Buying Property in Cyprus 2024

Simplified procedures, increased availability of information, and advanced technologies ensure a smoother and more efficient property acquisition process. This makes it accessible to a wide range of investors and individuals from around the world.

Economic Situation in the Real Estate Sector in Cyprus

Impact on the Economy
The real estate sector is a key component of Cyprus’s economy, reflecting one of the highest levels of property ownership in Europe. As of January 2024, approximately 70% of Cyprus residents own property, highlighting the significant contribution of this sector to the overall economic structure of the country.

Economic Growth
Since 2014, the overall improvement in Cyprus’s economic indicators has also played an important role in the development of the real estate sector. This is reflected in the growth of construction volumes, which increased by 7.4% year-on-year in the second quarter of 2023. This growth indicates a recovery and expansion of construction activity, which is a positive signal for the economy.

Interest in Real Estate
In recent years, there has been a steady increase in interest in Cypriot real estate from both foreign investors and local residents. This interest has led to increased investments in real estate and stimulated the development of new projects.

Opportunities for Investors

The growing interest in real estate and active construction make Cyprus’s real estate sector attractive for investors. This creates opportunities for both foreign and local investors in various areas, including residential, commercial, and tourism properties.

Overall, the positive dynamics in Cyprus’s real estate sector contribute to strengthening the country’s economy and provide promising opportunities for investment and development.

Buying Property for EU Citizens

Cyprus property laws allow citizens of EU countries to purchase real estate without the need for special permission. These citizens, along with Cypriots, can buy any number of properties and register them in their name without restrictions.

Buying Property for Non-EU Citizens

Individuals from non-EU countries can also purchase property in Cyprus. However, they need to obtain permission for property registration. To do this, an application must be submitted to the local district office after signing the purchase agreement. In general, the process of obtaining permission is a formality and is open to all law-abiding buyers.

Restrictions on Buying Property in Cyprus for Non-Cypriots and Non-EU Citizens

Foreign nationals who are not Cypriots or EU citizens may face restrictions when buying property. Each family is allowed to purchase up to two properties from the following list:

• An apartment or house.
• A villa on a plot of land or a land plot of no more than 4,014 square meters.
• A land plot of up to 4,014 square meters intended for the construction of a residential house in the near future.

Special conditions apply for purchasing other types of real estate (such as office spaces, entertainment venues, and industrial properties), including criteria such as the percentage of foreign ownership in the project, the volume of foreign investment, and compliance with national regulations.

If You Plan to Buy Property in Cyprus, Here Are the Main Steps to Achieve Your Goal:

Document and Title Verification
Once you have found your dream home in Cyprus, the next step is to verify the documents. In simple terms, you need to ensure that the property truly belongs to the seller. To buy a resale property in Cyprus without issues, you need to obtain the following information from the Land Registry:

Checking for Mortgages and Encumbrances on the Property through the Land Department
When purchasing a property, it is important to ensure that it is free of mortgages or encumbrances. To do this, you should contact the Land Department. If such encumbrances are found, your lawyer should arrange for the signing of a waiver. This document is crucial as it ensures that your purchase agreement takes priority over any obligations the seller has to the bank regarding the property.

Negotiating Payment Terms
When buying property, it is also important to discuss and agree on payment terms, including timelines and payment methods.

Checking Construction Permits When Purchasing a Property Under Construction
If the property is under construction, it is crucial to check for all necessary permits for design and construction. You should also ensure that architectural plans and specifications are included in the contract.

Land Plot Verification
When buying a land plot, you should check the zoning area to determine how many square meters can be built. It is also important to ensure that the intended use of the land and any planned buildings comply with the established permits. Additionally, you should check the possibilities for connecting the property to utility networks.

Property Reservation
Next, the selected property in Cyprus from the developer or resale market is reserved. The reservation deposit amount varies depending on the cost of the property. Typically, this deposit ranges from 1% to 2% of the total sale price. This initial payment confirms the buyer’s serious intentions and serves as a guarantee that the chosen property will be reserved until the deal is completed. Once the buyer makes the deposit, the property is reserved for them and taken off the market. The reservation period is usually 1.5 months.

Legal Services

To navigate all stages of the purchase process, you will need the assistance of a Cypriot lawyer. Real estate agencies in Cyprus offer comprehensive legal support to make the home-buying process as simple as possible for the buyer. A contract is signed with the lawyer, and their fees usually amount to €500 for the preliminary purchase agreement and €2,000 for the main contract.

Drafting and Signing the Purchase Agreement and Registration
The lawyer drafts the agreement, outlining all the conditions under which the buyer purchases the property in Cyprus, including timelines, amounts, down payments, and property identification. The signing process can be arranged on the island or elsewhere, but the buyer and seller must be present in person.

After the sale of the property in Cyprus is documented and certified by both parties, the agreement must be registered with the Cyprus Land Department within 60 days to enter the transaction into the land registry. This guarantees the buyer’s rights as the new property owner until an individual title deed is issued.

After completing the purchase, an application with a copy of the buyer’s passport is submitted to the Council of Ministers for approval of the sale. This procedure is necessary to ensure that the buyer is law-abiding and that the property being purchased is their first in Cyprus. A response from the authority typically takes about a month.

