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Legal system and overview
The Legal System is based upon the same principles as those applicable to the United Kingdom and all statutes regulating business matters and procedures are also based essentially on English law, which makes property purchasing and other legal transactions understandable to most expatriates.
Seeking Expert Advice and Buying Property:Expert advice must be sought after before entering into any transaction for acquiring property in Cyprus.
Your lawyer will check the following points:
- A search at the Lands Office must be made to ensure that the seller has a valid title to property and that there are no mortgages over the property, which would present problems with the transfer of ownership.
- In the cases of property under construction it must be checked that separate title deeds can be issued and the planning and building permits can be obtained. The contract provisions must be made to provide for remedies in the failure of the Vendor to do so.
- It must be guaranteed that the land is suitable for building purposes i.e. zoning restrictions, building regulations, access to an official road, and availability of water supply, electricity and telephone lines.
- Foreign companies can buy or build their offices only. No permit will be given for the purchase of a residence unless residence can be registered in the name of a company’s director who must also submit the application.
A. Real Estate Transfer Tax-Fees
Real Estate Transfer tax-fees are necessary in order to transfer FREEHOLD ownership to the name of purchaser. This can be done as soon as the relevant Government Authority has issued title deed and purchase has been completed. The Transferee is responsible for tax payment.
The rates are on a graduated scale:
- Value of property - Transfer fee rate
- CYP (per hundred %)
- Up to 50,000 - 3%
- From 50,000 to 100,000 - 5%
- From over 100,00 - 8%
E.g. If the purchase price is CYP 90,000:
- The First Cyp 50,000 @ 3% [50,000 * 0.03] = Cyp 1,500
- Next Cyp 40,000 @ 5% [40,000 * 0.05] = Cyp 2,000
Total = Cyp 3,500
Should purchase be made in joint names (provided price is more than CYP 50,000) effective value for calculation is halved.
E.g. If the purchase price is CYP 90,000:
- 1st Buyer CYP 45,000 @3% [45,000 * 0.03] = CYP 1,350
- 2nd Buyer CYP 45,000 @3% [45,000 * 0.03] = CYP 1,350
Total = CYP 2,700 Transfer of ownership takes place by a simple procedure of registration at Land Registry Office and issuing of the title deed after completion and delivery. This can be done either by you in person or by a Power of Attorney authorising your Solicitor.
B. Stamp Duty
The purchaser is liable for payment of stamp duty at a rate of 1.50 pounds per thousand up to the value of 100,000 CY Pounds thereafter the rate is 2.00 pounds per thousand. This must be paid within 30 days of signing the contract.
E.g. If the purchase price is CYP 150,000:
- The First CYP 100,000 @ 1.5‰ [100,000 * 0.0015] = CYP 150
- Next CYP 50,000 @ 2.0‰ [50,000 * 0.002] = CYP 100
Total = CYP 250 C. Immovable Property Tax
The annual immovable property ownership tax is based upon the value of property. Certain immovable properties are exempt.
PROPERTY VALUE
CY Pounds (CYP) Annual Property tax (rate per thousand)
- Up to 100,000 - Exempt
- From 100,001 to 250,000 - 2.0%
- From 250,000 to 500,000 - 3.0%
- Over 500,000 - 3.5%
Immovable Property: Tax is based upon value of property in 1980 which is much lower than the current market value. So there is no immovable property tax for the majority of properties in Cyprus.
Road Tax: Road Tax is due at the beginning of each year and is charged according to vehicle engine size, unladen weight and whether a petrol or diesel.
| Engine Capacity (cc) |
Discount |
Up to
1450 |
1451-
1650 |
1651-
2050 |
2051-
2250 |
2251-
2650 |
2651 & more |
| Cyp per cc |
|
0.025 |
0.035 |
0.07 |
0.085 |
0.115 |
0.115 |
| Private Car |
0% |
6-36 |
51-58 |
116-114 |
174-191 |
259-305 |
305- |
| Van |
0%6-36 |
51-58 |
51-58 |
116-144 |
174-175 |
175 |
175 |
| Double Cabin |
55% |
6-16 |
23-26 |
52-65 |
78-86 |
116-137 |
137-175 |
To work out the rate for your vehicle, multiply engine size of vehicle (cc) by Cyprus pounds rate and the engine category into which it falls. It will be in the range shown.
