Property taxes in Cyprus

1. OWNERSHIP TRANSFER FEE (single payment, paid by the purchaser).
The fee is imposed by the Department of Land and Surveys in order to transfer the ownership of the property to the purchaser

Rates:

The cost of property in euroRate
to 85,430 3%
from 85,430 to 170,860 5%
Over 170,860 8%

 Notes:

If the purchase price is strongly reduced in relation to the market value, the department of Land and Surveys can decide to impose the transfer fee based on their estimation of the market value.

Calculation example:

Property Price: €500.000 (not subject to VAT)

Original transfer fee: €85.000 x 3% + (€170.000 - €85.000) x 5% + (€500.000 - €170.000) x 8% = €33.200

Transfer fee as of today (50% reduced): €33.200 / 2 = €16.600

In the case of free transfers of property between the following parties, the transfer fees are calculated on the value of the property as at 1 January 2013 at the following rates:

Exemptions from transfer fees

The following transfers are exempt from transfer fees:

 

2. STUMP DUTY (Single payment, paid by the purchaser)

he sales/purchase agreement for the acquisition of immovable property (land and buildings) in Cyprus are subject to stamp duties, at the following rates:

 

 

 

Cumulative

Purchase price

Rate

Fees

Fees

%

0 - 5.000

0

0

0

5.000 - 170.000

0.15

255

255

170.000 up to 10.046.250

0.2

 

 

The maximum amount of stamp duty payable is €20.000 per agreement.

 Calculation example:

 Purchase Price: €500.000

 

€ 5.000

at

0

=

0

 

€170.000            

at

0,15%   

=

€ 255

remaining

€ 325.000

at

0,20%  

=

€ 650

TOTAL Stamp Duty payable

€ 905

 

3. VAT (Value added tax, single payment, paid by the purchaser

Rates:

 The standard rate of 19% applies to the supplies of all goods and services in Cyprus which are not subject to the zero rate, the reduced rate or are not exempt.

As from 8 June 2012, the reduced rate of 5% applies to the acquisition and/or construction of residences to be used by eligible persons (residents of the Republic or/and other EU member states or other non-EU member states) as the primary and permanent place of residence, only after obtaining a certified confirmation from the Commissioner.

As from the 1st of October 2011, a reduced rate of 5% can be imposed on purchasing or construction of a dwelling in Cyprus, as long as the dwelling is used as the principal and permanent residence in the Republic by the beneficiary. The reduced VAT rate of 5% applies on the first 200 square meters of the buildable area of the dwelling. In cases of large families (minimum of four children) the total area of the dwelling is enhanced by 15 square meters per each additional child (over three children). A VAT advisor will be able to advise you exactly on how to calculate the reduction.

For the reduced rate to be in effect, certain terms and conditions must be met:

  1. The property must be used as the primary and permanent residence of the applicant (for the next ten years).
  2. The applicant has not acquired any other residence in Cyprus with a reduced VAT rate. 
  3. The applicant must be an individual, over 18 years old, thus legal entities cannot are not eligible for the VAT reduction in question. 

Extension of the reduced VAT rate to citizens from third countries:

Reduced VAT rate of 5% may also be applied on the supply construction of residental properties to citizens of third countries (e.g. Russian Federation, USA, China, etc.) if the said residences will be used by the applicant as his/her principal and permanent place of residence whilst in the Republic.

Basic requirments for the applicant of 5% VAT to non-EU citizens:

  1. Property must be used as main residence while in the Republic.
  2. There is no time limit for non-European citizens to stay in the Republic. Thus, the reduced VAT rate of 5% may be applied even if the non-European buyer has not completed 183 days of residency in the Republic, so as to be considered tax resident in the Republic.
  3. The reduced rate of 5% cannot be applied if the property is used for investment or leasing purposes or to exercise any other economic activity.

14% VAT refund procedure:

In case the property hasn't yet received the building permit, the purchaser has to pay the full VAT of 19%. As soon as the building permit has been received, the purchaser can apply for 14% VAT refund by providing the necessary documents to the VAT authority. As soon as the documents are collected, the application is submitted at the VAT authorities. It normally takes about a month to get the answer.

n case a VAT reduced property is disposed (sold out or rented out), the previously effected VAT refund must to be returned to the state, multiplied by the factor (10 – number of years in use)/10.

A VAT refund can be cancelled by returning the refunded amount to the state, in which case another VAT refund can be effected on another property in the future.

IMPORTANT NOTE: In order to get the approval of reduced, VAT the purchaser must not get possesion of the property before getting the approval from the VAT authorities. 

Imposition of 19% VAT on the letting of immovable property for business purposes

As from 13 November 2017, VAT at 19% is imposed on the leasing and/or letting of immovable property to a taxable person for the purposes of carrying on taxable activities, commencing on/or after 13 November 2017.

