Nikos Papatheocharous Advocate

| Practice Area | Immovable Propery | Letigation |
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General & legal information ABOUT BUYING A PROPERTY IN CYPRUS

 

1. EU & non EU Nationals not residing in Cyprus can buy and acquire the Title Deed to only one property on the island, (house or flat-this does not refer to land). However this restriction only applies if they do not have a valid residence permit for Cyprus. If they do have a residence permit then they may purchase as many properties as they want (refer to paragraph 6 below). To purchase a property in Cyprus they will need the approval of the Council of Ministers- which is a mere formality.

2. To purchase a property an application to the Council of Ministers has to be submitted to the District Administration office of the District where the property is located- subject to paragraph 6 below. A copy of the Survey Plan, Building Permit, Contract of Sale and the Title Deed must accompany the application. When the approval is granted- provided that a separate Title Deed to the property is available- the purchaser can acquire his/her Title Deed.

3. For EU Nationals, there is no restriction on the number of pieces of land they can buy-irrespective of size or their residence status.

4. The Legal System in Cyprus is based on the British Legal system with variations in the statutory and common law precedents.

5. Information provided by Land Registries in Cyprus is accurate and investors/purchasers can rely on the information and results of searches provided.

6. Approval to acquire immovable property is no longer required (according to be Immovable Property Acquisition (Aliens) Law Cap. 109, as amended by Laws 52/69, 55/72, 50/90 and 54 (1) /03, -since 1st May 2004, when Cyprus became a member of the European Union), in the following cases:-

For EU Nationals,
who have their permanent home in the Republic of Cyprus.

For EU Nationals,
who do not reside permanently in Cyprus in cases where he/she acquires property other than a secondary home (i.e. land).

For a legal entity
(e.g. a Limited Liability Company),
that is registered according to the law of a member state of the E.U. and which has, as per the Constitution, the Head Office, the Central Administration and the main establishment, in the Republic of Cyprus.

For a legal entity
(i.e. company),
that is registered according to the law of a State member of the E.U. and which has, as per the Constitution, the Head Office, the Central Administration of the Company and the main establishment in a member state, in cases of the acquisition of immovable property other than a secondary home (land).

7. According to Article 2 of the Immovable Property Acquisition (Aliens) Law, Conditions, Restrictions, Requirements, Criteria for the issue of approval (Amended), Regulations 2004 K.D.P. 534/2004(relates to certificate to acquire multiple properties)

A physical person,
to whom a permit to stay in the Republic of Cyprus is granted, according to the of Article 7 and/or 11 and/or 18 and/or 30 and/or 37 and/or 57 of free Movement and Residence of citizens of Member States of the European Union and of the members of their families, law (N92 (1) / (2003), is considered as having a place of permanent residence in Cyprus and

A legal entity which is registered according to the law of a Member State means the legal entity which has secured a certified copy of the Certificate of Registration, the Registered Office address, directors, shareholders (members) and secretary of the company- according to the provisions of the company laws of the member state.

An entity/person living permanently in Cyprus as per paragraph 7a) & b) above can easily secure a certificate that he/she can use acquire as many properties in Cyprus as he/she wishes.

The acquisition of the certificate is very simple. The citizen of a member state of the EU living in Cyprus can visit the District Administration Office for the area in which he/she lives, along with his/her passport and Temporary Resident Permit. A form, giving their full name and address, will be filled in and a fee of CY£ 5.00 is required to be paid. In a few days they will receive the certificate, which gives them the right to acquire an unlimited number of properties of any size in Cyprus.

Since the 1st May 2004 when Cyprus joined the European Union, EU Nationals have the right to buy land without any restriction on size or number of plots.

8. TITLE DEEDS

a) Purchasers buying a property built some years ago, or is one unit i.e. not part of a complex, should generally acquire their Title Deed without any undue delay.
The procedure is similar to that in the U.K.
It is safer to appoint a local Lawyer. If the Lawyer advises that everything is satisfactory, contracts can be signed, the payment made and the Vendor then provides the Title Deed without delay.

b) Purchasers of a property under construction, or just completed or part of a project, must follow a slightly different procedure and cannot acquire the Title Deed to their property immediately.
The Title Deeds to a new property or to properties which are part of a project (complex), takes approximately 3–5 years, following completion, to be issued.

Purchasers can feel secure providing their lawyer acts as follows:

i) A search is made to confirm that the land on which the project is under construction, or has just been completed, is clear of any encumbrances.

ii) Ensures that stage payments are in accordance with the progress of the work.

iii) That the Contract of Sale is stamped by the Tax Office and lodged with the Land Registry for Specific Performance purposes, (Law cap 232 as amended by the laws 50/70, 96/72 and 51 (1) /95).

The lodging of the contract with the Land Registry Office is very important because the property is then blocked and the Vendor cannot sell it or transfer it to anyone else-without the purchaser’s written consent.
Whilst a vendor is able to secure a second charge on a property this is fairly rare because in general the banks in Cyprus are averse to second charges for their security.

