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Some Important Facts

Restrictions for Foreigners According to the current legislation, nationals of countries outside the EU require a permit from the Council of Ministers in order to acquire property in Cyprus. This permit, however, is usually granted to all bona fide purchasers. The Council of Ministers will grant this permit to foreigners applying to purchase one flat or one house or one plot of land up to approximately 4,000 sq.m. Please note that this permit is only required at the land registry when transferring the title deed of a property. It is legal, however, to sign a contract of sale and enjoy the absolute possession of a property without this permit, given that the title deed is not transferred. Consequently, foreigners often buy more than one property on the island. EU nationals residing in Cyprus do not need a permit from the Council of Ministers and can buy as much property as they wish. EU nationals not residing in Cyprus can buy as much land as they wish without a permit, however, a permit is required for flats or houses. The Council of Ministers will grant this permit to EU nationals applying to purchase one flat or one house.  All restrictions to EU nationals will be abolished in the near future. Title Deeds Title deeds are in general issued a few years after the completion of a project, given that the right procedures were followed and the development complies with the relevant laws and regulations. In general, if a re-sale property does not have its title deed issued, it is advisable to check why this is the case. In other words, you should find out whether the title deed is not issued because the process is not yet completed or whether the process was halted because of some serious problems with the development. The latter could result in never obtaining the deeds. Please note that one can enjoy the absolute possession and even sell the property without the deeds being issued. The absence of deeds, however, often puts off potential buyers. The procedure to be followed when buying re-sale property without deeds is a little bit more complicated and there are a few more things one has to investigate. It is strongly recommended that you avoid buying property which has no deeds from the purchaser, in other words from the person who bought it from the original owner. On the contrary, you should insist that the original owner whose name is still on the original title deed of the land is the one who signs the contract of sale. A purchase is much more straightforward if the deeds are already issued. Nevertheless, as in the case where the deeds are not issued, it is important to carry out a small investigation to establish whether the deed belongs to the vendor, whether there are any mortgages, any charges or any other legal encumbrances on the deed. New or under construction properties will not have their deeds issued. The process of issuing the individual deeds for properties comprising a project starts after the completion of the project and it is a long, complicated and time consuming process. The law acknowledges this fact, so it offers purchasers a way of protecting their rights by registering a contract of sale at the land registry. If a buyer does so, a charge is placed on the vendors assets. The purchaser's rights are consequently protected using a mechanism similar to the one employed by banks when granting loans secured by mortgages on deeds. Again, it is important to carry out a small investigation to establish whether the appropriate procedures were followed, the development complies with the relevant laws and regulations, the appropriate permits were granted, the deed of the land belongs to the vendor and whether there are any mortgages, any charges or any other legal encumbrances on the deed of the land. When the deeds are eventually issued they should be transferred on the purchaser's name. Please note that this is the point where the permit from the Council of Ministers is required. In the meantime, the purchaser can enjoy the absolute possession and sell the property (as discussed earlier - re-sale properties without deeds). Mortgage and Finance While local banks claim to grant up to 100% of the purchasing price this is usually not the case. Banks usually grant up to 100% of the 'force sale value' of the property which is assessed by an independent surveyor. This valuation is approximately 30% lower than the market value of the property, so in most cases a contribution of approximately 30% is required by the purchaser. There are many schemes offered by numerous banks with varied interest rates and repayment periods so should you require a local loan it would be worth it to shop around a bit. On the other hand, funds could be obtained in your country of origin by placing a mortgage on a free asset or a second mortgage on an asset if extra liquidity is available (i.e. when the market value of your asset is significantly higher than the money you owe on its mortgage). Fees, Taxes and Other Expenses A. Stamp Duty Stamp duty should be paid when a contract of sale is signed in order