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Buying property in Cyprus

Buying new property in Cyprus is a remarkably simple and fast process, by comparison with the UK. All Alpha Panareti’s properties are sold as Freehold with Title Deeds and, with no previous owners involved, matters are straightforward.

Agreeing the price and payment terms Once you have agreed a purchase price with the developer, it is usual to give an immediate initial deposit of EUR 2500 to secure the property. This can normally be paid by Credit Card. This makes the agreement legally binding, so that no ‘gazumping’ can take place.

A schedule will then be agreed concerning the method of payment. This is usually based on progress payments throughout the building process of your property, although it may be possible to negotiate other terms with your developer. It is, however, standard for the developer to request payment of between 20% and 30% at the time of Contract signature.

A Contract of Sale will then be drawn up, including the method of payment mentioned above. You will be required by law to pay for your property from ‘external funds’, i.e. from outside Cyprus.  Please see notes below about banking.

You must have a solicitor in Cyprus in order to complete a purchase and you will probably want to consult with one before going ahead. In general, solicitors will offer you a free consultation meeting in order to meet you, establish a relationship and give you general information about their services and the process of house buying in Cyprus.  They will then charge a fixed rate for your property purchase, agreed in advance. The solicitor will do any necessary searches on your property, draw up the contract and carry out the ‘Specific Performance’ and Council of Ministers application.  (Please see information below). The solicitor will also be able to take your Power of Attorney if you do not intend to live permanently in Cyprus, in order to carry out official business with banks or government authorities. Please ensure that the solicitor you choose is independent of the company from which you are purchasing.

You will need a bank account in Cyprus in order to complete your purchase, probably with both a Sterling account and a Cyprus Euro account.  This will allow you to transfer funds from the UK and then make your progress payments on the new property.  You can also use it for transferring pension, investment or other income out to Cyprus. Banks in Cyprus have very modern, up to date systems and provide a wide variety of services, including Internet banking that can be accessed from the UK.  Opening accounts is a simple process. All banks offer mortgage schemes (there are no Building Societies in Cyprus).

Specific Performance This process prevents the seller/developer from re-selling a property to another buyer and provides an absolute safeguard to the buyer until the application to the Council of Ministers has been made and approved. The Contract of Sale must be deposited at the Land Registry within two months of being signed and stamped.  Your solicitor will do this as part of his duties.

Approval of the Council of Ministers Once you Contract has been agreed and signed, it is necessary for you to make an application to the Council of Ministers to grant its approval for a non-Cypriot to acquire what is known as ‘immovable property’.  Your solicitor will make this application on your behalf. At this date, no UK citizen has ever been refused this approval. This is a routine procedure that can take up to 12 months to complete, but there is no restriction on you taking full possession of your property pending the granting of the approval.

The system provides for the following: 1. You can live in your property from the moment you take delivery of it, prior to the Council of Ministers granting approval. 2. You can re-sell your property during this time and inheritance rights are not affected by the process. 3. Should approval not be granted, you can re-apply. 4. Should approval not be granted, you will have seventeen (17) years in which to sell your house.

Selling your property You may sell your property at any time after the Contract to purchase has been signed.  You may then immediately repatriate all proceeds, provided the initial purchase was paid for in properly imported foreign currency. Neither the State nor Alpha Panareti places any restrictions upon whom you may sell your property to.

Capital Gains Tax Capital Gains Tax is levied at 25% on profits arising from the sale of a property. However, when ‘foreign’ owned property is sold, there are generous allowances and exemptions from the tax.  The ‘gain’ also takes inflation into account.  Remember to keep evidence of improvements to your property after taking possession of it, such as invoices, as these will be useful when the ‘gain’ is calculated.

Inheritance tax There is no inheritance tax (Death Duty) in Cyprus.

THE COST OF PURCHASING AND ON-GOING EXPENSES Your fixed purchasing costs are likely to be made up as follows:

• The cost of the property plus any mortgage fees and interest
• The solicitor’s fee – around EUR 1500 to 1700
• Council of Ministers Application:  EUR 170 – 340.  Sometimes included in your solicitor’s fee.
• Property Transfer Tax - see below
• Stamp Duty – see below

Property Transfer Tax The payment of Property Transfer Tax is required in order to transfer the Freehold ownership to your name and is payable once the property is registered in your name at the Land Registry Office.  This process cannot be completed until after the Council of Ministers approval has been received.  In reality, this means that it will be up to three years from taking delivery of your property before you actually pay the tax. The tax is payable once only to the Land Registry and is calculated as follows:

Value of Property (EUR)	Transfer fee rate %
Up to 85,430.07	3%
From 85,430.08 to 170,860.14	5%
Above 170,860.15	8%

Method of charging:  if a property has been bought jointly by two or more people i.e. if their names are on the Contract of Sale, then the cost of the property may be divided equally between those owners.  The tax will then be charged to each owner for their portion, meaning that the individual cost will fall into a lower price band.  The grand total will then be less. Stamp Duty The purchaser is liable for Stamp Duty.  This is charged at the rate of EUR 1.50 per thousand up to the value of EUR 170,860.14 and thereafter at the rate of EUR 2 per thousand.  This duty should be paid within 30 days of signing the contract and your solicitor or the property developer will help you deal with it. On-going expenses Immovable Property Tax The registered owner of a property is liable for an annual tax, based on the value of the property.

Value EUR	Annual tax euros per thousand
Up to 170,860.14	exempt
170,860.15 to 427,150.36	2.5
427,150.37 to 854,300.72	3.5
Over 854,300.72	4.0

However, the charges are based on the market value of the property as at 1st January 1980.  In practice therefore, this means that you are unlikely to be liable for much tax as the law stands at present. Local authority tax Your local authority will make an annual charge to cover such services as street lighting, refuse collection etc.  The amount depends upon the area and the size of the property and ranges between about EUR 85 and 308 per annum at present. Home insurance You will need, of course, to take out full house and contents insurance on your property, once you have taken delivery of it.  There are many, many schemes available.  As a guideline, you should anticipate paying between EUR 1 and 2 per thousand euros insured. Living expenses The utilities - electricity, water and telephone - are all billed every two months by the relevant authorities, based on metered usage. Costs will vary widely depending on the amount of equipment in use and the time of year, but ‘average’ bills for a permanent household of four may be: Electricity – EUR 50 every two months Water – EUR 17 - 34 every two months

PERSONAL TAXATION
The following are very brief notes about the most obvious forms of taxation – you are advised to seek professional advice to confirm this information and for more complicated personal situations, including self-employment or running a company.

Double taxation agreements exist between Cyprus and most European countries.

Individuals permanently resident in Cyprus are taxed here on the following types of income:

• Employment income for work performed in Cyprus.
  
• Profits from a business activity, which is carried out though a permanent establishment in Cyprus.
  
• Pensions in respect of employments exercised in Cyprus (except for pensions paid from a fund established by the Cypriot Government or any local authority.)

Retirees
Alien retirees are taxed at a flat 5% per annum on pension and investment income brought into Cyprus, with exemptions totalling EUR 6834 per person.

Income tax and NI
A person living and working permanently in Cyprus will have their income taxed as follows:

Taxable income (EUR)	Rate
Up to 19,500	Nil
19,501 to 28,000	20%
28,001 to 36,300	25%
above 36,300	30%

Employers and employees are required to make National Insurance Contributions at the rate of 6.3%.

E & O E
The above information is published in good faith and is correct to the best of our knowledge, but please check the details with independent sources before relying on it.

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