The island in the Mediterranean boasts some of Europe’s cleanest beaches and 320 sunny days per year.
Cyprus‘s low business costs and good standard of living make it an attractive location.
Limassol, a lively and cosmopolitan city, Paphos, a picturesque and archaeology-rich town, Larnaca, a historic and transportation center, and Nicosia, a bustling and cultural capital, are only a few of the local regions. Property Buying in Cyprus is easy. The procedures are as follows:
Step-by-Step Guide to Purchase a Property in Cyprus
House Reserving
a proposal to buy something at a fixed price. There is a non-refundable reservation fee paid by the buyer in exchange for the seller taking the property off the market for a set length of time. For more information about exclusively available properties for sale in Cyprus visit iListers website
Legal Consultation
Although not mandated by statute, seeking the advice of an outside attorney is always in one’s best interests.
Due Diligence & Conveyancing
Legal representation for the buyer does the necessary due diligence to verify ownership and the ease of transferring title to the property.
Discussion and Conclusion of Contracts
The purchaser’s attorney will review any purchase agreements, draught any necessary amendments, assist with negotiations, and oversee the document’s correct execution.
Request for a Lower Rate of Value-Added Tax
For newly constructed homes, the typical VAT rate is 19%. However, there are some requirements and guidelines that must be met in order to qualify for the reduced VAT rate of 5% for your primary residence.
The Land Registry Office (LRO) Registration of the Contract of Sale (CoS)
The purchaser is afforded the greatest possible legal protection through registration. Once this is completed, buyers can resell the property to someone else before they receive their own title documents.
Acquisition Authorization for Real Estate in Cyprus
applicable exclusively to people who aren’t EU nationals and has to be done before the transfer of ownership documents.
Purchasing Property & Documents Used in the Transfer of Title are as follows The transfer is finalized when the buyer and seller each have their own title deed and present it to an official at the Land Registry. The buyer is responsible for paying any transfer fees.
Explanation of Steps for Buying Property in Cyprus
Here we’ll examine the specifics of this seemingly simple procedure as we purchase real estate in Cyprus.
1. Placement on Hold
The reservation fee is a percentage of the total purchase price (usually between 5.11% and 11.11%, or €5,111 to €11,111). The down payment is held in escrow by your agent or lawyer until the sales agreement is finalized.
The reservation fee removes the home from sale and locks in the purchase price. In the event of a successful sale, the reservation fee will be applied to the final sales price.
2. Setting Up a Meeting with a Cypriot Lawyer Regarding a Real Estate Purchase
Legal services may include due diligence, review and/or preparation of the CoS, negotiation and/or completion of the contract, registration of the CoS with the LRO, representation before the LRO during the title transfer, application to the tax authorities for reduced VAT, and application for permission to purchase real estate in Cyprus.
It is common practice to pay between €2,111 and €5,111, or 1% of the purchase price, in legal expenses for due diligence and conveyancing (from studying the contract to signing it).
3. Due Diligence and Conveyancing
Performing due diligence before signing a contract is strongly advised. Your attorney will check the LRO to make sure the seller is the legitimate owner and to see if there are any liens on the property’s title that could prevent a sale.
If the property is undeveloped land, the attorney can look up the zoning regulations in the area, the maximum number of units that can be constructed, and the maximum density of those units.
Your attorney can verify the existence of planning and building permissions with the appropriate authorities for properties without individual title documents. Your lawyer can conduct a search at the Registrar of Companies if the seller is a company.
4. Contract Signing & Negotiations Process
In a COS, you and the vendor are entering into an exclusive contract. The COS is normally provided by the seller for you to study (together with your attorney). It is not uncommon for the purchaser’s legal counsel to need assistance in drafting the CoS. All COS is written in English.
Your lawyer may be able to arrange for a translation if one is needed. Value-added tax: The purchaser is obligated to make the following stamp duty payments within 31 days of the contract’s signing:
Value and Fees of the Agreement
- It is 1.11% for the first €5,111.
- €5,111 – €171,111 is 1.15%
- Above €171,111, 1.21% applies.
There is a stamp duty cap of €21,111.
5. Request for the Value-Added Tax Discount
All newly built homes in the European Union are required to pay a standard VAT rate of 19% in compliance with EU law. However, the VAT rate is reduced to 5% for the acquisition of a primary residence under the following circumstances:
- You must be at least 18 years old and in good physical condition to apply.
- In order to avoid eviction, the house must be used as the primary residence for the following eleven years.
- Previously, the same person had not qualified for the reduced VAT rate.
- The first 211 square meters of a property are eligible for the lower VAT rate. For any additional square meters, the base rate will be used.
6. The LRO’s Registration of the CoS
When all parties have signed and dated the contract, and the buyer has paid the down payment (typically 31%-41% of the purchase price), a “particular performance” application can be filed at the Land Registry Office (LRO) (within six months of signing).
The LRO is now effectively made aware of the buyer’s particulars. Sale of Immovable Property (Specific Performance) Law protects the buyer by prohibiting the seller from reselling, transferring, or encumbering the property as long as the contract of sale is valid and legal. After this is completed, the buyer is free to resell the property before he even has his own title deed.
7. Authorization to Acquire Cyprus Real Estate
Real estate purchases by Cypriots and other EU nationals are not subject to any kind of quota or governmental oversight. In order to purchase real estate, non-EU citizens need the approval of the Council of Ministers.
In most cases, approval can be expected within a month after submitting the application and signing CoS. Possession of the property need not await the consent of the Council of Ministers.
8. Documents of Title Transfer
It usually takes a few years following the completion of development before title deeds are issued for individual units. If the buyer has paid the seller in full, paid any government transfer fees or taxes, and obtains the appropriate permit from the Council of Ministers, then the seller will transfer the title deed to the buyer at the Land Registry Office.
The process is straightforward, and purchasers who wish to have their attorneys handle it on their behalf need to grant the attorneys a Power of Attorney. The Department of Land and Surveys will accept the sale price as the basis for the fee. I’ll show you the math behind it: Estimated Value, Annual Cost, and Total Cost of Owning a property
- To begin, multiply €2,551 by 3% to get €85,111.
- €85,111 – €171,111 is 5% €4,251 €6,811
- For amounts above €171,111, an additional 8% will be added.
Transfer fees are calculated on a per-buyer basis, therefore if two people are purchasing a house together, they will pay a lower combined transfer charge. In addition to the 51% reduction in the aforementioned rates, properties that are liable for VAT no longer have to pay any transfer costs at all.
Costs Related to Owning Property in Cyprus
The Tax on Movable Property
There is no tax on real estate. Completely done away with as of January 1, 2016.
Location Tax
estimated using the property’s most recent official valuation (currently 2022). Local governments normally set their rates between 1.1% and 1.2% annually.
Vat For Disposal of Waste Water
estimated using the property’s most recent official valuation (currently 2022). The municipal sewerage board establishes the rates, which range from 1.15 percent to 1.33 percent every year.
Charging for Garbage Collection
The annual cost of garbage collection is often assessed by cities and towns. The cost is proportional to the square footage of the property and the local government.
The annual trash collection price for a three-bedroom vacation home in Protaras, Famagusta, is approximately €141.
Tax on Capital Gains
The profit obtained from the sale of the property is subject to a 21 percent capital gains tax.
Surtax On Inheritance
As of 2002, there is no longer any estate duty, so there is no inheritance tax to worry about.
*Please note that the contents of this document are intended merely as a general guideline and not as legal advice.
