Legal And Financial
Legal and Financial Information
Maispa Developers Ltd offers this publication as a courtesy to inform and provide general information about property investment in Cyprus.
Maispa Developers Ltd believes that the best client is an informed client, and for this purpose the Maispa Developers Property Guide has been published.
A key factor in making the right choice is to be able to rely on a well-established company with tradition. As a company with an excellent track record, Maispa Developers Ltd has, since 1988, grown into a company who cares for their valued customers.
Maispa offers full information, a comprehensive service and a permanent, retirement or holiday home of your choice. Each property is characterized by its incomparable quality and unique location.
The experience, tradition and credibility of Maispa Developers Ltd, is the best guarantee for any investment.
Disclaimer: While every effort has been made to provide true and accurate information, this is only meant for guidance purposes and any information contained in this presentation, while correct at publication, should always be checked by a lawyer and errors and omissions are expected and accepted.
PURCHASE OF PROPERTY IN CYPRUS
Cyprus became a member of the EU on the 1st May 2004. Though the principle of a united Europe imposes for example the right to free movement of people or goods there are still some restrictions that apply in relation to the acquisition of property by non-Cypriots. All these restrictions will be abolished for European citizens during 2009.
In any case the following procedure must be followed:
1. Contract of sale
The lawyer responsible for drafting the contract, beside inserting the fair terms and conditions for the protection and interest of the buyer ,will examine the deeds of the property sold by obtaining a copy from the vendor or the Land Registry Office and generally he will make sure that all the details correspond to the property in question and that it can be sold to the prospective buyer, assuring that at the end the buyer will be able to register the title deed into his name free of any encumbrances. When the contract is ready, to the satisfaction of the buyer, it can be signed by the buyer himself or by his lawyer by virtue of a Power of Attorney that can also be used for all other necessary acts and documents until the completion of the transaction.
2. Stamp Duty
Once the contract is signed the purchaser is responsible for the payment of stamp duty at the rate of 0.15% towards the purchase price up to the value of € 170.860.14, thereafter the rate is 0.20%. The amount should be paid within 30 days from signing the contract in order to avoid the payment of a fine.
For example if the purchase price is € 256.290.22
The first €170.860.14 x 0.15% =€ 256.29
Next € 85.430.08 x 0.20% = € 170.86
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Total € 427.15
3. Lodging a copy of the contract of sale with the Land Registry Office.
As from the date of signing the contract of sale the buyer has the right, within 2 months from that date, to lodge the contract with the Land Registry Office for what is called 'specific performance' purposes. This is very important for the protection of the buyer mainly for two reasons. First, once the contract is lodged, the buyer is considered the beneficial owner of the property until the time he becomes both the beneficial and legal owner of the property by transferring the title deed into his name. Therefore, there is a clear declaration that he bought the property in question, the Land Registry Office is aware of this transaction and his interest is protected e.g. by preventing the vendor to resell the same property to somebody else or by having a mortgage over the property.
The second main reason is to secure that the title deed will pass to the buyer even if the vendor is omitting to act for that purpose. Title deeds usually are ready 3-4 years after completion of the whole project, which is considered a standard practice in Cyprus (unless the property sold is already built some years ago and is a single project, which means that the title deed is available when the contract is signed). At that time if the vendor, for whatever reason, is delaying or refusing to grant the deeds then the buyer can file an action against him and ask the Court inter alia for an in injunction for specific performance, (to oblige him to grant the title deeds of the property), otherwise the only remedy available to the buyer would be an action for damages.
4. Permission from the Council of Ministers
Before transfer of the property sold into the name of the purchaser, permission must be sought from the Council of Ministers (district Office) by written application, which must be submitted by the purchaser after the agreement is signed. However, this permission is granted more or less as a matter of course to all bona fide purchasers. This procedure may take 8 – 10 months but in the meantime, purchasers can take possession of the property without any restriction.
