Buyer Guide
Buyers Protection
1. Seeking Legal Advice: Engaging a lawyer is crucial to navigate the complexities of property transactions. A lawyer can verify the property’s status, review contracts, and ensure that the buyer is legally protected. Lawyers registered with the Cyprus Bar Association in Cyprus are bound by a professional code of conduct. The Cyprus Bar Association has established a rigorous set of ethical guidelines to ensure lawyers operate with integrity, confidentiality, and professionalism. Breach of these codes can lead to disciplinary actions, ranging from admonishments to disbarment.
2. Conducting a Land Registry Search: Before purchasing property (signing of the formal Contract of Sale) in Cyprus, buyers should obtain a comprehensive search from the Land Registry, that can be undertaken by the buyer’s legal representative, which will reveal any encumbrances on the property, including mortgages, tax liens, and any other charges.
3. Specific Performance: As from the date of signing the contract of sale the buyer has the right within 6 months from that date to lodge the contract with the Land Registry Office for what is called “Specific Performance” purposes. This is very important for the protection of the buyer mainly, once the contract is lodged at Land Registry, the buyer is considered the beneficial owner of the property until the time he becomes both the beneficial and legal owner of the property by transferring the title deed into his name. Therefore, there is a clear declaration that they bought the property in question, the Land Registry Office is aware of this transaction and their interest is protected e.g. by preventing the vendor to resell the same property to somebody else or acquiring any mortgage over the property after the lodging of the Contract of Sale.
4. Securing a Waiver: Buyers should ensure that they obtain a waiver from the bank, in case of a prevailing mortgage over the property in consideration to purchase, which states that upon payment, the bank relinquishes its rights over the property. This document is essential in preventing future disputes. A recent amendment in December 2023 mandates that sellers or developers provide a Land Registry search report to potential buyers. This report must be updated within five days before the purchase contract is submitted. Additionally, the revised law stipulates that the repayment of the purchase amount should be directed to the mortgagee (the bank),if applicable, rather than the developer.
Illegal Sale and Purchase of Greek Cypriot Properties in Northern Cyprus
The Government of the Republic of Cyprus is the only international recognized Government on the island – a member state of the EU since the 1st May 2024, as well as member of the UN and other International organizations.
As a result of the Turkish military occupation and presence in the Northern part of Cyprus due to the invasion in 1974, the Government of the Republic of Cyprus is not in a position to exercise effective control over the occupied areas of the self-proclaimed so-called “Turkish Republic of Northern Cyprus”,” TRNC”
The so-called “TRNC” has been condemned and declared as both illegal and invalid by the whole of the International Community through the Security Council Resolutions 541/83 and 550/84, except for Turkey, the occupying invaders, no other state in the world or International Organization recognizes the secessionist entity.”
A judgment by the European Court of Justice will have serious implications for anyone buying a property in the occupied part of Northern Cyprus. The essence of the decision is that if an EU national purchases a property in the Turkish part of Cyprus and that property belongs to a Greek Cypriot (and was taken over by Turkish Cypriots after in invasion 1974) then the Greek Cypriot owner may sue the purchaser in a court of law in the Republic of Cyprus.
If the purchaser subsequently fails to respect the Cyprus Court’s judgment, then the Greek Cypriot owner may have the judgment enforced by the courts in another EU member state, for example the purchaser’s country of origin.
The majority of properties in the occupied northern part of Cyprus belong to Greek Cypriot refugees driven out by the invasion of 1974, and title deeds were often falsified. It would be prudent to work on the basis that no documentation in the TRNC can be fully trusted, and neither can those unscrupulous agents and developers who are desperately trying to shift property in Northern Cyprus.
Authorities in Cyprus are escalating their efforts to curb the illegal sale of properties, particularly those in the northern regions that belong to Greek Cypriot owners. The issue has recently gained more attention during 2024,marking the fourth arrest linked to such activities, signalling a tightening grip on the illicit real estate market.
Reservation Agreement
The Purchasers and Vendors enter into a Reservation Agreement, a short contractual document briefly stipulating the main provisions of the future transaction as agreed by both parties during their discussions and negotiations to form the basis under which the formal Contract of Sale related to the property is to be formulated. Simultaneously with the Reservation Agreement, the Purchasers usually enters into a contract with an appointed Cyprus lawyer for legal support and ease of the transaction, usually issuing the required Powers of Attorney to their lawyer to act on their behalf, including assisting with the preparing and submitting of all the relevant required documents as required by the banks, that undertake a comprehensive due diligence of the buyer’s funds, to be cleared and received by the Vendor.
