Cyprus property buying guide for buyers
When buying property in Cyprus through an Agent, they typically charge the buyer a commission of 5%, although an extra 3% may be charged if a developer is also involved. It is always best to buy through an Agent as the land registry system is somewhat bureaucratic. Legal fees are likely to be in the region of CYP1,000 for a normal transaction.
Obtaining finance for a property purchased in Cyprus is relatively straightforward, and thanks to the country's British connections, most bank staff speak reasonably fluent English. The usual rate you can borrow is between 60% and 80% of the value of the property with the term usually fixed at seven to ten years, although longer repayment periods can be negotiated.
There are a number of taxes that are associated with the purchase of property in Cyprus. First, there is a Real Estate Transfer Tax. This is necessary to transfer the freehold into the name of the buyer and is levied on a progressive scale up to 8%.
The buyer is also liable for stamp duty.
Since joining the EU, VAT must be paid when buying new-build property. There are two rates: 5%for the first purchase of residence by permanent residents of Cyprus; 15% for any other purchase.
Roughly speaking you should budget about 11% of the purchase price for associated purchasing costs.
The local authority taxes per annum vary, depending on the size of the property and cover refuse collection, sewerage, street lighting etc.
There is also an Immovable Property Tax (an annual tax based on the market value of your home. It usually totals between CYP50 and CYP100.
Not everybody investing in Cypriot property is doing so with the intention of living there, and many investors (mainly British) will rent out homes whilst staying put in their home jurisdiction. Rentals in Cyprus will generally yield around 8% gross. After various management fees and costs, yields are closer to 5%.
Few countries tax their citizens purely on a territorial basis (that is, only on income obtained from within the country of residence), and rental income from a property let in Cyprus will almost certainly attract income tax in your home state should you choose to remain there, not to mention capital gains tax when the property is sold on. In Cyprus itself, income tax is levied on a progressive scale up to 30% on income above CYP20,000. The first CYP10,000 is exempt. Meanwhile, pensions are taxed at 5%.
When you have found your ideal property it is normal to sign a preliminary contract and hand over a fee of between CYP1,000 and CYP2,000 in order to reserve the property.
Once you have reserved the property the contract to purchase will then be drawn up by your Cypriot lawyer.
When you sign the contact you will be expected to pay an agreed deposit. This is usually between 20% and 30% for new-build property and about 10% for resale property. You can complete this formality by appointing a power of attorney if you wish.
The next stage is for the lawyer to send the contract to the Land Registry. This protects your rights of ownership until you are issued with the title deeds.
When the Land Registry is happy with the contract and the price of the property, they will issue you with the title deeds.
You will also need to make an application to the Council of Ministers for permission as a non-Cypriot to acquire immovable property. This will cost between CYP100 and CYP200. Check with your lawyer as some include this in their fees and will carry out the proceedure for you.