate the market value of the property being purchased and charge the buyer Transfer Fees as follows:
There is currently a 50% discount on the above rates, and transfer fees are not chargeable at all if VAT has been paid. Typically, VAT is payable on new properties. If there is more than one buyer, the purchase price is divided by the number of buyers, and the transfer fees apply for each buyer. Each buyer then has a 50% discount on the transfer fees attributed to it. Understanding a property’s market value is crucial when calculating these tax obligations.
3. Value Added Tax (V.A.T)
Value Added Tax (VAT) at the rate of 19% applies to the purchase price of new properties only. However, this may be reduced to 5% provided that the property is to be used as the primary and permanent residence of the applicant under the following conditions:
Submission of an application with the relevant supporting documents
The property must be used as the main primary and permanent place of residence
The applicant does not possess any other property which is used as the primary residence in the Republic of Cyprus.
The reduced rate of 5% is applied only on the first 200m2 and the area exceeding the first 200m2 bears standard VAT rate of 19%. A tax calculator can be used to estimate these tax obligations related to purchasing property.
4. Other expenses
When buying a property there are other smaller expenses, such as the cost of lodging a purchase contract or an assignment and other due diligence costs. As a way of example these are some of the typical land registry fees payable for the lodging of documents.
Lodging of a power of attorney or a contract of sale €50,Lodging an assignment contract (if the property is a resale and new title deeds have not yet been issued): 0.5% of the purchase price with a maximum of €3.000. Written stamp duty is calculated based on the value of an agreement, with specific percentages applicable for different value ranges.
Immovable property tax for owners of property in Cyprus
1. Immovable Property Tax (I.P.T.)
This property tax in Cyprus was payable by property owners to the Inland Revenue up until the end of 2016. Since 2017, this tax has been abolished. Whoever owned property in Cyprus before 2017 is still liable to pay the tax. I.P.T. is calculated based on the market value of the property on 01/01/1980. These apply per owner and not per property. Additionally, the maximum stamp duty applied is capped at €20,000 per agreement, which can significantly affect property owners when calculating their dues.
2. Local Authorities: Taxes & Rates
Cyprus properties will be situated in either a Municipality’s or a Village Council’s jurisdiction. Cyprus property taxes and rates vary depending on which Municipality/Council the property is located. Municipality/village council taxes in Cyprus roughly range from about €90 to €300 annually, depending on the property size. These usually entail sewage, refuse collection, street lighting and other local expenses. Basic utility rates such as Electricity and Water depend on your usage, usually based on meter readings. All electricity bills are issued by the Electricity Authority of Cyprus (E.A.C.) and the water bills are usually issued by the Municipality or Village Council.
3. Communal Expenses
These refer to the expenses for properties that are part of a unified complex that entails common areas. They are usually managed either directly by the residents themselves (by the Management Committee of the complex) or are delegated to property management companies who specifically deal with the upkeeping of the complex. The cost for communal expenses varies widely depending on location, the size of the property, and the communal area management company.
4. Insurance
Usually, property owners insure their properties. For persons owning properties in a building complex or project, it is wise to check with the Communal Management Committee of the project first to see what kind of insurance they have and what it covers. The cost of insurance varies depending on the size and condition of the property and of course, the insurance company one chooses.
5. Inheritance Tax
You do not need to worry if you concern yourself with how your property will be taxed after you pass away. The inheritance tax in Cyprus was abolished on 1 January 2000.
Cyprus capital gains tax for sellers of property
1. Capital Gains Tax (CGT)
Capital gains tax applies to the profit made on the sale of a property at the rate of 20%. There is a one-lifetime allowance of the first €17,086 gains, which are exempt for each seller until this allowance is used up. To find the taxable profit certain costs in addition to the cost of acquisition of the property (the purchase price) are deducted from the sale price. These costs include the transfer fees paid when transferring the property in the seller’s name and certain costs for the betterment of the property (such as structural changes, installing central heating and the fees of a duly registered (in Cyprus) real estate agent). Sellers must also consider property transfer fees, which are taxes paid to the land registry when transferring property titles.
2. Expenses for the provision of necessary documents to the buyer
Typically, a seller of property will need to provide the buyer with the following:
Land Registry Search (for Mortgages or other charges): range from €10 to €50,
Copies of Architectural & Site Plans and previous contracts obtainable from Land Registry: €5 to €40,
Lodging of a general power of attorney: €50,
The energy certificate referred to above.
3. Payment of debts, utilities and taxes
When selling a property, any outstanding debts, utilities, and taxes must be cleared. For example, a debt covered by a mortgage on the property amounts due to the developer of the property, any balance to the management committee for communal expenses, amounts due to the authorities for water, electricity, refuse collection, etc.
4. Professional Services & Fees
The typical fees paid are those of an estate agent and a lawyer. The fees for registered and regulated real estate agents are currently capped at 5% plus V.A.T. Legal fees for property transactions are agreed upon between the seller and the lawyer, typically for a fixed amount. In addition, the law obliges sellers to present an energy certificate of the property being sold to the buyer.
The cost of this ranges from €300 – €500.
5. Reduced tax of 0.4% on sales for the support of housing for Cypriot refugees
In November 2022, the Cypriot government announced the imposition of a 0.4% tax on the sale of Cyprus properties, payable by the seller, to support the housing of the Cypriot refugees who were dislocated after the Turkish invasion. The 0.4% tax extends to direct sales of property in Cyprus as well as the sale of shares in companies owning (whether directly or indirectly) property in Cyprus.
The Cyprus Tax Authority has announced that this tax has retrospective effect from the 22nd of February 2021. However, due to obvious enforcement problems, it has mentioned that it will issue guidance at a later point for payments of tax for transactions that have been completed since then and until the 18th of November 2022. For transactions completed after the 18th of November 2022, new forms have been published.
We assist people looking to buy or sell property in Cyprus in doing so safely, quickly, and stress-free. We provide clarity as to expenses, taxes, and all other costs from the outset so that you can plan your next steps accordingly.
Contact us for a free consultation.
*This article has been drafted purely for informational purposes and does not constitute legal or tax advice. Certain information may change and you should always seek professional advice before taking action about conveyancing transactions, contracts or tax in Cyprus.