Based on the Reservation Agreement the Purchasers needs to pay a mutually agreed upon Reservation Deposit to the Vendors to enable the selected property to be withdrawn from the market and reserved whilst the legal process is undertaken by the Purchasers legal representative towards completion. The Reservation Deposit is usually subject to a satisfactory Land Registry Search and due diligence by the Purchasers lawyer. In case of an unsatisfactory search, and fault of the Vendors, that cannot be rectified by the Vendors , this Reservation Deposit will become fully refundable by the Vendors to the Purchasers, further-more the Reservation Deposit is considered as a part payment towards the full and final agreed selling price of the Property
Contract of Sales
Stamp Duty
Once the contract is signed the purchaser is responsible for the payment of stamp duty at the rate of 0.15% towards the purchase price up to the value of Euro 170.860.14 thereafter the rate is 0.20%.
The amount should be paid within 30 days as from signing the contract to avoid the payment of a penalty fine.
0 – €5000 rate is 0%.
For example, if the purchase price is € 256.290.22
The first €170.860.14 x 0.15% = € 256.29
Next € 85.430.08 x 0.20% = € 170.86
Total € 427.15
Lodging a copy of the contract of sale with the Land Registry Office
As from the date of signing the contract of sale the buyer has the right within 6 months from that date to lodge the contract with the Land Registry Office for what is called “Specific Performance” purposes. This is very important for the protection of the buyer mainly for two reasons. First, once the contract is lodged the buyer is considered the beneficial owner of the property until the time he becomes both the beneficial and legal owner of the property by transferring the title deed into his name. Therefore, there is a clear declaration that they bought the property in question, the Land Registry Office is aware of this transaction and his interest is protected e.g. by preventing the vendor to resell the same property to somebody else or by having a mortgage over the property.
The second main reason is to ensure that the title deed will pass to the buyer even if the vendor is omitting to act for that purpose. Title deeds usually are ready 3-4 years after completion of the whole project, which is considered a standard practice in Cyprus (unless the property sold is already built some years ago and is a single project, which means that the title deed is available when the contract is signed). On that time if the vendor for whatever reason is delaying or refusing to grant the deeds then the buyer can file an action against him and ask the Court inter alia for an in injunction for specific performance (to oblige him to grant the title deeds of the property) otherwise the only remedy available to the buyer would be an action for damages.
Permission from the Council of Ministers
Transfer of Ownership at the Land Registry Office
Transfer Fee
For a limited period, until the further notice, any property transaction NOT subject to VAT, which is been transferred and/or submitted, to the local Land Registry Office, since the issuing of the relevant Planning Permission or Building Permit, is eligible for a 50% reduction of Transfer Fee costs, provided the date stipulated on the signed Contract of Sale ,submitted to the relevant Land Registry Office, is within the required period of validity of the Act.
0-85.430 Euro @3%
Euro 85.430 – 170,860.14 @5%
Over Euro170,860.14 @8%
Transfer Fees-Rate Scale With 50% Reduced Rate
0-85.430 Euro @1.5%
Euro 85.430 – 170,860.14 @2.5%
Over Euro170,860.14 @4%
Levy on Transfer & Sales of Immovable Property
On Thursday 27th October 2022, the House of Representatives passed an amended bill regulating the levying of a 0.4% tax on all sales of real estate with the proceeds going to support Greek Cypriot refugees. All transfers and sales of immovable property and/or shares of a company which is not listed on any recognised Stock Exchange and that directly or indirectly owns immovable property, a Tax Levy of 0.4% will be paid by the seller of the property or shareholder.
Solicitor Fees
Immovable Property Tax
V.A.T
Disposals of newly constructed properties for which a proper application for the planning permit has been submitted with the relevant authorities after 1/5/2004 are subject to the 19% prevailing VAT rate of the Republic of Cyprus.
However, according to the amended VAT legislation, effective from the 1st October 2011, Permanent residents of the Republic of Cyprus, may apply to the relevant local Vat authority for a reduced 5% VAT rate, subject to certain terms and conditions, including that the planning permit has been obtained or an application for such permit has been submitted on or before the 31st of October 2023, thereafter a new updated law is applicable.and furthermore, the relevant application for the 5% VAT rate has been submitted within 3 years from the date of the new law (i.e. by 15/06/2026).
For a limited period effective from the 2nd of December 2011, any property transaction subject to VAT, is eliminated and exempt of Transfer Fee costs, irrespective of the purchaser’s country of origin and permanent residence.
