Buying a Property in Cyprus? - What does it Involve?

Whilst there are no hard and fast rules governing the purchase method of property in Cyprus, one will typically buy through an agent or developer, or a partnership of both. Agents typically charge the buyer a commission of 5%, although an extra 3% may be charged if a developer is also involved. However, fees become more negotiable when the market cools. There is nothing to stop a buyer dealing directly with a seller, but this is not recommended, as the land registry system is somewhat bureaucratic and best tackled by a professional representative. Legal fees are likely to be in the region of €1025 for a normal transaction.

Obtaining finance for a property purchased in Cyprus is relatively straightforward, and thanks to the country's British connections, most bank staff can speak reasonably fluent English. Typically, Cypriot banks will lend between 60% and 80% of the value of the property with the term usually fixed at seven to ten years, although longer repayment periods can be negotiated. As things stand, it would be very difficult to obtain a Cyprus mortgage from a non-Cyprus bank. The country's accession to the EU means in theory that any restrictions on capital transfers or interest rates should no longer apply. In practice however, it is taking longer than expected for the domestic banking industry to fully adjust to the new environment.

There are a number of taxes that are associated with the purchase of property in Cyprus. First, there is a Real Estate Transfer Tax. This is necessary to transfer the freehold into the name of the buyer and is levied on a progressive scale up to 8%).

For residents there is an Immovable Property Tax based on the value of the property at a rate of 0.2% between €170,860 and €427,150; 0.3% up to €854,300; and 0.35% over @854,300. The first €170,860 is exempt. The buyer is also liable for stamp duty.

Depending on the size of the property, local authority taxes per annum vary, and cover refuse collection, sewerage, street lighting etc.

When the time comes to sell, capital gains tax is charged on disposals of real property in Cyprus and shares in companies owning real property in Cyprus. The base date for calculating the acquisition cost of real property is 1st January 1980 or later acquisition.The tax rate is 20% of the chargeable gain as adjusted for inflation unless the gain is already liable to corporation tax, but certain lifetime exemptions apply to individuals for the disposal of agricultural land and main residence. The first €17,086 of a gain is exempt.

This exemption limit rises to €85,430 if the seller has lived in the property continuously for the previous five years. Further allowances are granted in relation to transfer fees, inflation and improvements made to the house, but the total exemption cannot exceed a €85,430 limit.

Capital gains tax does not apply to profits from the sale of overseas real estate by residents who were not resident when they purchased the asset.