Compared to other EU countries, real estate investment in Cyprus is a very popular and often the most profitable option for investing money.
This is due to the fact that interest rates on loans for the purchase of houses and apartments are currently at historic lows, and taxes levied on transactions with real estate and its ownership are not high. In addition, interest rates on deposits become negative, so it is much more profitable to buy and then rent out your home than to keep your savings in a local bank.
Every year the budgets of the EU member states receive about 2.6% of their total GDP in the form of real estate taxes. It is noteworthy that the amount of taxes is significantly different: in some countries, very high taxes are charged on real estate, others have lower taxes, but there are also some EU members where this indicator is practically zero.
If for Cyprus, then the period from 2013 to 2014 turned out to be the most difficult for homeowners in the country. In addition to the main payments, property owners were required to pay an additional tax. Fortunately, it was canceled in 2017. Earlier, the Cypriot authorities stopped taxing the inheritance.
Today, owners of Cypriot real estate are not burdened with a large number of payments for their property. In other words, owning a house or apartment in Cyprus is relatively inexpensive when compared to other EU countries. The main taxes are: municipal property tax, sewage tax, and garbage collection.
At the same time, the government of the country plans to launch the program "You pay how much you throw away", to abolish the obligatory taxes on sewerage and collection for garbage disposal. The scheme is expected to cover not only households but also commercial organizations. The essence of the program is that people and organizations will pay the actual costs of recycling their waste.
EU and Eurozone Taxes / GDP
Cyprus is ranked 18th in Europe for property taxes. They account for 1% of the country's GDP. The island's 'big brother', Greece, is in fourth place (3.2% of GDP). The top three are France (4.7% of GDP), Great Britain (4.3%) and Belgium (3.6%). At the same time, the average for Europe is 2.6%, and for the Eurozone - 2.4%.
If we consider regular payments for real estate, then their volume is equal to 0.9% of the GDP of Cyprus. In this category, the island is in 11th place among the EU countries. The average for Europe is 1.6%, and for the Eurozone is 1.4%.
Taxation in Cyprus
The Cyprus Property Law was passed in 1946. It regulates all matters related to the ownership, registration, disposal and valuation of immovable property under the Cyprus cadastral registration system, according to which immovable property is kept.
Currently, real estate located on the territory of the Republic of Cyprus is subject to the following types of taxes:
This is an annual tax that is charged on the property of an individual or legal entity located within a particular municipality. Since January 1991, each municipal council sets the rate of the municipal fee and the date of its calculation independently. The market value of the property is taken as the basis for the calculation.
This tax is paid to local water and sanitation councils in areas where there is or is planned a sewerage system. The owner is obliged to pay the fee once a year, or quarterly by prior agreement with the council.
Garbage collection fee
This tax is paid not by the owner, but by the person who uses the property. The law establishes an upper limit on the tax rate for residential and various categories of commercial premises. The actual tax rate is reviewed annually by each municipality, taking into account certain criteria. For example, the area in which the apartment or house is located.
Capital gains tax
According to the tax department, this type of tax is levied at the rate of 20% on the difference between the purchase price and the sale price of the property. For a legal entity, this tax is levied on the following types of capital gains:
- on the sale of real estate located on the territory of the Republic of Cyprus
- on the sale of shares of companies-owners of Cypriot real estate, securities that are not listed on the stock exchange
- on shares of companies that indirectly own Cypriot real estate and receive at least 50% of the market value of the properties.
Individuals are entitled to lifetime deductions from profits:
- the sale of an apartment or house (main place of residence) - 85,430 euros
- the sale of agricultural land - 25,629 euros
- the sale of other property (car, jewelry, household appliances, etc.) - 17,086 euros.
Capital gains tax is not paid:
- when transferring shares or real estate by inheritance
- when donating between relatives (up to the third degree of relationship)
- when the gift is transferred to a company whose shareholders are members of the donor's family and continue to be family members for five years from the date of donation
- when donating shares or real estate to shareholders of a family company, if the donated property was also received by the company as a result of donation. The property must be owned by the recipient for at least 3 years from the date of donation
- from donations to a charitable organization, municipality or political party
- when exchanging or selling agricultural land; when exchanging real estate, if the value of the objects is equal
- from profits from the sale of shares listed on the stock exchange;
- from profits from the alienation of property or shares in the process of reorganization;
- when transferring immovable property of a missing person, if the inheritance property management regime applies to such property;
- when transferring real estate between spouses in case of divorce by a court decision.