Life In Cyprus – Cyprus Property Guide – A guide to buying property in Cyprus
We have compiled a short but thorough guide elaborating on the suggestions and legal procedures surrounding the purchase of real estate in Cyprus, whether for a holiday home, a permanent residence, or for business purposes.
Research Online, Inspection Trips & Due Diligence
Begin with an online research to familiarize with current market trends, availability and prices. Compare developers and what they have to offer in terms of quality, products and services.If you are traveling from abroad we suggest a maximum of 3 working days in Cyprus. This should leave you with enough time to inspect properties and deal with the legal and banking paperwork. Whenever possible book your appointments directly with the developer and save on agency fees.Your attorney should carry out a thorough investigation of the developer’s financial standing and the property’s status at the Land Registry. Due diligence will reveal any mortgages, charges or other adverse matters against the title of the property or the developer.
Reserving a Property
Once you have found the property you want and have agreed on the purchase price, the developer may ask you to pay a Reservation Fee before taking the property off the market. The Reservation Fee Agreement should outline the circumstances in which the reservation fee will be returned to you or retained by the developer, and that the amount will be deducted from the actual price.
Contract of Sale and Deposit and Stamp Duty and Property Registration
While drafting the Contract of Sale put down any requests for changes or improvements to be done on the property and agree on the tender. Finalise the details of your payment plan and be informed of your overall obligations in meeting payment deadlines with the developer and your annual fees and taxes with the government.
The Contract of Sale is a legally binding document that outlines each party’s responsibilities and protects their respective interests. It will be duly stamped and registered at the Land Registry Office, so it cannot be re-negotiated or amended at a later point, nor are addendums commonly accepted after signature. The Deposit (normally, a 40% of the overall price) is placed on a non-refundable basis and does form part of the purchase price.
Within 30 days from signature, the Contract must be stamped at the Tax Office to show that the Stamp Duty applicable to the Contract is paid. Then, a copy of the Contract is deposited with the Land Registry the property is registered in your name (€50 registration fee). A surcharge of approximately 10% of the unpaid amount is payable if payment is made within 6 months after the due date; otherwise the surcharge is twice the unpaid amount. For a transaction which is evidenced by several documents, Stamp Duty is payable on the main contract and ancillary documents are charged at a flat rate of €2.
Paying the Property V.A.T
In January 2014 the standard VAT rate in Cyprus was set to rise to 19%, which is still the third lowest rate in the EU after Luxemburg (15%) and Malta (18%). VAT applies to all new property (including property under construction or off-plan property) which was submitted for a Town Planning Permit after 1st May 2004, when Cyprus joined the European Union. All new property which was submitted for a Town Planning Permit before 1st May 2004, are VAT exempted. The no VAT policy also applies in the case of used property (were the VAT has already been paid previously), resales and land. With effect from 1st October 2011, a reduced VAT rate of 5% is implemented on new property when it involves the purchase of the primary residence in Cyprus, subject to conditions (read more about the Special Grant for Reduced VAT on new property).
Opening a Bank Account, Connecting Utility Services
To open a bank account in Cyprus the applicant requires having a certified true copy of a valid passport, original bank reference from a reputable Bank, proof of residential address in Cyprus, and the Bank’s application form completed and signed. Similar documents are required in order to connect your property with the Electricity and Waterboard Authorities.
Transfer of Ownership in your name & New Property Transfer Fees Reduction
Immovable property in Cyprus (a term that includes land and all that naturally goes with it, such as buildings, trees and underground resources) is freehold and for life. A freehold property can be transferable by inheritance or purchase. Cyprus maintains a land registry system in which all immovable property is registered. Each property has an associated “Certificate of Ownership”, known as Title Deed, which serves as a formal document procuring any easements, privileges, rights of way, rights reserved, mortgages and encumbrances, contracts of sale, trusts and leaseholds on the property. The Title Deed contains information such as the registered owner’s name and the property’s type, size, location and a reference number at the Land’s Office. About two years after the construction has been completed, and following inspection, separated Title Deeds are issued and it is the moment when the full ownership of the house can be transferred in your name.
A provision remains in place for reduced Property Transfer Fees on the first sale of a property, which was put in place to encourage the sale of new property, and it is valid for Contracts of Sale executed between 2nd December 2012 and 31st December 2016. This provision removes the need to pay Property Transfer Fees where the purchaser has paid VAT on the property – and reduces the Property Transfer Fees by 50% in cases where the transfer relates to land or to property exempted from VAT.
Paying the Immovable Property Tax (IPT) every year
Under the Cyprus “Immovable Property Tax Laws 1980 – 2004 all property owners, regardless of whether they are resident in Cyprus or not, they are liable to pay an annual tax based on the total value of all the immovable property registered in their name. Cyprus property tax is calculated on the market value of the property as at 1st January 1980 and must be paid annually to the Inland Revenue Department. Individual owners are exempt from this tax if the 1980 value of their property is less than €12,500. Every registered owner whose immovable property value exceeds €120,000 is required to submit a declaration of Immovable Property (IR301 and IR302) and must pay the respective tax every year before the end of September.
Paying the Community Fees, Municipality Fees and Sewerage Fees every year
Your property is subject to annual fees, payable to the Local Authorities or municipality it belongs to, covering community services such as regular refuse collection, street lighting and sewerage tax. Depending on the size of your property and its value in 1980, local authorities charge between €85 – €250 per property per annum calculated on the basis of the property’s value on 1st January 1980. There is no straightforward way to estimate the period of payment or the amounts due as each municipality follows an independent program.
For new properties we will provide comprehensive property insurance against fire and associated hazards during the construction phase until the property is delivered; thereafter, the cost is approximately €100 – €300 per year depending on the estimated replacement construction costs. For communal projects with joint and shared ownership facilities, the management company will arrange a block insurance with one company and then split the charges down to each individual property unit. Household insurance is the responsibility of the purchasers and can be obtained for approximately €2.50 per €1,000 sum inspued per year depending on the term of the policy.
Water and Electricity Bills
Charges for water and electricity utilities are payable to the respective authorities at regular intervals (every 2 months) throughout the year and are based strictly upon unit consumption.
Relevant Common Expenses
Some communal projects will have shared facilities, such as swimming pools, private roadways, gardens and parking. In order that these facilities are maintained to high standard a communal maintenance charge will be levied by the assigned management company. This is usually paid quarterly in advance and it is calculated depending on the project, size of the property and common share percentage.