Taxation and Fees for Real Estate Transactions in Cyprus

Stamp Duty

• For the first €5,000: 0%
• From €5,001 to €170,000: 1.5%
• Above €170,000: 2%

Transfer Fee

• For the first €85,000: 3% (current discount of 50%, so 1.5%)
• From €85,001 to €170,000: 5% (current discount of 50%, so 2.5%)
• Above €170,000: 8% (current discount of 50%, so 4%) Transfer fees do not apply if the transaction is subject to VAT.

A 50% discount on the transfer fee is currently in effect.

VAT (Value Added Tax)

The standard VAT rate of 19% applies to the sale of new properties.

Resale properties are exempt from VAT.

A reduced VAT rate of 5% applies to the first 130 square meters (or 200 square meters until June 16, 2023) for the purchase of a primary and permanent residence in Cyprus.

The reduced rate applies under the following conditions:

• Property value up to €350,000
• Total transaction value not exceeding €475,000
• Total internal area up to 190 square meters
• The property must be used as the primary residence for at least 10 years, and renting it out is not permitted.

VAT on Land Plots for Development
A standard VAT rate of 19% applies to the purchase and sale of land plots intended for development. VAT is charged if the land is sold for construction and the transaction is related to economic or commercial activity. VAT is not charged if the land sale is an incidental transaction.

Capital Gains Tax

Tax Rate
Capital gains tax in Cyprus is charged at a rate of 20% on the profit from the sale of property located in Cyprus. This also applies to profits from the sale of shares in companies that directly own Cypriot real estate.

Tax Exemptions
Property purchased between July 16, 2015, and December 31, 2016, is exempt from this tax upon sale, provided certain criteria are met. Transfers of property due to death. Gifts between parents and children, spouses, or relatives up to the third degree of kinship. Gifts made by a family company to its shareholders.

Tax Calculation
Deductions: The tax calculation includes the cost of acquiring and improving the property, adjusted for inflation according to the Cyprus Consumer Price Index. Expenses related to acquisition and sale, including commissions, legal fees, etc., are also deductible. Personal Exemptions: Individuals can deduct the following amounts from their taxable base:

• €85,430 for the sale of a primary residence (subject to conditions)
• €25,629 for the sale of agricultural land by farmers
• €17,086 for any other sale These exemptions are lifetime allowances, with a maximum total exemption of €85,430.

Transfer of Title Deed When Purchasing Property

Transfer of Title Deed for Resale Property
When the seller already has a title deed for the property, the process of transferring ownership to the new owner can be completed immediately. This often happens when buying resale property that has already been in use and is being resold.

Registration of the Purchase Agreement for New Properties
In the case of purchasing new property, where the developer typically does not yet hold a separate title deed for the specific unit, the buyer’s ownership is secured in a different manner. To ensure the buyer’s rights, the purchase agreement is registered with the Department of Lands and Surveys. This registration guarantees the legality of the buyer’s ownership rights to the property until an individual title deed is issued.

Taxation and Fees for Real Estate Transactions in Cyprus

Capital Gains Tax (continued)
If you’re selling a property that was purchased after July 16, 2015, and before December 31, 2016, you may be eligible for an exemption from capital gains tax, provided specific conditions are met. Additionally, properties transferred due to inheritance or as gifts between close family members (such as parents to children, spouses, or up to third-degree relatives) are exempt from capital gains tax. Furthermore, gifts from a family company to its shareholders are also exempt.

When calculating capital gains tax, you are allowed to deduct certain expenses from your taxable income. These include the original purchase price and the cost of any improvements made to the property, adjusted for inflation using the Cyprus Consumer Price Index. Additional costs associated with the acquisition and sale of the property, such as legal fees, agent commissions, and transfer fees, can also be deducted.

Personal exemptions for individuals include:

• €85,430 for the sale of a primary residence, under certain conditions.
• €25,629 for the sale of agricultural land by farmers.
• €17,086 for any other type of property sale.

These exemptions are lifetime allowances, with a cumulative maximum of €85,430 over the individual’s lifetime.

Obtaining the Title Deed

Finalizing Ownership for New Properties
Once all the payments have been completed and the property has been handed over, the final step is obtaining the individual title deed. This document is crucial as it confirms the buyer’s full ownership of the property. In the case of new properties, once the development is fully completed and inspected, the title deeds are issued by the Land Registry Department, and the property is officially transferred to the buyer’s name.

Importance of Legal Assistance
Given the complexities involved in property transactions in Cyprus, including navigating legal requirements and ensuring all taxes and fees are correctly calculated and paid, it’s highly advisable to engage a qualified Cypriot lawyer. This professional can guide you through each step, from verifying property ownership to registering your purchase, ensuring that all legalities are observed and protecting your interests.

 

Purchasing property in Cyprus in 2024 offers numerous opportunities for both personal enjoyment and investment. Whether you’re looking for a vacation home, a primary residence, or an investment property, Cyprus provides a stable and attractive market. With the help of professional legal and real estate services, you can navigate the process smoothly and secure your dream property on this beautiful Mediterranean island.