[BUYING AND SELLING REAL ESTATE IN CYPRUS]
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Assignment Agreement at the District Land Registry . creates in favour of the purchaser a real interest (akin to an encumbrance) over the property and gives to the purchaser the right of “specific performance” of the contract. J. Annual Costs for property ownership a. Property Insurance: Usually, property owners insure their properties. The cost for insurance varies depending on the size and condition of the property. b. Communal Expenses: This refers to the properties that consist of part of a unified complex that entails common areas. The cost for communal expenses varies widely depending on location, size of property and the communal area management company. c. Local Authorities Taxes: Property owner’s falls under either a Municipality’s or a village council’s jurisdiction. Taxes and rates vary depending on which municipality/council the property is located. Taxes roughly range from about €85 to €256 annually, depending on the size of the property. These usually entail sewage, refuse collection, street lighting and other local expenses. d. Immovable Property Tax: This tax was payable by owners of property to the Inland Revenue up until the end of 2016. Since 2017, this tax has been abolished. K. TAX The main types of tax that may be relevant to a real estate sale and purchase transaction, are VAT and Capital Gains Tax. VAT : VAT may apply at the existing rate of 5%,
19% or it may not apply at all (depending on the type of the property purchased, the intended use by the purchaser and the condition (new or used) of the property. Capital Gains Tax : It is imposed on the seller and is calculated where there is a “gain” from the sale (e.g., where the seller has purchased the property at a lower price and sells it at a higher). Generally, Capital Gains Tax is imposed at the rate of 20% subject to exemptions which may apply to reduce or exclude it. New Tax Announcement: The Parliament has passed a new law levying a 0.4% tax on all sales of immovable properties. In accordance with the amended legislation all transfers of immovable property as defined in the Immovable Property (Tenure, Registration and Valuation) Law Cap 224 and shares of a company which are not listed on any recognised Stock Exchange and that directly or indirectly owns immovable property, a tax of 0.4% will be paid by the seller of the property or shareholder. It is considerable to mention that the tax is not imposed in the case of a company reorganization as defined in Income Tax Law and in case of a restructuring of a non- performing loan as defined in the Capital Gains Tax Law. Inheritance Tax : It is abolished in Cyprus since 1/1/2000. Taxes in relation to renting a property: The rental income received from a property which is located in Cyprus is considered for tax purposes as a Cypriot sourced income and as a result is subject to personal income tax and General Healthcare System contributions, irrespective of the owner is tax resident in Cyprus. Depending on the tax residency and domicile status of the owner, rental income
ILN Real Estate Group – Buying and Selling Real Estate Series
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