Other taxes | Cyprus Developers Alliance
Lump-sum (one-time) payments associated with immovable property acquisition
The Legal Issues section explains that a buyer becomes a registered immovable property owner after the Government’s execution of Title Deed for the purchased property and its transfer onto the buyer’s name.
This process is accompanied by the payment of Transfer Fee - a government tax. Transfer Fee which is being charged stands for a contract value of the property (excluding VAT).
Tax rates are demonstrated below:
Property Value, EUR
From 85.001 to 170.000
Transfer Fee is not charged on a property which is subject to VAT (in other words for a new property). The tax is being charged only for purchase of a re-sale property.
Let’s consider this example: one has purchased a property worth €500.000. The transfer fee one has to pay shall be calculated the following way:
85.000*1,5% + 85.000*2,5% + 330.000*4% = €16.600
How does one save money? Individuals could register the purchase onto two buyers. According to the contract, each pays €250.000. In this case, the calculation shall be the following:
(85.000*1,5% + 85.000*2,5% + 80.000*4%)*2 = €13.200
If the purchase is acquired by several individuals, they can save even more.
Also, there is an option of optimizing this tax by transferring the cost of some works and materials outside the framework of the basic sales agreement, formalising them as additional works "extras".
One should bear in mind that it is necessary not to abuse this opportunity, as for calculating the Transfer Fee, the Land District Office takes into account not only the contract value of one’s property, but also the price of similar properties sold in the same area, around the same time. They may disagree with one’s proposed figures, if they notice that the price of one’s property is clearly understated compared to similar properties.
From the Legal Issues section, one can learn that after signing the sales agreement, it is deposited to the Land District Office and passed on for Stamp duty payment.
Stamp duties represent a state duty when purchasing property. It is paid as a lump sum within thirty days of signing a contract for property acquisition. Stamp duties comprise 0,15% of contract of sale amount (excluding VAT) which does not exceed EUR170.000 and 0,2% of amount exceeding EUR170.000. The first sum of EUR5.000 is not taxed
Thus, if one has purchased property amounting to EUR500.000, Stamp duties will make up:
5.000*0% + 165.000*0,15% + 330.000*0,2% = EUR907,5
Here is a short summary. When property is purchased in Cyprus one pays two taxes – Transfer Fee and Stamp Duties. In our example, during acquisition of the property amounting to 500.000 EUR by two persons, a lump sum payment of €14.100 is required
In certain cases developers sell property, which is registered on a company. In this case, one buys shares of the company that owns the property. Thus one will not have to pay taxes when purchasing this property.
Lump-sum (one-time) payments associated with immovable property sale or transfer
Capital Gains Tax
In case one has made up their mind to sell their property in Cyprus one will pay Capital Gains Tax at 20% rate of profit gained (difference between the selling and buying price). Wherein one should note that as a matter of fact the actual tax rate is significantly smaller as the Cyprus Legislation provides substantial benefit for this tax.
For one thing, when property is sold, first EUR17.086 will be exempted from tax for each owner.
Following that, if the seller has been using the property within at least five years and decides to sell it in Cyprus for the first time, then first EUR85.430 of the capital gain shall be exempted from tax.
Moreover, confirmed costs for using the property, such as renovation and other costs are deducted from the taxable base.
At the same time, Cyprus legislation allows complete avoidance of Capital Gains Tax. In order to use this opportunity, it is essential at the time of property acquisition, to have the purchase registered at a local Cyprus company. The property should be company’s only asset. Then the property sale can be executed in the form of sale of company's shares. In this case, one will not have to pay Capital Gains Tax, while the buyer will not have to pay a Transfer Fee.
In brief, an appropriate purchase arrangement will optimize taxes related to the future sale of the property. Our specialists along with associate members of the Alliance are ready to offer a comprehensive consultancy related to the matter.
Properties in Cyprus are inheritance tax exempt.
Annual Immovable Property Tax
Starting from 2017, yearly immovable property tax is completely abolished.
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