Buying in Cyprus
There are many financial benefits to owning a property in Cyprus and undoubtedly the time is right for investment, with prices continuing to rise steadily and the market looking bright since the accession to the EU.

For people moving to Cyprus for either partial or permanent residence there are many financial incentives that make the purchase of property and obtaining residency even more attractive than just for the location and the glorious weather. Some of the incentives are outlined below:

£ The cost of living is substantially lower than most European countries, it is estimated that an average retired couple with no mortgage, running one car and enjoying an active social life can comfortably live on between CY£10,000 - 12,000 per year.

Pensions from abroad are subject to a flat tax rate of 5%, with an initial annual allowance of CY£2,000 being tax exempt. There are many qualified specialist accountants who can assist you in transferring your pensions across to Cyprus and also providing asset and wealth protection advice.

Investment income remitted from abroad is also subject only to a flat rate of 5%, again with an initial annual allowance of CY£2,000 being tax exempt. Interest earned on foreign capital remitted into Cyprus is tax exempt.

Cyprus has long been an attractive location for offshore international companies to operate from with numerous tax advantages, not least 4.25% corporation tax. Whilst no longer considered an offshore haven, Cyprus is now classified as a tax efficient location due to changes in taxation laws, in line with the EU accession. Cyprus is still however considered an extremely tax efficient location to run either local (onshore) or international (offshore) business from, with both types of companies now being taxed at 10% corporation tax and employees enjoying the first CY£9,000 tax exempt prior to a progressive sliding income tax scale.

Retired couples are each entitled to own a duty free car.


PROPERTY PURCHASE

Financing & Mortgages

All commercial banks in Cyprus are authorised to offer mortgage facilities to assist foreigners (non-Cypriots) in the purchase of property. The amount that the banks are prepared to loan is discretionary, but typically 60% - 80% of the value of the property can be obtained, with the usual 10-15 years repayment period now being extended to up to 25 years in some cases, but depending on specific circumstances (i.e. age and long term income). Cerise Consulting can help to point you in the right direction and arrange for you to meet appropriate financial advisors and banking personnel who can advise you. The Accountants, Auditors and Tax Advisors for Cerise Consulting are PricewaterhouseCoopers of Pafos, should you require their advice or assistance, we would be happy to introduce them to you.

Legal Fees

The cost of a reputable solicitor experienced in property conveyancing in Pafos is approximately CY£800 - CY£1000 per contract of sale transaction, depending what is specifically involved. Don't be afraid to ask for a quote up front.

Stamp Duty

This is due at the same time as the Contract of Sale is signed, the duty must be paid and the contract stamped within 30 days of signature otherwise a fine will be imposed. Your solicitor will arrange payment and typically include the Stamp Duty within their final invoice to you. It is applied to the full Contract of Sale purchase price, levied on a simple sliding scale as below:

The first CY£100,000 charged @ 0.15% (CY£1.50 per CY£1,000)

Over CY£100,000 charged @ 0.2% (CY£2.00 per CY£1,000)

Therefore on a property purchased for CY£150,000 the Stamp Duty would be calculated as follows:

CY£100,000 @ 0.15% = CY£150
CY£50,000 @ 0.2% = CY£100
Total Stamp Duty = CY£250

Immoveable Property Tax

Immoveable Property Tax is somewhat of a quirky legacy from the past, as the tax itself is based upon the value (like the old UK rateable value) of the property as at 1980, which obviously is considerably lower than current market values. Given that the first CY£100,000 (at 1980 valuations) is tax exempt then invariably most properties are exempt from Immoveable Property Tax or face an inconsequential amount. It is charged annually on a sliding scale as below:

The first CY£100,000 is exempt

Between CY£100,001 and CY£250,000 is charged @ 0.25% (CY£2.50 per CY£1,000)

Between CY£250,001 and CY£500,000 is charged @ .35% (CY£3.50 per CY£1,000)

Over CY£500,000 is charged @ 0.4% (CY£4 per CY£1,000)

Insurance

Household insurance can be obtained for approximately CY£2 per CY£1000 sum insured per year. Medical and Health insurance is also available at extremely competitive prices.

Utilities & Municipality Levies

Charges for utilities are payable to the respective authorities at regular intervals throughout the year and are based strictly upon unit consumption, an approximate estimate for both water and electricity would be CY£200 per year for an average 3 bedroom villa occupied on a residential basis. In addition the local municipality will also levy a tax for rubbish collection and street lighting etc., this varies depending on the municipality but an approximate cost would be CY£30 - CY£100 per year.

Relevant Common Expenses

Some properties will have communal facilities, such as swimming pools, private roadways, gardens and parking. In order that these facilities are maintained to a high standard a communal maintenance charge is generally levied and amounts to between CY£300 - CY£700 per annum depending on the Project and size of the property.

Transfer Fees

Upon transfer of the property and registration in the purchasers' names, the District Land Registry Office will charge Transfer Fees, which are calculated on a progressive sliding scale, on the market value of the property at the time of purchase, and are calculated as follows:

The first CY£50,000 charged @ 3%
Between CY£50,001 and CY£100,000 charged @ 5%
Over CY£100,001 charged @ 8%

Therefore an example purchase of CY£150,000, would be calculated as below:

CY£50,000 @ 3% = CY£1,500
CY£50,000 @ 5% = CY£2,500
CY£50,000 @ 8% = CY£4,000
Total Transfer Fee = CY£8,000

However the good news is that if a property is bought in joint names then each partner receives an equal allowance, which reduces the burden, see the below calculation using the same example of £CY150,000:

Partner 1 CY£50,000 @ 3% = CY£1,500
Partner 2 CY£50,000 @ 3% = CY£1,500
Partner 1 CY£25,000 @ 5% = CY£1,250
Partner 2 CY£25,000 @ 5% = CY£1,250
Total Transfer Fee = CY£5,500

Also remember that the Transfer Fee is often deferred for sometime depending on how quickly the District Land Office can process the administration involved, a typical time period is 2 years from project completion.

Capital Gains Tax

Upon the sale of your property you could be liable for CGT. A capital gain of CY£10,000 per person (therefore CY£20,000 for a property in joint names) above the property purchase price is tax free, thereafter CGT is chargeable at 20%. There is also an indexation allowance taking into account inflation. On top of this allowance the seller is entitled to a further allowance regarding the transfer fees paid and the costs of any additions or improvements made to the property. Any gains made from the sale of a property that can be proved to have been your primary dwelling house are exempt up to CY£50,000 in total if the seller has resided in the property continuously for at least five years.

Inheritance Tax

Estate Duty was abolished in Cyprus in 2000. However, UK Inheritance Tax laws include properties Worldwide, therefore you can expect to be liable to UK Inheritance Tax on a Cyprus property. UK Inheritance Tax is currently levied at 40% over £255,000 sterling.