Buying Property in Cyprus: Legal, Tax, and Registration Procedures
Parties must initially sign a Contract of Sale, having placed a deposit on a property, which is drawn up by the purchasers Advocate.
The purchasers Advocate must arrange for a Cypriot bank account to be opened for him, which is used to pay for the property. It is important to remember that interest earned on capital emanating from foreign funds is not taxed. Cyprus and the UK have a double tax treaty and arrangements can be made for purchasers wishing to retire in Cyprus. Having resided in Cyprus for at least 6 months and 1 day, purchasers may then elect to have their pension or investment income paid directly into their Cypriot external account and since it is generated from outside Cyprus it will be taxed at just 5%. According to the Cyprus tax system, residents are obliged to declare their income from pension or any other sources to tax authorities – a financial or legal advisor can determine your tax liability.
The next step is for the signed contract to be stamped by the purchasers Advocate. This must be done within 30 days of its dated signature or a fine will be imposed.
The property is then encumbered on behalf of the Purchaser by the Advocate, in order for the vendor to be prevented from re-selling the said property before the transfer procedure.
Payment for the property must be made in foreign funds emanating from abroad. All commercial banks in Cyprus are authorised to offer mortgage facilities to assist in the purchase of property. The loan will be in foreign currency. The amount ranges from 7 to 10 years. Easy terms of payment and long-term in-house finance schemes are also available.
In order to be allowed to export your money from Cyprus, should you wish to sell your property, evidence of payment for the property with foreign exchange must be provided to the Central Bank by the purchasers Advocate, along with a duly stamped cancellation contract. The law dictates that the equivalent of the full amount paid for the property in foreign funds and any increase in the value of the property may be transferred abroad at the time of resale. As for the capital gains tax position, the first £10,000 is tax exempt and the rate of 20% is charged on the rest of the gain. With Cyprus joining the EU, currency exchange control restrictions have been abolished both in respect of purchasing and selling immovable property.
Permission from the Council of Ministers and evidence that the property has been paid for with foreign exchange is needed in order to obtain immovable property. Under the Immovable Property Acquisition (Aliens) Law Cap 109 no non-Cypriot can acquire immovable property without prior permission of the Council of Ministers. Such permission is required both on purchase of freehold and on leases exceeding 33 years. Normally permission is granted, after written application, to bona fide alien individuals to acquire a flat or house or a piece of land for the erection of a house not exceeding three donums. Permission is usually granted for personal use and not for letting or commercial use. Commercial use is dealt with on an entirely different basis and a different set of criteria applies.
The transfer of ownership takes place by a simple process of registration at the Land Registry Office and the issuing of a title deed after completion and delivery. This can be done either by the purchaser or by a Power of Attorney to the purchaser’s lawyer.
Before the registration of the completed property and the transfer of freehold ownership the purchaser must pay the transfer fees to the Land Registry Office. Transfer fees are based on the market value of the purchased property which is calculated at the rate of 3% for the first £50,000, 8% from £50,000 – £100,000, and 8% for amounts over the first 100,000. The Advocate can then affect registration into the purchaser’s name.
Title can be obtained by all members of a family together on the same title deed and also unmarried couples who have lived together for over 5 years and have evidence of a joint bank account and/or a child together are looked on favourably by the Council of Ministers.
Once you own property in Cyprus, your Advocate can arrange an appointment with the immigration authority and on provision of sound financial standing, pension forecast, bank details and a sales agreement of the property purchased, you can obtain a temporary residence permit. Temporary residence status can be from one to four years. For a permanent permit, in addition to the above requirements, the applicant must establish evidence of a secured annual income of not less than CYP£5300 (9056 Euro) for a couple. UK nationals are allowed to work in the country if they have a work permit.
It is wise for a property purchaser to arrange for his Advocate to draw up a will for him. Inheritance tax is not imposed on property paid for by foreign funds, however if one dies without a Cypriot will in place, a will completed abroad would not legally cover property in Cyprus. Therefore it would be difficult for the purchasers Advocate to carry out any wishes as to who should inherit, or indeed find the legal heirs. Once the property registered in the name of the purchaser, there is no restriction on them selling the property or disposing of it by will. Furthermore, no permission will be required for the legal heir to have the property transferred into his name.
Personal effects, household goods and furniture can be imported duty free by property owners provided they are over a year old and are for personal use.
published by Cyprus Properties For You
