Property Taxes in Cyprus

Property Taxes in Cyprus

The Cyprus real estate market is growing every year. Cyprus is a member of the EU, but residents of Russia are allowed to purchase real estate here. Investing in property in Cyprus is a good way to make a profit, given the country`s tax benefits and active tourism development.

When acquiring property in Cyprus, the following taxes must be paid:

– VAT (payable on the purchase of a new property);

– title transfer fee (payable on the purchase of secondary housing);

– stamp duty.

Taxes are the same for both residents and non-residents of Cyprus.

VAT

Value Added Tax (VAT) must be paid on the purchase of new land or property. It amounts to 19%.

There is also a reduced rate of 5 %, which applies under the following conditions:

– a buyer shall use the purchased property for permanent residence in Cyprus for the next ten years. For owners residing outside the country, there are no restrictions on the length of stay in the country;

– there should be no other property purchased in Cyprus previously at the reduced VAT rate;

– it only applies to individuals (not companies), 18 years of age and over;

– property purchased at a reduced rate cannot be rented out or used for other profit-related activities.

VAT is payable during the contract signing and in case a buyer declares his/her intention to receive the reduced VAT an application must be submitted before the property is handed to him/her.

The reduced VAT applies to the first 130 m² of a buildable area (up to 190 m2) provided that its value doesn’t exceed €350,000. The remaining area is subject to the standard rate of 19 %. In case of large families (with at least four children), the total area of the residence is increased by 15 square meters for each additional child beyond three, both for construction and acquisition of the residence. However, the increase does not affect the threshold of €350,000 and €475,000 on the value of the properties.

If the property is sold or rented out before the lapse of 10 years, the difference in VAT 19% and 5% shall be paid on a pro-rata basis for the remaining 10 years.

VAT is not payable on the purchase of a secondary housing

Secondary residence taxation

When purchasing property on the secondary market, property transfer fee shall be paid by a buyer, the amount of which depends on the property market value:

– 3% – for property worth up to 85,000 €;

– 5 % – for property worth between 85 000-170 000 €;

– 8 % – for property worth more than 170,000 €.

The tax can be reduced if the property has several owners – it can be divided between them proportionally (according to the shares they own).

Stamp duty

Stamp duty is paid for property bought both on the primary and secondary market. Payment is made no later than thirty days after the signing of the sales agreement. The maximum amount of stamp duty per transaction does not exceed 20,000 €.

The amount of the tax depends on the property value:

• no fee is charged for properties worth less than 5,000 €,
• 15 % for properties worth between 5,000 € and 171,000 €,
• 2% for properties worth more than171,000 €.

Taxes to be paid by property owners in Cyprus

There are several taxes that property owners should pay every year. In the past, the main annual tax was an immovable property tax. However, it was abolished in 2017. Currently, property owners pay the municipal tax instead.

The tax rate depends on the market value and the location of the property and varies from 0.1% to 0.2%. The approximate amount the owner will have to pay is €85 to €500 annually. This money is used to keep the streets clean, collect rubbish, maintain public lighting, and for other local expenses.

Calculating total cost of buying property in Cyprus

When buying a property in Cyprus, it is important to estimate total costs. Below there is an approximate calculation of the costs related to property purchase in Paphos, a town located on the Mediterranean coast, where flats are in high demand.

A duplex apartment, 120 m² – €380,000

If this is his/her first property in Cyprus and the buyer plans to live there permanently, the VAT is 5%. The total costs in this case include:

– value of the property – 380,000 €;

– VAT – 380,000 × 0.05 = 19,000 €;

– stamp duty – 380 000 × 0,002 = 760 €.

Excluding the fees of lawyer, notary and realtor, total costs will amount to 399,760 €.

A villa, 150 m² – 800,000 €

The amount of the transaction is above the limit of reduced rate, so the VAT rate is 19 %. Thus:

– value of the property – 800,000 €;

– VAT – 800,000 × 0.19 = 152,000 €;

– stamp duty – 800,000 × 0.002 = 1,600 €.

Total costs – 953,600 €.