Taxes/Fees Payable by the Buyer
- A. Stamp Duty
If there is a contract of sale with the intention to be used in court proceedings or for the transfer of ownership of property or to be filed at the Land Registry so that the buyer to avail with the additional protection of a The Sale of Immovable Property (Specific Performance) Law of 2011, then, usually, the buyer is obliged to pay the stamp duty on the Contract of Sale.
The Stamp Law provides for stamp duty on contracts on the basis of the consideration at the following rates:
- No stamp duty is payable on transactions with a consideration of €5000 or less,
- 0.15% on transactions with a consideration between €5.001 and €170.000 and
- 0.20% for more than €170.000 with a capped at a maximum of €20.000 stamp fees.
Stamp duty must be paid within 30 days from the date of execution of the relevant documents or, if they are executed abroad, within 30 days after they are received in Cyprus.
It should be taken into consideration that if you do not pay the stamp duty on time, then you will have to pay the stamp duty plus a fine. Specifically, a surcharge of approximately 10 percent of the unpaid amount is imposed if payment is made within six months after the due date; otherwise the surcharge is twice the unpaid amount.
|The first €5,000||0|
|€5,001 – €170,000||0.15%|
|More than €170,000||0.20%|
- B. Property Transfer Fees
Transfer fees are paid by the buyer to the Department of Land and Surveys on the date of transfer of the immovable property in his name. Although the fee is usually calculated on the purchase price, the Department of Land and Surveys may impose higher transfer fees if the valuation department decides that the market value of the property at the time of purchase exceeds the purchase price.
The fees charged by the Department of Land and Surveys for the transfer of immovable property are:
|Property Price||Rate||Fee||Accumulated Fee|
|€85,001 – €170,000||5%||€4,250||€6,800|
Important Incentives of the Government to revive the property market:
- Properties subject to VAT are exempt from the above transfer fees.
- Properties not subject to VAT are eligible for a 50% exemption from the above except for property acquired under the foreclosure process prescribed in Part VI and VIA of the Transfer and Mortgage of Immovable Property Law
Some others exemptions from transfer fees are in the cases of companies’ reorganizations, cases under a qualifying loan Restructuring and in the context of bankruptcy, liquidation, disposal of mortgaged immovable property by the lender, where the sales proceeds do not exceed the amount of €350.000 per owner.
In the case of free transfers of property between the following parties, the transfer fees are calculated on the value of the property as at 1 January 2013 at the following rates:
- from parents to children: 0%
- between spouses: 0,1%
- between third degree relatives: 0,1%
- to trustees: €50
- Mortgage registration fees are 1% of the current market value
Through investments in real estate it is possible to apply for Cyprus Citizenship by Investment or Residency permit by investment. More information (http://novumtempus.com.cy/en/personal-substance)
- VAT on Immovable Property
VAT is chargeable at the standard applicable rate of 19% on the first sale of new buildings or parts of buildings and the land on which they stand if the application for a planning permit was submitted after 1 May 2004.
The reduced rate of 5% applies to contracts that have been concluded from 1 October 2011 onwards provided they relate to the acquisition and/ or construction of residences to be used as the primary and permanent place of residence for the next 10 years.
As of 18 November 2016, the reduced VAT rate of 5% is applied on the first 200 square meters. On the remaining square meters, the standard rate of 19% is imposed as determined based on the building coefficient. In case of families with more than 3 children the allowable total covered area increases respectively. The reduced rate is imposed only after obtaining a certified confirmation.
As of 2 January 2018, VAT at the rate of 19% is imposed on the transfer of non-developed building land when supplied in the course of business. Specifically, VAT is imposed on the transfer of ownership, transfer of indivisible land portion, transfer of ownership under a sale agreement or an agreement which specifically provides that the ownership will be transferred on a future date or by virtue of a leasing agreement with the right to buy non-developed building land which is intended for the construction of one or more structures in the course of carrying out a business activity.
- Legal Fees
Lawyers are usually the principal professional advisers in a real estate transaction. Their legal fee is depended upon the services provided and the fees are usually agreed between the lawyer and the client. The current market legal fees range is between 0,5% - 1,5% of the purchase price of the property.
Legal Fees usually includes inter alias the following:
- the negotiation between the parties for drafting the contract of sale.
- filing of the Contract of Sale in the Land Registry Department to ensure that property is transferred to clients name,
- the lawyer of the buyer will usually verify the ownership of the real estate by the seller as well as carry out an official search to confirm the registration of any encumbrances over the property as well as the availability of all necessary permits with reference to buildings erected thereon
- Collecting and/or drafting and/ or reviewing all the necessary documents for the transfer
- Assisting with the transfer of the property.
If buying from developer, they usually provide their agreement, but still it is recommended involve lawyers to act on best interest of yours. Agreement usually is in English, can be translated to client language.
Taxes/Fees Payable by the Seller
- A. Capital Gains
Capital gains tax is imposed (where the disposal is not subject to income tax) at a fixed rate of 20% on both individuals and companies. Capital gain tax is calculated based on gains arising from:
- the disposal of immovable property situated in Cyprus
- companies not listed on a recognised stock exchange which own immovable property situated in the Republic
- the disposal of shares of companies which indirectly own immovable property situated in the Republic and derive at least 50% of their market value from such immovable property
The capital gain tax is calculated after deducting from the sales proceeds:
- The value of the immovable property as at 1 January 1980 or cost if the date of acquisition is later, as adjusted
- The cost of any additions after 1 January 1980, or the date of acquisition if later, as adjusted for inflation.
- Expenditure incurred wholly and exclusively for the production of the gain (e.g. transfer fees, approved real estate agent commission, advertising, legal expenses interest costs on related loans).
