SALE AND PURCHASE OF PROPERTY IN CYPRUS
The law governing the acquisition of immovable property in Cyprus by foreigners is the Cypriot Acquisition of Immovable Property (Foreigners) Law, Cap. 109 of the Laws of Cyprus (hereinafter referred to as “the Law”), as amended from time to time.
In 2003 [Law 54(1)/2003], and by reason of Cyprus’s entry into the European Union on 1/5/2004, the above Law has been amended giving to EU citizens and EU companies more but not absolute rights in acquiring immovable property in Cyprus. Cyprus had the right to maintain for five years from the date of accession, restrictions on the right of E.U citizens and E.U companies to acquire residence for secondary use. Even though there has been no amendment in the said Law since 1/5/2009 by the instructions of the Government there are no restrictions to the E.U. citizens.
Section 2 of the Law – Definitions
It should first be noted that for the purposes of the Law, “foreigner” means a person who is not a citizen of the Republic and includes a company controlled by foreigners, a foreign company and a trust created for the benefit of a foreigner.
But does not include the following:
- A foreigner Cypriot;
- A foreigner wife of a citizen of the Republic of Cyprus who is not divorced from her husband by decision of a competent court;
- European Union National
Section 3(1) of the Law – Prohibition
Section 3(1) of the Law, provides that:
“A foreigner is prohibited from acquiring immovable property (in the Republic) by cause of death (i.e. inheritance) or otherwise, except with the prior license (i.e permission) of the Council of Ministers.” A foreigner, though, can acquire only one property in Cyprus i.e. one house, flat, land etc. In case of land this shall not exceed 4014 sq. m. in extent.
In Practice – Procedure including permit issued by the Council of Ministers
In practice, the foreigner who wishes to proceed with the acquisition of immovable property in Cyprus will attend to the following matters:
1. Drafting and execution of an Agreement for the Acquisition of Immovable Property (hereinafter referred to as “the Agreement);
The above mentioned Agreement will set out the terms and conditions of the acquisition of the immovable property in question and regulate the relationship between the “seller” and the foreigner as “buyer”, but in the eyes of the Law, it will not confer on the foreigner, an ownership right to the immovable property:
Section 3(3) of the Law, provides that:
“A valid agreement, written or oral, drafted in accordance with the Contract Law or any other law in force, which provides for the acquisition of immovable property in Cyprus by a foreigner, does not provide the foreigner with any ownership rights to the immovable property, up until the issue of a permit (license) by the Council of Ministers pursuant to Section 3(1) (which is set out above).”
This agreement must be officially stamped within one month of its signing (in case of default penalties are imposed) and it must be deposited within 2 months from its signing and after stamping, to the Land Registry Office of the district where the purchased property is situated. The depositing of the Contract in the Land Registry is a security to the Purchaser that the Property is his property obstructing the Vendor of selling it or transferring it to someone else or even mortgaging it. This is done to cases where a separate title deed has not yet been issued for the Purchased Property. This applies to Properties under construction or to new properties. The title deed for those properties is issued within 3-4 years approximately after completion. The lack of a separate title deed for the Purchased property in the name of the Vendor does not prevent the Purchaser from selling the Purchased Property. In such a case a cancellation can be signed between the Vendor and the Purchaser simultaneously with the signing of a new Contract of Sale between the Vendor and the New Purchaser. It is advisable for the Purchaser at the time of the negotiation to agree with the Vendor his cancellation fee and include it in the Contract of Sale.
The depositing of the Contract of Sale in the Land Registry is also being done for specific performance reasons. Cap 232 Sale of Immovable Property (Specific Performance) Law provides among others that in order to be able to bring an action to Court for an order for specific performance the Contact of Sale must be deposited in the Land Registry within 2 months of its signing.
For old properties where there is a separate title deed issued a transfer of the title in the name of the Purchaser can take place immediately.
In Cyprus we have one of the best and reliable Land Registries in Europe
The stamps needed are as follows:
- 1, 5 per thousand up to €170860, 14 plus
- 2 per thousand from €170860, 14 up to €8543007, 21
- €17086, 01 fixed amount for a purchase deal of €8543007, 21 and over
2. Application to the Council of Ministers for the issue of their permit and/or license for the acquisition of immovable property;
Upon finalization of the Agreement, which may or may not contain a clause as to the necessity for the granting of a permit by the Council of Ministers, the foreigner’s legal advisors, prepare an application to the Council of Ministers, requesting the issue of a permit pursuant to the provisions of the Law.
When the Council of Ministers receives such an application, it:
“…examines the said application, decides on the issue and provides the person who has submitted the application with a written notification of its decision…”
The time frame, within which such a decision is being notified, is 8 to 10 months approximately.
Until today all applications by foreigners to the Council of Ministers have been approved.
After the granting of the permission from the Council of Ministers and provided that a separate title deed has been issued for the purchased property then the vendor is obliged under the relevant Law (unless the contract of sale is not filed to the Lands office) to transfer and register the property in the name of the Purchaser.
3. Registration of immovable property with the Land Registry in Cyprus;
When the permit and/or license for the acquisition of immovable property in Cyprus is granted to a foreigner, he/she must then visit the offices of the Land Registry in the district in which the immovable property concerned is located, and request that his/her ownership of the land, be recorder in the relevant Register.
The foreigner shall then be provided with the title deed to the property and this shall be the evidence of his/her ownership of the immovable property concerned.
The registration fees payable for the registration of the immovable property in the name of the applicant purchaser are as follows:
- 3% up to €85430, 07 plus
- 5% from €85430 up to €170860, 14 plus
- 8% from €170860, 14 and over
The registration fees are estimated by the District Land Registry Office at the time of the registration taking into consideration the value of the purchased immovable property at the time of the signing of the contact of sale provided that the contract of sale is officially stamped as provided above at the time of the signing. In case the contract of sale is not officially stamped at that time then the purchaser must prove to the Land Registration Office that the purchase took place on the date of the contract of sale.
Such proof may be receipts, payment slips, banker’s draft, remittances etc. and it is at the discretion of the Land Registry to accept such evidence or not.
4. Other Taxes
a) Inheritance Tax: There is no Inheritance Tax in Cyprus
b) Capital Gains Tax: The capital gains tax is the tax imposed on the net profit proceeds from the sale. Net Profit means the profit of the sale after deducting the following:
- transfer fees
- €17086 per person for first sale
- Registered Estate Agents fees
- Any extras done on the Property
- Inflation etc.
In case the Property Sold was the residence of the Purchaser for at least five years then the amount of €85430 is deductable.
c) V.A.T.: For new Properties (that is for properties where the application for Town Planning Permission was filed after the 1/5/2004) V.A.T. is imposed.