Purchase Guide

Purchase Guide

It is quite easy to acquire real property in Cyprus and even though this sounds appealing there are risks involved that need to be addressed. This is why finding the right people to guide you through one of the most important purchases in your life is essential. Below is a summary of the main financial and legal issues that need to be considered before any purchase.

Need Help?

LET US HELP YOU DETERMINE YOUR BUDGET

One of the most common mistakes that buyers make is that they proceed with a purchase without taking into account the additional costs involved. Give us your contact details and we’ll get in touch with you to arrange a no obligation consultation meeting.

Get in Touch
Property Transfer Fees

This is the equivalent of Stamp Duty in the United Kingdom and is a levy calculated on the transaction value of any property transfer. It is necessary to mention that the final transaction amount on which the levy is calculated is determined by the Land Registry.

Property Value Fees % Transfer Fee €
Up to €85,430 3% €2,562.90
€85,431-170,860 5% €4,271.50
Over €170,860 8% -

Example: Apartment with a Market Value of €250,000 will incur the following charge:

€85,430 x 3% €2,562.90
€85,430 x 5% €4,271.50
€79,140 x 8% €6,331.20
Total Transfer Fee €13,165.60

Important Update

Transfer fees reductions/abolition: The Cypriot House of Representatives recently passed a bill which reduces or abolishes transfer fees for sales contracts submitted after the 1st of December 2011 where the property was liable to VAT. The bill’s deadline is the 31st of December 2016 and was introduced as a means to stimulate demand for new property. The parameters are as follow:

50% reduction on transfer fees for all transactions not liable to VAT
No transfer fees for properties liable to VAT

New properties & VAT

VAT property charges are calculated at 19% of the transaction value "Market Value" since the 13th of January 2014. However a reduced charge of 5% may apply for contracts completed on 1st of October 2011 onwards. Parties are only eligible to the full reduction if they acquire or build their property for use as their main/permanent residence and for a period of no less than 10 years. The interested party has to submit a formal declaration of the above, for approval at the VAT Service of the Tax Department. In cases where the total duration of 10 years is not completed the owner will be required to return the equivalent subsidy apportionment.

The reduction is available for residences of up to 275sqm and is only applicable as a Value apportionment to the first 200sqm only. An exception however applies in the case of large families, where the reduction can exceed the 275sqm threshold with an increase of 15sqm for every additional child in families with more than three children.

Mortgage Registration Duty

Mortgage duties are always calculated as a fraction of the loan amount and not of the value of the security. For the registration of a new mortgage the charge is calculated at 1% of the loan amount, however substantially reduced charges may apply in cases where the property has a pre-existing mortgage registered. These are two examples that show the variation in mortgage registration costs.

Example 1: Apartment with a Market Value of €250,000 with a loan amount of €150,000 with no pre-existing mortgage will incur the following charge:

€150,000 x 1% = €1,500

Example 2: An apartment with a Market Value of €250,000 with a loan amount of €150,000 and a pre-existing mortgage of the same loan amount, within the same credit institution, will incur the following charge:

Lump sum of €50

It is necessary to note that different charges will apply under varying circumstances. The main factors that influence the charge include whether the mortgage has been transferred between different credit institutions, variations of the loan amount between the cancelled and new mortgage, on the time lapse between the cancellation and registration of the new mortgage etc.

Contract Notarisation (Certification) Cost

Notarisation of the Sales Contracts establishes the rights of all involved parties over the proposed agreement and is a mandatory step before submission to the Land Registry. Since the 1st of March 2013 the cost is calculated as follows:

Property Value Fees %
Up to €170,860 0.15%
Over €170,860 0.2%

Example: An apartment with contract purchase price of €250,000 + VAT will incur the following charge:

€170,860 x 0.15% = €256.29
€79,140 x 0.2% = €158.28
Total Transfer Fee €414.57

Immovable Property Tax

Immovable Property Tax in Cyprus is calculated based on the owners' aggregate property value as at 01.01.1980 determined by the Land Registry. Since the year 2013 the applied taxation bands are as follow:

From €0 To €40,000 6%
From €40,001 To €120,000 8%
From €120,001 To €170,000 9%
From €170,001 To €300,000 11%
From €300,001 To €500,000 13%
From €500,001 To €800,000 15%
From €800,001 To €3,000,000 17%
From €3,000,001 19%

Example: An apartment with a value of €25,000 as at 01.01.1980 will incur the following charge:

€25,000 x 0.006 = €150

The latest amendments to the application of immovable property tax were set as a mandatory term through the new Economic Adjustment Programme for Cyprus. This has led to census valuations with up-to-date values as at 01.01.2013 upon which the tax levy will be calculated in the future. Although the survey has been completed the levy is still imposed on the notional values of January 1980.

Town Rate & Council Tax

These taxes reflect the local authorities cost of garbage collection and disposal, street lighting and repairs of public infrastructure. The amount of tax payable depends on a number of factors including but not limited to the property’s value determined by the Land Registry as at 01.01.1980, location and size.

These costs vary and could amount to €5 for plots of land in agricultural areas with no infrastructural coverage, or around €200 for average size residential units in central locations.

It is also common for the local municipal authorities to require owners of vacant plots and building sites to clean up any wild vegetation or refuse on their properties. The property owners can choose to do this through their own resources, if they fail to do so within the deadline however, the authorities will carry out the work for a fee. These notifications are sent at the owners registered address. The fee varies between different authorities and is related to the size of the property, an indicative cost amount for cleaning a standard building site is approximately €100.

Valuation Surveys - Chartered Surveyors

Having a documented expert opinion of the Market Value is an essential tool that secures the buyers' interests in any transaction. This not only empowers the buyer in the bargaining process, but it can also safeguard against the purchase of an overpriced property. Although we can provide you with an informal valuation, we do recommend you commission a formal valuation report from an independent surveyor who is a member of the RICS (Royal Institution of Chartered Surveyors).

Valuation cost: from €200

Legal Due Diligence - Solicitors

This essential process involves research on behalf of the buyer by a qualified lawyer who carries out an investigation of the company's official records kept with the Department of the Registrar of Companies and Official Receiver, searching the company's real assets in the records kept with the various District Land Registries and obtaining information in relation to the company's indebtedness and its charged or mortgaged or otherwise encumbered assets.

Legal due diligence will determine the availability of title deeds, identify mortgages, memos, pending charges and any other encumbrances attached to the property for both privately or company owned assets.

Solicitor's cost: from €300

DISCLAIMER - USE OF INFORMATION

The above information has been collected by LEMONIA property from a variety of publically available government sources including the Inland Revenue Department, the Land Registry and the Ministry of Interior, as well as from specialised professionals. It is necessary to emphasize that property related legislation is constantly changing and we will put all reasonable effort to keep this section current and accurate. As such the above information is to be used for information purposes only and we strongly urge all clients to seek professional advice before they proceed with any purchase.