Wills: It is imperative that expatriates have wills that are appropriate to the national laws of the country in which there living.
Needless to say, English law is not completely the same as the law of Cyprus jurisdiction. Owners of holiday homes outside the UK are sensibly advised to make a local will to deal just with that property, either for reasons of local law, or because it makes things easier, when the time comes to wind up the estate, to deal with a property under a local will. The cost of making a will in Cyprus can vary from lawyer to lawyer, however as a guide: CYP 50 - CYP 150
Inheritance Tax: Cyprus does not have any inheritance tax, making it an ideal place to invest your money as you can be assured that any person inheriting property will NOT be liable to pay any taxes when the owner has deceased.
Importing Personal Goods & Pets: There is generally no problem for EU citizens importing furniture for their houses to Cyprus, it’s however usually better to have a professional removal firm deal with the move unless you’re only taking a few "special" items. We are renowned for our excellent working relationship with shipping companies both in the UK & Cyprus, so please feel free to speak to us before you make any arrangements, as we have found our contacts to be the most cost effective & reliable.
For more information regarding bringing pets into Cyprus please see About Cyprus info.
Personal Tax: (one of the lowest in Europe with corporate tax at 10% & VAT @15%.) Following the recent tax reforms, as from 1 January 2003 liability to income tax will be based on residence or Cyprus source income. If you live in Cyprus for more than 183 days in a tax year (January to December) you will be resident and tax will be levied on your world wide income whether you bring it to Cyprus or not.
For expatriates retiring in Cyprus there will be a choice as to the system of taxation. Either the first CYP 2.000 is exempt and all remaining will be taxed at 5% or the first CYP 9.000 is exempt and the remaining income will be taxed at 20%, 25% and 30% depending on the amounts and which income bands apply to you. Husbands and wives are to be taxed separately.
Interest and dividends are exempt from income tax but they will be subject to defence contribution, 10% in the case of interest and 15% for dividends. Residents of a contracting state can of course take advantage of the Double Taxation Agreements Cyprus have entered into, so that foreign income can be received in Cyprus without deduction of tax.
Foreign employees and Cypriot will be treated the same, the distinction now will be between residents and non-residents. Foreign employees working wholly in Cyprus will be subject to tax under the same system as other residents.
Year 2004 / 2005 Rate:
- Up to CYP 10,000 - 0%
- Up to CYP 10,001 to 15,000 - 20%
- Up to CYP 15,001 to 20,000 - 25%
- Up to CYP 20,001 and over - 30%
Company Income Tax: Under new legislation, companies will need to consider resident in Cyprus if they are managed & controlled in Cyprus. The taxation of companies will be based on tax residency unlike before when International Business Companies were considered residents of Cyprus & taxed in Cyprus irrespective of place of their management and control.
Double Tax Treaties: Cyprus has entered into a considerable number of double-tax treaties (unusually for a low-tax jurisdiction). The general effect of these treaties is that Cyprus-registered offshore entities that have tax exemptions in Cyprus will have the same exemptions in the treaty countries
Most treaties follow the OECD Model Convention, although the US Treaty follows the most recent model of United States Agreements. Normally speaking, therefore, the country of residence will give a credit for taxes paid in the other treaty country. The Cyprus offshore entity qualifies for treaty protection under all the extant treaties except those with Canada, France, the UK and the USA, and even in those cases the limitations apply only to flows of income to Cyprus, and not to income flows from Cyprus to the countries concerned.
Revisions to Cyprus corporate tax regime consequent upon its accession to the EU, and the abolition of the offshore sector as such, have made Cyprus attractive as a tax treaty partner, and the island will need to revise many of its treaties as a result, as well as entering new treaties with additional countries. |
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