If you have real estate in the European Union, then regardless of what citizenship you have, in the absolute majority of countries you will have to pay annual taxes. But not in Cyprus.
In 2017, the island's authorities took an unprecedented step and abolished the annual property tax, which was previously paid by all owners of houses and apartments on the island.
Until 2017 , there were two annual taxes on immovable property in Cyprus:
- immutable property tax — state tax paid to the tax department,
- local property tax — municipal tax paid to the municipality.
In 2017, Cyprus' tax policy changed. Since January 1, 2017, the annual state tax on the ownership of real estate in Cyprus immutable property tax (IPT) has been abolished.
Important! The owners of real estate, who still have a debt to the state for this tax, must repay it.
Taxes that you will have to pay when buying a property in Cyprus
Perhaps the first thing that the future owner of the Cyprus property will have to pay is stamp duty. It must be paid within 30 days after signing the contract of sale, after which you can transfer the contract to the Land Committee. Registration must take place no later than two months after the conclusion of the contract. 0.15% of the first 170,860 euros of the cost of the object is charged and 0.2% — from the amount that exceeds 170,860 euros.
Property Transfer fee
This is a fee for the renewal of ownership of real estate. Accordingly, when buying a new building, you will not have to pay for it. In the primary market, the buyer is exempt from paying the title fee, i.e. the title fee is 0%.
If you purchase real estate on the secondary market, the amount of the title fee is calculated as follows:
- for the first 85 thousand euros, 3% is paid
- 85 thousand to 170 thousand euros – 5%
- 170 thousand euros – 8%.
However, the authorities of Cyprus have provided ways to reduce. The amount of the fee can be reduced if you register the property for two or more persons. In this case, the taxable amount attributable to each owner is proportionally reduced, which means that the tax rate becomes lower.
For the first property of an area of up to 200 m2, if it's used as a personal residence, VAT in Cyprus is 5%, for all others – 19%. Secondary real estate is not subject to VAT.
At the same time, the buyer of real estate can receive the right to the next VAT rate of 5% in 10 years after the first purchase. Land plots can also be subject to VAT.
The applicant first pays VAT at the standard rate of 19%, and then submits an application to the relevant state department. After the VAT department confirms the legality of granting benefits to the applicant, VAT is recalculated at a preferential rate of 5%.
Important! If you have used the reduced VAT rate of 5%, you will not be able to use the property for investment purposes (to rent it out).
At the same time, of course, friends, acquaintances, relatives, their acquaintances and relatives, and so on can move into your property bought with 5% VAT for free. However, the contract for water and electricity in this case should be concluded on the owner's name.
The reduced rate is granted, according to the amendments to the VAT Law of June 8, 2012, to both EU/EEA citizens and non-Europeans, if:
- The applicant must be an individual, not a legal entity.
- The applicant (the buyer of the property) must have reached the age of 18.
- Real estate should be their main place of residence in the Republic of Cyprus. It can be an apartment, a house or a residential project under construction.
- The applicant must not have any other real estate in Cyprus purchased within 10 years. After 10 years, the buyer may again receive a tax benefit by specifying the new apartment as the main place of residence.
- The property must be used exclusively as a residential property, and the applicant must be the first to enter into the actual ownership of this object from the moment of completion of construction.
- The area of the object does not exceed 200 m2. Otherwise, the deduction will apply only to the first 200 m2.
Attention! All documents must be submitted within six months from the date of signing the contract of sale.
If the applicant, to whom the authorities have approved a reduced VAT rate, refuses to use the property earlier than 10 years after taking possession, then they are obliged to notify the VAT Department of the Ministry of Finance within 30 days and pay the difference between the preferential and standard VAT rate valid at the time of conclusion of the contract.
Taxes that the property owner will have to pay
Local property tax
As mentioned above, there is no annual property tax in Cyprus. At the same time, there are annual payments to the treasury of the municipality. The tax rate and the time frame in which the tax must be paid is set by each municipality independently. The tax base is the market value of the object as of January 1, 2013. The tax rate varies from 1 to 2%.
You can pay the tax directly in the municipality or online on the JCCsmart website. Penalties are applied for late payment of this tax. In Limassol and Larnaca, for example, the fine is 10% of the unpaid tax amount.
In addition, the owner of a property in Cyprus pays:
For garbage collection
For regular garbage collection, street lighting, sewerage and similar utilities must be paid to local governments at the location of the property. The amount depends on local rates and the size of the property and ranges from 85 euros to 500 euros per year.
The owner of the property is obliged to pay an annual sewer tax calculated on the basis of the market value of the property as of January 1, 2013. As a rule, the amount of tax is about 100-200 euros.
Property rental income tax
The income tax from the rental of real estate is paid on a progressive scale and ranges from 0 to 35% of the amount of profit. If your income has not reached 19.5 thousand euros per year (1,625 euros per month on a long—term lease) - the rate is zero. Therefore, those who are trying to make some money on renting apartments, townhouses or small villas for three or four bedrooms will most likely not have to pay anything. If the annual profit is above 19,501 euros to 28 thousand euros, the owner will have to pay — 20%, up to 36,600 euros — 25%, over -30%.
When selling real estate
When selling real estate in Cyprus, you need to pay capital gains tax at a rate of 20%. At the same time, when selling several real estate objects in a short time, the percentage for the second and subsequent housing units may be higher.
The transfer of property by inheritance and donation are not taxed. Inheritance from parents by children — 0%, between spouses and distant relatives — 0.1%.
To understand all aspects of the acquisition, sale and rental of real estate in Cyprus, visit DOM. The portal presents the largest real estate database in the country – from residential to commercial. Choose and contact professionals who will help you make the right choice!
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