The leasing of buildings used as residences remains an exempt transaction for VAT purposes. #

Imposition of 19% VAT on non-developed building land

As from 2 January 2018, VAT at 19% is imposed on the transfer of non-developed building land. Specifically, VAT is imposed on the transfer of ownership, transfer of indivisible land portion, transfer

of ownership under a sale agreement or an agreement which specifically provides that the ownership will be transferred on a future date or by virtue of a leasing agreement with the right to buy non-developed building land which is intended for the construction of one or more structures in the course of carrying out a business activity.

4. IMMOVABLE PROPERTY OWNERSHIP TAX (annual tax, paid by the owner)

The tax has been abolished from the 1st of January 2017.

5. MUNICIPALITY TAX (annual tax, paid by the owner)

Depending on the size of your property, local authorities charge between €85 – €500 per annum for regular refuse collection, street lighting, sewerage and similar community services. Communal Services fees are payable to your local municipal authority.

6. CAPITAL GAINS TAX (single payment, paid by the seller)

The seller is liable to pay Capital Gains Tax at the rate of 20% from the NET profit.

The tax is not applicable for purchases registered from 16/07/2015 to 31/12/2016.

Deduction of the CGT payment is possible in case if there is a proof of following expenses:

Calculation example:

Notes

  1. Subject to conditions, land as well as land with buildings, acquired in the period 16 July 2015 up to 31 December 2016 will be exempt from CGT upon its future disposal subject to certain anti-avoidance provisions
  2. Expenses that are related to the acquisition and disposal of immovable property are also deducted, subject to certain conditions e.g. interest costs on related loans, transfer fees, legal expenses etc
  3. Lifetime Exemptions

Individual (not Company) can deduct from the taxable capital gain the following: €

Disposal of private principal residence (*): 85,430

Disposal of agricultural land by a farmer: 25,623

Any other disposal: 17,086

(’) must be able to prove that was the owner and use the property as primary residence for the last 5 years

The above exemptions are lifetime exemptions subject to an overall lifetime maximum of €85.430

7. TAX FROM RENTAL INCOME

A non-tax resident of Cyprus is subject to taxation only on rental income arising from the renting of an immovable property situated in Cyprus.

The gross rental income is also subject to special contribution for defence at 3% on the amount of the gross rental income reduced by 25%.

The rental income received by non tax residents and/or tax residents who are not domiciled of Cyprus are exempt from special defence contribution.

8. INCOME TAX, DIVIDENT TAX AND OTHER TAXES

Dividends received by tax residents who are not domiciled of Cyprus are exempt from the special defence contribution, as well.

Interest received by tax residents who are not domiciled of Cyprus are exempt from the special defence contribution, as well.

(restricted 1,5% of the remuneration, based on circular issued on 20/7/15)

9. A SUMMARY ON TAX RESIDENCY

Individuals

Brief summary of the major provisions of the Cyprus Income and Special Contribution for defence

183-day and 60-day rule

The personal allowances are limited to 1/6 of the taxable income before these allowances.

Effective from the tax year 2017, an individual can be a tax resident of Cyprus even if he spends less than 183 days in Cyprus provided that the individual satisfies all the conditions described below within the same tax year (1 January – 31 December):

  1. does not spend more than 183 days in any other country;
  2. is not a tax resident of any other country;
  3. spends at least 60 days in Cyprus;
  4. maintains a permanent home in Cyprus (owned or rented);
  5. carries on a business in Cyprus, is employed in Cyprus or holds an office in a Cyprus tax resident person at any time during the tax year.

If the employment/business or holding of an office is terminated during the year, then the individual would cease to be considered a Cyprus tax resident for that tax year.

According to the amendment of the Law and the non-domicile rules introduced, an individual who is a tax resident of Cyprus under the provisions of the Income Tax Law (183 days rule mentioned before) BUT he is “not-domiciled” in the Republic of Cyprus, will be exempt from special contribution for defence on interest, dividends and rent.

An individual who is not tax resident in the Republic, is taxed on income accruing or arising only from   sources within the Republic.

10. TAXES FOR COMPANIES

Doing Business through the Cyprus tax regime

Securities, as defined in the law, include shares, bonds, debentures, founder’s shares and other securities of companies or other legal persons and options over such securities.

In case of disposal of shares by a company tax resident of Cyprus, no tax should arise provided that the company of which the shares are disposed does not own directly or indirectly immovable property in Cyprus.

Only 20% of the net profits derived by a Cypriot company from the exploitation of its qualifying IP (subject to conditions) is subject to tax at the corporate income tax rate of 12.5%.

Unilateral tax credit relief. Relief for taxes paid abroad is in the form of a tax credit if the respective income is subject to tax in Cyprus. The relief is given unilaterally irrespective of the existence of a tax treaty. Where a treaty is in force, the treaty provisions apply if more beneficial.

IMPORTANT NOTE: Please be informed that the information presented above is indicative and has to be verified with a professional auditor or a relevant specialized service provider. Grand Property Group doesn’t hold the qualification of an auditing firm to deliver a 100% accurate tax related advice.

 

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