Read this blog about how to properly gift something of value - a house, a car or even a Cypriot business.
As of today, there is no property or inheritance tax on the island of Aphrodite. But there is a capital gains tax. Therefore, to give something substantial can be quickly and practically without the accompanying financial costs. And sometimes it is even in many ways more favorable than a sale.
The Cyprus Capital Gains Tax Law of the 80th year states that this tax is levied on money received from the sale of property that is not subject to income tax. The capital gains tax is 20%. There is little or no financial outlay during the gifting process, especially when it comes to intra-family transfers.
Let's look at the main types of gifts and the format of gift-giving on the island of Aphrodite. In the end, we will consider the peculiarities of gift-giving to foreigners who are not permanent residents and non-EU citizens. For a gift to be more than just words, it must necessarily be re-registered in the name of the new owner.
Mobile property
On the island there are no restrictions on giving someone a car or even a yacht for free. An important condition: the exchange of not only money, but also services is excluded. Otherwise, the tax is right there. In this case, the lucky person can be absolutely any person, even if he is not a relative in relation to the donor. Re-registration of vehicles usually takes place in Citizens' Assistance Centres.
Business
To gift a Cypriot business there are no restrictions either. As long as the company's tax affairs are in order, it is very easy to make such a gift. In addition, it is even easier to gift shares in the company to another person if the business does not own real estate.
Real estate
And here is where the procedure is a little more complicated. When formalizing a gift of real estate you must be sure to pay the standard utility taxes to the local municipality (for street lighting and garbage collection), sewer tax and municipal tax. And this is just the flowers.
The Cyprus Capital Gains Tax Law does not apply to certain types of gifts of real estate:
- A gift of real estate to a relative of the third degree of consanguinity. For example, giving a gift to your child, grandchild or great-grandchild, nephew, their parents, grandparents, aunts and uncles, sisters and brothers.
- When a company gifts real estate to a person who is a relative and at the same time a holder of the company's shares for a certain period of time (minimum 3 years).
- A gift to a company whose shareholders are members of the donor's family.
- Reorganization of property as a result of a reorganization of the structure of an institution.
- Division or transfer of property between husband and wife.
- A charitable gift to the state.
- Exchange of property. If the property is not equal, income tax will have to be paid in the case of a sale at the time of the transaction.
- Transfer of property upon the death of the owner.
If the gift is intended for a person who is not a close relative, you will have to pay income tax, commission for the transfer of property, and in some cases VAT. The sum can run up quite impressive.
How to process the re-registration of ownership
It will take about one day to re-register the property in the Land Department. Here you can register donations, mortgages, exchanges, sale and purchase transactions and so on.
The person to whom the property is donated pays for the re-registration of the property. In the case of a purchase, the buyer also pays for the procedure. The amount of payment is calculated on the basis of the market value of the real estate at the time of registration of the gift.
In this case, the fee does not need to be paid for the registration of real estate as a gift from parents to their children and vice versa. The gift of a new building, if it is already subject to VAT, also does not require a fee. If a company and the sole property of that company are purchased at the same time, there is also no charge. Fees are not payable for the re-registration of property located in the occupied territory of the TRNC (Northern Cyprus) until the political situation is resolved.
By the way, when reselling property the amount for re-registration by the government is currently reduced by 50%. A fee of 0.1% of the value of the property is charged for the registration of a gift between husband and wife, as well as relatives of the third degree. From 3% (property value up to 85 thousand euros) to 8% (property value over 170,001 thousand euros) of the value of the property must be paid for the transfer of real estate to a relative who is not a relative in the third degree, as well as in the ordinary sale.
The "right to sublet" can also be a gift
If the right to sublet is given by spouses, parents to their children or third-degree relatives, the standard fee is 50 euros. When gifting to other people, the fee will be 5% of the market value of the lease (the exact amount will be determined by the Land Department).
The rules of gifting to EU citizens and foreigners are different
Since May 2004, when Cyprus officially joined the European Union, the real estate of the island of Aphrodite can be purchased by any EU citizen who is a permanent resident of Cyprus. The same applies to companies registered in the territory of the European Union and having an office in Cyprus. Thus, and gift real estate to these people can be on the same terms as described above.
Citizens of other countries need to request permission to buy or receive real estate as a gift from the Council of Ministers, which will take about a couple of months. In this case, you will need an application for the purchase of real estate, the contract of sale and the consent of the donor.
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