to register it at the land registry. This is calculated on the contract price and it is charged at £1.50 per thousand for the first £100,000 of the contract price and £2.00 per thousand thereafter. Consequently, if you buy a house for £120,000 the stamp duty will be: £1.50 x 100 = £150 £2.00 x 20 = £40 Total = £190 B. Transfer Fees Transfer fees are payable at the land registry simultaneously with the transfer of the title deed of the property. Transfer fees are charged as follows: Value of property (£) Transfer fee rate (%) Up to 50,000 3 From 50,000-100,000 5 From over 100,000 8 Please note that: Transfer fees are charged either on the contract price OR on the land registries valuation of the property at the time when the contract of sale was signed, whichever is the higher. In other words, if you bought a flat in 1994 for £30,000- and the land registry believes that this flat in 1994 was worth £35,000, then you will be asked to pay transfer fees on £35,000-. If the property will be transferred on joint names, then each person will be charged on the value of his or her share. In other words if the value of the property to be transferred on two persons is £90,000, each will pay 3% on £45,000, therefore avoiding having to pay 5% on the £40,000 in excess of the first £50,000 charged at 3%. C. Immovable Property Tax This is charged on a yearly basis at: Value of property (£) Annual Property tax (per thousand) Up to 100,000 exempt 100,001 - 250,000 2,0 250,000 - 500,000 3,0 Over 500,000 3,5 Please note that: Property tax is not charged on the contract price but on the properties valuation in 1980. In other words is charged on how much the property is question would be worth in 1980. This valuation is considerably lower than today's prices and most properties are below the £100,000 limit which is tax free. Therefore, it is unlikely that you will have to pay property tax. Until the title deed of a property is issued, the property still remains on the vendor's name. If the total assets of the vendor exceed £100,000, the vendor will be charged property tax and its assessment will include the value of all properties sold and not transferred. Therefore, the vendor will require each purchaser to refund him the property tax charged for the sold property. When the title deed is eventually transferred on the purchaser's name and if the purchaser has already paid property taxes to the vendor, the purchaser can claim back from the Inland Revenue Authorities part of these taxes on the basis that 'had the deeds been issued and transferred when the sale of the property was made, the purchaser would not have to pay property tax as his/her total assets would not exceed the £100,000 limit which is tax exempt'. D. Capital Gains Tax On selling a property, capital gains tax will be payable at the rate of 20% on the gain with the first C£10,000 being exempt for each person. Gains from the disposal of a dwelling house are exempt up to CYP 50,000 in total if the owner resides in it continuously for at least five years prior to selling it. The law allows adding other costs on the purchasing price of a property in order to assess the actual cost of acquiring it, such as the transfer fees paid, the inflation rate per year and the cost of any additions made to the house. To understand this, please consider the following example: Mr A and Mrs B bought a house 7 years ago for £60,000. The transfer fees paid were £1,800 and the inflation on £60,000 for 7 years was a further £3,500. Furthermore they constructed a patio outside at a total cost of £4,000. This house was a holiday home (i.e. not a dwelling house). The house is sold today for £130,000. The actual cost of acquiring the property is therefore: £60,000 + £1,800 + £3,500 + £4,000 = £69,300 Therefore the gain or profit is £130,000 - £69,300 = £60,700, £30,350 for each Mr. A and Mrs. B. Each of them is allowed the first £10,000 tax exempt, so each of them will have to pay capital gains tax at 20% on £20,350 (i.e. £4,070 each). E. Other Rates, Taxes and Expenses Legal Fees: These depend on the solicitor, the cost of the property and the range of services required. Expect to pay anything from £500 to £1,500. Council Tax and Other Local Authority Fees: These vary according to the area and the size of your property. For example in some areas there is a central sewerage system so you will be charged a sewerage fee and in some areas you will not as there is no central sewerage system. For all of the above expect to pay anything from £40 to £170 per year. Complex Management, Common Fees: In most developments, the management of the complex is run by a running committee voted by and consisting of the owners of each property comprising the development. The annual charge depends on the actual requirements of the complex in question. In other words, the annual charges of a complex with a communal pool, communal gardens and so on will be much higher than those of a block of apartments without these facilities where the only requirements will be providing lighting and cleaning the communal areas.

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