Selling property in Cyprus involves more than just finalizing a deal and transferring ownership. It encompasses a range of tax obligations and expenses that must be taken into account. This article will help you navigate the main taxes and fees you will need to pay when selling property in Cyprus, as well as nuances that may help reduce your tax liabilities.
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Capital Gains Tax (CGT)
Capital Gains Tax is the primary tax levied on the profit made from the sale of property. In Cyprus, this tax rate is 20%. However, there are several legal ways to reduce the amount of this tax.
First Tax Exemption
Every property seller in Cyprus is entitled to a one-time tax exemption on profit up to €17,086. This means that this portion of your profit will not be taxed.
Long-Term Ownership Benefit
If you have owned the property for more than five years and this is your first sale in Cyprus, you can receive a substantial tax exemption—up to €85,430 on the profit. This is particularly advantageous for those planning to invest in property for the long term.
Deduction of Property Improvement Costs
All expenses incurred on the improvement or renovation of the property can be deducted from the taxable amount. This may include major repairs, upgrades, and other improvements that increase the value of the property. It is important to keep all receipts and invoices to substantiate these expenses for tax authorities.
Immovable Property Transfer Levy (IPTL)
Since November 2022, Cyprus has introduced a new mandatory levy (IPTL) of 0.4% of the property’s sale price. This levy is directed towards supporting housing for Cypriot refugees. The levy applies to all property sales transactions, as well as the sale of shares in companies owning property in Cyprus.
Additional Costs When Selling Property
In addition to taxes, there are several other mandatory expenses associated with selling property in Cyprus:
Legal Fees
In Cyprus, legal fees for property sales are usually fixed and can amount to up to €2,500. The lawyer is responsible for preparing all necessary documents, verifying the legal status of the property, and ensuring all legal formalities of the transaction are met.
Real Estate Agent Fees
A real estate agent assists in marketing the property, finding buyers, and negotiating deals. The agent’s commission is typically up to 5% of the sale price. Given that these expenses can be significant, it is important to discuss all terms and fees with the agent in advance.
Energy Certificate
This document certifies the energy efficiency level of your building and is mandatory for the sale. The cost of obtaining an energy certificate ranges from €300 to €500, depending on the size and condition of the property.
Land Registry Search
The seller must provide the buyer with a document confirming that the property is free from encumbrances. This includes checks for liens, mortgages, and other legal restrictions. The cost of a land registry search usually ranges from €10 to €50, depending on the complexity of the search and the amount of information requested.
Payment of Utility Bills and Debts
At the time of the property sale, all utility debts must be settled. This includes payments for electricity, water, waste disposal, and other utilities. Unpaid debts can become an obstacle to completing the transaction as they may be transferred to the new owner. Therefore, it is advisable to settle all accounts in advance and obtain receipts confirming the absence of any outstanding debts.
Recommendations for Property Sellers
Selling property in Cyprus is a process that demands careful planning and consideration of all tax and legal aspects. To minimize tax liabilities and avoid unexpected expenses, it is recommended to:
Consult with Professionals
Lawyers and tax consultants can help you plan the transaction properly, taking into account all possible benefits and mandatory payments.
Document All Expenses
Keep all receipts and invoices related to property improvements. This will help you deduct them from the taxable base and reduce the amount of capital gains tax.
Settle All Debts in Advance
Ensure that all utility bills are paid at the time of sale. This will not only simplify the transaction process but also maintain your reputation as a responsible seller.
In summary, it is important to approach the process of selling property in Cyprus with a full understanding of all tax obligations and expenses. Proper planning and utilization of available benefits can help you successfully complete the transaction while avoiding unexpected tax costs and obligations.