Some additional requirements and conditions to be eligible for the reduced, 5% VAT rate are:
a) The applicant’s application must be accompanied with the appropriate Town Planning Permission of the relevant property, dated after the 1st May 2004, reflecting and verifying that the property is subject to Vat.
b) Members of third country nationals are eligible and entitled to apply for the reduced 5% VAT rate.
c) In case the planning permit was submitted on or before 31/10/2023,The total area of the residence must not exceed 275sqm. The reduced 5% VAT rate is limited to the first 200sqm. (Note: In cases of large families with 4 or more children, the total area of 275 sq.m may be increased by 15 sq.m for each additional child beyond three). This rule is relevant only to, if the planning permit was submitted up to 31st October 2023,thereafter the new updated VAT law applies*
d) The purchaser (applicant) must be of the minimum age of 18 years or older on the date of application. Foreign student residing within the Republic of Cyprus are not entitled and eligible for the reduced 5% Vat rate, as are not companies.
e) The 5% Vat rate is applicable and eligible only to a property or dwelling that will be used as the primary and permanent residence of the applicant, whilst their stay within the Republic of Cyprus. Married couples are only entitled to apply for the reduced 5% VAT rate, on one dwelling/property between themselves.
f) The eligible and entitled applicant for the reduced 5% Vat rate, must provide with their application, within six months of the delivery of the property, to the relevant Vat Authority, supporting and substantiating evidence that the property/dwelling is been used as their primary and permanent residence e.g. Copy of Contract of Sale, Copy of telephone bill; Copy of electricity and water bill; Copy of municipal services bill.
g) The applicant shall have no other property purchased in Cyprus previously at the reduced VAT rate. The property shall be used solely for one’s own use and not for profit (such as from renting).
h) At the time of approval of the reduced VAT rate, the property should not have been used (not habituated, consuming water and electricity).
UPDATED CHANGES TO V.A.T REGULATION EFFECTIVE FROM 31 st OCTOBER 2023 *
A new updated law related to V.A.T, was passed during June 2023, for a reduced 5% VAT rate applied for the first 130 sqm build area of a residence, either a house or a flat, with a value of €350,000. It also provides for a transitional period, during which the proposed regulations will not apply in cases where urban planning permission has been obtained or an application has been submitted within four months from the updated law, effective date 1ST November 2023.
According to the new law, for houses/apartments with a built area of 131-190 sqm valued at €475,000, 19% VAT will be imposed for every square meter above the 130 sqm limit. The law includes a provision allowing reduced VAT on the first 190 sqm of a constructed area for individuals with disabilities.
In other words: The reduced rate of Value Added Tax (VAT) of 5%, imposed upon delivery or construction of a house, covers the first 130 sq.m. of build area of residence, worth up to €350,000, and provided that the total value of the transaction does not exceed €475,000, and the total buildable area of 190 sq.m.The law approved by Parliament also provides for a summary of provision, so that in the case of people with disabilities the reduced VAT rate (5%) will be applied to the first 190 sq.m. of buildable area of residence.
Bearing in mind, these area’ and price rules mentioned directly above* do not apply for buildings for which a planning permit has been obtained or an application for such permit has been submitted on or before the 31st of October 2023, and the relevant application for the 5% VAT rate has been submitted within 3 years from the date of the new law (i.e. by 15/06/2026).
Capital Gain Tax
Capital Gains tax is levied at the rate of 20% on gains arising from the disposal of immovable property or the disposal of shares of companies the assets of which consist mainly of immovable property, As a general rule the gain is calculated as the difference between the sale proceeds and the original cost of the property. Interest on payments paid for the acquisition, additions to the property and inflation rate as published yearly by the government are deducted from the fees. Moreover individuals are entitled to the following allowances which in essence minimize any capital gains tax payable:
- The first €17.086 of gains arising from the disposal of any property is exempted.
- The first €25.629 of gain arising from the disposal of agricultural land are exempted (subject to certain conditions)
- The first €85.430 of gains arising from the disposal of a house are exempted provided that the house is used by the owner for his own habitation for a minimum duration of 5 years (subject to certain conditions)
- A tax incentives package was introduced and a full exemption from capital gains tax on any sale of immovable property acquired between 16th July 2015 to the 31st of December 2016, provided that:
– The property has been acquired from an independent third party; and
– The property has not been acquired through an exchange of property or through donation/gift.
Personal Income Tax
Income Tax | Tax Rate | Tax Amount Euro | Accumulated Tax Euro |
|---|---|---|---|
0 – 19.500 | 0 | 0 | 0 |
19.5001 – 28.000 | 20% | 1.700 | 1.700 |
28.001 – 36.300 | 25% | 2.075 | 3.775 |
Over 36.301 | 30% |