5. Transfer of Ownership at the Land Registry Office
The transaction is concluded with the transfer of ownership by a simple process of registration of the Land Registry Office once the necessary permissions are granted, (as prescribed above), and as soon as separate title deed for the property sold is issued by the Land Registry Office reflecting the property erected on the land. At this stage the buyer is responsible for the transfer fees. The rates are on a graduated scale towards the purchase price i.e. up to € 85.430 3% from € 85.430 - € 17.0860.14 the rate is 5% and over € 170.860.14 is 8%
For example if the purchase price is € 153.774
The first €85.430 x 3% = € 2.562
Next €68.344 x 5% = € 3.417
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Total € 5.980
If the purchase is made in joint names then the total amount is divided by two and you could have a fee reduction advantage.
For example if the purchase price is € 153.774
The first € 76.887 x 3% = €2.306.61
Next € 76.887 x 3% = €2.306.61
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Total € 4.613.22
6. Legal Fees
Legal fees are calculated as 1% towards the purchase price plus 15% VAT and any other disbursements if any.
7. Mortgage Fees
The registration fee of a mortgage payable to the bank is 1% of the amount secured plus the relevant stamps.
8. Immovable Property Tax
The registered owner of a property is liable to an annual immovable property tax calculated on the market value of the property as on 1st January 1980 as follows.
Value of the property in Euro / Annual Tax
0 – 170.860 0
170.861 – 427.150 0.25%
427.151 – 854.300 0.35%
Over 854.300 0.40%
9. Other Taxes
The registered owner of a property is also liable to other minor taxation under other laws such as municipal or village regulations. These taxes are calculated according to the area and the size of the property and cover sewerage, refuse collection and street lights.
10. VAT
Since 1/5/04 a new statute in respect of VAT on properties, has been introduced. Disposals of newly-constructed properties for which a proper application for planning permit has been submitted with the relevant authorities after 1/5/04, are subject to VAT at standard rate.
Under certain conditions, a grant is given to entitled persons for the purchase of newly-constructed properties that are used as the main permanent residence.
The application for the grant is submitted to the Ministry of Finance by any physical person citizen of the Republic of Cyprus or of any other EU member state who resides permanently in the Republic of Cyprus. The grant is for properties whose total covered area does not exceed 250 m2 and is restricted to 130 m2. For more details you may contact us.
11. Capital Gains Tax
Capital Gains tax is levied at the rate of 20% on gains arising from the disposal of immovable property or the disposal of shares of companies, the assets of which consist mainly of immovable property,
As a general rule the gain is calculated as the difference between the sale proceeds and the original cost of the property. Interest on payments paid for the acquisition, additions to the property and inflation rate as published yearly by the government are deducted from the fees.
Moreover individuals are entitled to the following allowances which in essence minimize any capital gains tax payable.
. The first €170.086 of gains arising from the disposal of any property are exempted.
. The first €25.629 of gain arising from the disposal of agricultural land are exempted (subject to certain conditions)
. The first €85.430 of gains arising from the disposal of a house are exempted provided that the house is used by the owner for his own habitation for a minimum duration of 5 years (subject to certain conditions)
12. Personal Income Tax
All Cyprus tax residents are taxed on all income accrued or derived from all sources in Cyprus and abroad. Individuals who are not tax residents of Cyprus are only taxed on income accrued from sources in Cyprus. An individual is a tax resident in Cyprus if he/she stays in Cyprus more than 183 days per year.
The following income tax applies to individual
Income Euro Tax Rate Tax amount Euro Accumulated Tax Euro
0-19.500 0 0 0
19.501 – 28.000 20% 1.700 1.700
28.001 – 36.300 25% 2.075 3.775
Over 36.301 30%
13. Pensioners
The pension for a person who is a resident of Cyprus, paid for services which have been rendered abroad, is taxable at 5% on any amount exceeding € 3.417 = in a tax year.
14. Corporation Tax
All companies tax resident of Cyprus are taxed on all their income accrued or derived from all sources in Cyprus and abroad. A non – Cyprus tax resident company is taxed on accrued from a business activity which is carried out through a permanent establishment in Cyprus. A company is a resident of Cyprus if it is managed and controlled in Cyprus. The corporate tax rate is 10% and all expenses incurred wholly or exclusively in earning the income of the company are deducted.
Should you have any queries we would be more that happy to be of further assistance. maispa@cy.net
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