Procedure of buying a new property

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Procedure of buying a new property
Procedure of buying a new property

Why Invest in Cyprus Property

- Excellent return on investment.
- Land and property prices have increased by more than 50% over the last 6 years with a continuous upward trend.
- Upward trend in the prices of holiday and/or retirement homes.
- Numerous tax benefits available to pensioners, IBCs, foreign companies and expatriate employees when purchasing property in Cyprus.
- No restrictions on the acquisition of property by EU citizens.
- Financing possibilities, in any currency, through banks located in Cyprus.
- Land registry offers security of title deed and protection of ownership.
- Strong legal system (based on British law).
- Low costs associated with property purchasing.

The Cyprus property market remains strong, making property in Cyprus an ideal investment. Cyprus has clear and fixed laws on purchasing property, and offers security and protection to the buyer.

Property Ownership and Transfer

There are no restrictions on property ownership for EU citizens and permanent residents of the Republic.

There is currently however a restriction on overseas investors and non-EU citizens (individual or corporate) of one freehold ownership property – an apartment, house, and building plot or land up to 4,000 sq.m. This restriction will be lifted during 2009. The District Officer of the town where the property is located grants permission for the purchase of property by any non-Cypriot.

The Land Registry System of Cyprus maintains an accurate and effective registry of all immovable property and land, as well as a record of all transactions including the acceptance of submission of Property Purchase Agreements.

Cyprus International companies (IBC’s) may acquire premises for their activities or for residence for their employees.

Buying Process

When a property has been selected, the Purchaser pays a deposit to the Seller. A legal contract of agreement is drawn up for signing by both parties and the first agreed installment is payable.

An independent solicitor should be appointed to draw up such a legal document or to give advice on any standard agreement. The Purchaser and his solicitor should carefully examine all the plans of the property, its site position, planning permission and the building licence.


Having chosen a property, attention should be given as to whose name the property should be registered in:
• Own name.
• Joint names of both spouses.
• Names of adult children who will inherit the property
• Name of a limited company

If the property is bought through a limited company and the dealing is disclosed, it should be noted that overseas tax residents will be taxed by the country of their permanent residence as benefit-in-kind for the free accommodation on the property concerned.

If the purchased property is not transferred immediately into the name of the purchaser of the property (i.e., the property is new or not yet completed), the contract of agreement should be submitted to the Land Registry Office and duly stamped within two months from signing. This will protect the Purchaser in the case that the Seller for any reason does not or is not able to transfer the property to the Purchaser. This LRO certificated contract of agreement will be the document on which legal proceedings can be taken through Cyprus Law for the compulsory transfer of the purchased property to the Purchaser - called ‘Specific Performance’. However, if the contract of agreement is not deposited, the only remedy is to sue for damages for breach of agreement.

Payment for a purchased property under construction or off plan is made by an initial deposit with the balance being settled by installments until completion of the house, or by raising funds through a mortgage - either locally or overseas (see Banking and Financing).

Stamp Duty and Property Transfer Fees

The Stamp Duty payable by a Purchaser on a contract of agreement is 0.15% of the value of the property up to €170.860 and 0.20% for over €170.861. The contract of agreement should be stamped within a period of thirty days from its signing.

The Property Transfer Fees are payable to the Land Registry and are calculated on the purchase price (excluding V.A.T) property\'s market value:

Value of property € Transfer fee Rate
Up to 85.430 3 %
From 85.431 to 170.860 5 %
Over 170.860 8 %

Where there are two or more buyers and providing the price is more than €85,430 the effective value for calculation is split between the joint buyers. In the case of an expensive property this can represent a substantial saving.


Title Deeds

If the house is a resale property, and the title deeds are available, the title deeds of the acquired property can be transferred once the contract of agreement is signed and full payment has taken place.

Purchasers of a property that is under construction, newly completed or is part of a development project must allow about 1-2 years following completion for the title deeds to be issued and at that point the above process will be followed.

Banking and Finance

The banking system and regulations in Cyprus conform to European standards and Cyprus has been in the Euro zone since January 2008.