It must be noted that if the property is purchased prior to 1980, the cost used in the calculation is the market value of the asset as at 01.01.1980.
- Subject to conditions, land as well as land with buildings, acquired at market value (excluding exchanges, donations, and foreclosures) from unrelated parties in the period 16 July 2015 up to 31 December 2016 will be exempt from Capital Gains Tax upon their future disposal.
- Transfers on death or transfer of property of a missing person under administration
- Gifts made from parent to child or between husband and wife or between up to third degree relatives
- Gifts by a family company to its shareholders, provided such property was originally acquired by the company by way of gift. The property must be kept by the donee for at least three years.
- Gifts to a company where the company’s shareholders are members of the donor’s family and the shareholders continue to be members of the family for five years after the day of the transfer
- Gifts to charities and the Government
- Transfers as a result of reorganisations
- Exchange or disposal of immovable property under the Agricultural Land (Consolidation) Laws
- Exchange of properties, to the extent that the gain made on the exchange has been used to acquire the new property. The gain that is not taxable is deducted from the cost of the new property.
- Donations to a political party
- Transfer under a qualifying loan Restructuring
Individuals are entitled to deduct from the capital gain the following lifetime allowances:
|Disposal of principal private residence (subject to conditions):||€85.430|
|Disposal of agricultural land by a farmer:||€25.629|
|Other disposals:||€ 17.086|
To be eligible for the exemption of disposal of principal private residence up to: €85.430:
- The house must be used by the owner exclusively for his own habitation, for at least 5 years (10 years if second time or more times).
- The period of use does not necessarily have to be continuous. However, no exception will be given in a case of the disposal of the house after at least one year from the termination of the residency of the house.
- Situated on land that does not exceeds 1.500 square meters.
- Where the residence is built on land exceeding 1.500 square meters, tax is payable on the proportion of the gain accruing from the sale of the land in excess of the 1.500 square meters.
- B. Income Tax
Transfers of real estate are not subject to income tax unless the individual selling has made multiple transactions in real estate that therefore is considered as “trading in land”
Annual Property Taxes
Except from the above taxes, the transfer of a property to the buyer can take place immediately upon full settlement of the purchase price provided that the seller has settled all the below fees, charges and taxes that burden the immovable property being transferred. A certificate of payment of liabilities must be issued by the Sewage Board, Municipal fees and Community fees.
After the transfer, the new owner should pay annually the following fees, charges and taxes:
Immovable Property Ownership Tax payable to the Tax Department
Immovable Property Tax has been abolished as from 1st of January 2017.
Garbage collection fees
Local authorities charge between €70 – €300 per annum for regular refuse collection. Garbage collection fees are payable to your local municipality or community council.
Municipality Tax (Urban Immovable Property Tax)
As the registered owner of the property, you are required to pay an annual Municipality Tax, calculated on the market value of the property as at 1st of January 2018. Rates vary from 0,15‰ – 1,5‰. Municipality tax is payable to your local municipal or council authority.
As the registered owner of the property, you are required to pay an annual Sewerage Tax, calculated on the market value of the property as at 1st of January 2018. Rates vary from 0,5‰ – 1,5‰. Sewerage taxes are payable annually to your local sewerage board.
Taxes on Leases
- A. Special Contribution for Defence
The persons that are subject to Special Contribution for Defence (‘‘SDC’’) are:
- Cyprus tax resident companies
- Individuals who are tax resident and domiciled in Cyprus
SDC is imposed (amongst other) to gross rental income reduced by 25% at the tax rate of 3%.
SDC tax is payable on a self-assessment basis on the rent received. The estimated liability on income received in the first six months of the year must be paid by 30 June, and the estimated liability on income received in the second six months must be paid by the end of the year (31 December).
- B. GESY (General Health System)
Contributions relating to the implementation of the GESY started on 1 March 2019, and would increase from 1 March 2020 and onwards. However, due to the outbreak of coronavirus disease (COVID-19), the implementation of the second and final phase of GESY is to be pushed to the beginning of September 2020. However, only for the March of 2020 the increased contribution of the second phase need to be paid.
Persons earning rental income should pay contribution to GESY as follow:
- from the Phase A, (from 01 March 2019) at the tax rate of 1,70% on the gross rent income and
- from the Phase B (from the beginning of September) at the rate of 2,65% on the gross rent income.
GESY is payable on a self-assessment basis on the rent received. The estimated liability on income received in the first six months of the year must be paid by 30 June, and the estimated liability on income received in the second six months must be paid by the end of the yea (31 December). The specific amount of the contribution shall be calculated according to the above rates that applied in the given period of time.
- C. Income Tax / Corporation Tax
Rental income is also subject to personal income tax / corporation tax. Income tax is payable at the individual’s marginal rate or the standard corporate tax rate (12,5%) on the gross rent income less a deduction of 20%.
- D. VAT of 19% in the Leasing /Letting of Immovable Property for Business Purposes
As of 13 November 2017, VAT at the rate of 19% is imposed on the leasing and/or letting of immovable property to a taxable person for the purposes of carrying on taxable activities, commencing on/or after 13 November 2017.
The leasing of buildings used as residences remains an exempt transaction for VAT purposes.
The lessor/Landlord has the right to notify the Tax Commissioner by submitting a relevant form, to opt for the non-imposition of VAT to the lessee of the immovable property, subject to the terms and conditions specified in the relevant Notification of the Tax Commissioner.
The decision of the lessor/Landlord, to opt for the non-imposition of VAT of the immovable property is irrevocable.
The Estate Duty (Amending) Law of 2000 abolished any form of succession tax on the deaths of persons domiciled in Cyprus occurring on or after 1 January 2000.