In the unforeseen event that a Developer should suffer financial problems, the Purchasers interest, with a first charge, in the property/land must be satisfied first. Thereafter the banks are able to have their charge satisfied.
In the event a property is being sold, subject to a prior ( first charge, then the purchasers lawyer must ensure that the vendors bank provides a bank guarantee equivalent in value of second charge of the purchase. Consequently, the purchaser is again protected. If the contract is not lodged and registered with the Land Registry, the Purchaser/s is unable to require the Vendor or land registry to transfer the property in the purchaser’s name nor able to pay the stamp duty or transfer fees) latter being payable at the time of the issue of the title deeds to the purchaser.

 

By lodging the contract, the Land Registry is bound to accept the value of the property as the date contract. Consequently the Purchaser/s is/are not liable to transfer fees other than based as at the time of the purchase.

Contracts of purchase must be stamped- by the Tax Office--within 30 days of signing failing which a penalty is charged and added to cost of the stamp duty. The contract must also be lodged with the Land Registry Office within 60 days of signing. Failure to do so may result in the right to lodge being lost, and the contract can then never be lodged. The purchaser would also lose his right to ‘specific performance’ of the contract-i. e transfer the property into its name pursuant to the terms and conditions of the purchase contract.

The Title Deeds take time to be issued because the Companies developing land, must secure a building Permit, a certificate of Approval for the building, Division Permit, a Certificate of Approval for the Division, for submission to the Land Registry to issue separate Title Deeds. Government Departments are presently overburdened. Therefore, issuances of new Title Deeds are being delayed to between 2-5 years. The lack of a separate Title Deed does not prevent a property owner from selling/assigning its property/contract. In such instances a cancellation contract between the original purchaser and the Vendor, and a new contract of sale between the Vendor and the new purchaser will be required.

Purchasers must, at time of purchase, agree any cancellation fee that the Developer may charge, should the Purchaser decide to sell his/her property before the separate Title Deed is issued. It is advisable to include this agreement in the contract of sale.

9. STAMP DUTY
Before the contract is lodged in the Land Registry Office for specific performance purposes, it needs to be stamped by the Tax Office.

The Stamp Duty rates are as follows:-

0.5 % on the first Cy£ 100.000= (One Hundred Thousand)
0.2 % on the balance

The stamp duty must be paid within 30 days of signing the contract to avoid paying a penalty.

10. IMMOVABLE PROPERTY TAX
This tax is imposed on immovable property situated in Cyprus. The rates are follows:

Property Value (Cy£) Rate%
Up to £100.000= Nil
£100.000=-250.000= 0.25%
£250.001=-500.000= 0.35%
£500.001= & above 0.40%

This tax is payable annually.

Whilst the revaluation of properties is not undertaken frequently the precise time scale is unclear.

11. INHERITANCE TAX
On the 1st January 2000, Law 74 (1) /2000 came into force. This law abolished all obligations to pay Inheritance Tax regardless of the value of the estate. The fact that there is no Inheritance Tax to pay under Cyprus Law is encouraging people to invest in the island.

12. CAPITAL GAINS TAX (CGT)
The first Cy£ 10.000= (per person) is exempt. In calculating any CGT liability the following are deductible allowances
1. Inflation
2. Estate Agents fees (provided the agent is registered).
3. Improvements and fixtures and fittings-provided these can be established by way of receipts.
Capital Gains tax is then charged on the balance at the rate 20%.This allowance is a once in a lifetime allowance! However any unused allowance may be varied forward.
If, however, the property sold has been the main home of the Vendors for at least five years, then a CGT relief/allowance of Cy£ 50.000= can be claimed.

VAT
The rate of V.A.T. in Cyprus is currently 15% V.A.T. on new property is chargeable as 1st May 2004, at the rate of 5% for a property that is the principle place of residence, and 15% for secondary properties. For projects, V.A.T. is payable on the selling price of the property and land and building cannot be split.
No V.A.T. is payable in cases where an application for a Planning Permit was submitted before 1st May 2004.

TRANSFER FEES
When Purchasers acquire their Title Deed they must pay transfer fees to the Land Office.
In cases where the property is part of a project under construction, the Purchaser will generally acquire the Title Deed in approximately 3 – 5 years from the date of the possession of the property and it will pay the transfer fees at such time.

The Transfer Fee is the most serious expense over and above the purchase price. It is calculated as follows:
3% on the first Cy£ 50.000= of the purchase price
5% on the second Cy£ 50.000= up to Cy£100.000=
8% on any amount over and above Cy£ 100.000=

Example: If a property is purchased for £110.000= then the liability is as follows:-
3% on £50.000= £1500=
5% on next £50.000= £2500=
5% on next £10.000= £ 800=
Total = £4.800.=


Two purchasers buying one property will pay less in transfer fees as the first Cy£50.000= per person is 3%, and the second Cy£50.000= per person is 5%, and the balance at 8% for the joint purchasers.

Example as above i.e. purchase price of £ 110. 000=
3% on first £ 50. 000= for each joint purchaser = £ 3.000=
5% on £ 10.000= = £ 500=
Total = £ 3.500=