Cyprus banks have a network of branches throughout the island and many international banks are well represented in the main Centres. Non- citizens can easily open local and foreign currency accounts in Cyprus. Debit cards and major credit cards are widely accepted.

Mortgage facilities are available either in euro or foreign currency from Cyprus and international banks. Commercial banks will lend up to 80% to homebuyers if the property is the sole or main residence or up to 60% if the property is their second or holiday home. Overseas purchasers may classify the property as main residence if they do not own a property overseas and if they live in Cyprus for over 185 days per year.

In the case of land acquisitions, whether for own occupation or for developing, the maximum mortgage available is 60%.

Reduced Rate of V.A.T.

Individuals purchasing a property in Cyprus, provided that it will be used as first and permanent residence, are eligible for payment of a reduced rate of V.A.T. at 5%.

Individuals entitled to this benefit must:
• Be over 18 years of age, plus
• Be citizen of the Cyprus republic or any EU member state and
• Not use any other residence as first and permanent place of residence 

The benefit is subject to the following conditions:
• The application for the issue of building license was filed at the Town of Planning and Housing Department after the 1st May 2004
• The residence is to be used for the first time as primary and permanent place of stay and
• The property should not exceed 250 sq. m2

Immovable Property Tax

The registered owner of the property is liable for this annual tax, which is based on the value of the property as at 1st January 1980. Obviously this is much lower than the current valuation.

IPT payable by the registered owner is calculated as follows:

Value €
Annual Tax  
Up to 170.860 0 %
170.861 - 427.150 0.25 %
427.151 - 854.300 0.35 %
Over 854.301 0.40 %

Inheritance Tax
The abolition of Inheritance Tax in Cyprus in 2000 was an added incentive to individuals wanting to invest on the island.

Overseas domiciled individuals are liable to inheritance tax in their country of residence until a new domicile of choice is established - in Cyprus or other. According to Cyprus Law, for a person to be considered resident he/she must stay on the Island for at least 185 days per year.

Company Buying Property

Cyprus IBC’s can be the owners of properties in Cyprus and/or overseas and enjoy many tax and other benefits.

Cyprus IBC definition:
IBC is a legal entity, which is established by non-resident individuals or corporations. IBC’s have all the rights of local companies. There is no longer the stipulation that they must conduct their business activities outside Cyprus.

An IBC may maintain offices in Cyprus or operate from the offices of its Accountants or Auditors.

Taxation & Benefits to IBC’s
- low taxation of income - uniform tax rate of 10% on net profit (for reference the UK corporate tax scale is19%-30%)
- no withholding tax on dividends - able to registered for VAT purposes
- all revenue expenses incurred for the earnings of income are allowed as a tax deduction
- full estate duty exemption on inheritance shares
- full stamp duty exemption on contracts
- income from permanent establishment abroad is exempt from income tax in Cyprus
- losses may be offset against profits from other activities. Tax losses can be carried forward & set-off against taxable income without any limit
- low income tax for expatriate employees
- Duty-free facilities (company car, office equipment, etc.)
- many double taxation treaties (34 countries)
- no exchange controls

Buying Property by Trust

 Trusts: A trust is established by an individual and is a means whereby property is held by one or more persons for the benefit of another or others. Trusts are very important for tax purposes and numerous tax saving schemes include them.
International Trusts: International trusts are governed by the Cyprus International Trust Law. International trusts are not taxed in Cyprus and enjoy important tax advantages such as:
- The assets of an international trust are not liable to estate duty in Cyprus.
- Gains on the disposal of the assets of an international trust are not liable to capital gains tax in Cyprus.
- All overseas income of an International Trust is exempt from tax in Cyprus.
- A foreigner who creates an International Trust in Cyprus and retires in Cyprus is still exempt from tax if all the property settled and the income earned is abroad, even if he is a beneficiary.
- Interest, dividends or other income received by a Trust from a Cyprus international business company are not subject either to tax or to withholding tax.