The recent entry into the European Union has also brought many new benefits.
Reliable banking institutions, legal and accountancy services of a very high standard and the fact English is widely spoken, all contribute towards the continued popularity of Cyprus with foreign investors, whether it be as a holiday home, or that long cherished dream of a permanent home in the sun.
The geographical location of Cyprus, its excellent climate and the friendliness and hospitality of it's people, together with the relatively low cost of living, are just some of the reasons that have made Cyprus popular with foreign investors for over 20 years now.
Acquisition
Under the Immovable Property Acquisition Law, non-Cypriots, Companies and trusts are entitled to buy freehold immovable properties, subject to prior permission by the Council of Ministers. This must be submitted in writing by the non-Cypriot buyer after the Contract of Sale is signed. The procedure is merely a formality, and permission is normally granted more or less as a matter of course to all bona fide buyers wishing to purchase a flat, house or piece of land for the erection of a house not exceeding 3 donums (4,014sqm). This and other matters can easily be carried out for you by a solicitor.
Once permission is granted and the property is registered in the buyer's name, there is no restriction on selling the property or disposing of it by will.
Exchange Control
Now that Cyprus is part of the E.U., exchange control restrictions have been abolished both in respect of buying and selling immovable property.
Mortgage & Finance
All commercial banks in Cyprus are authorised to offer mortgage facilities to assist in the purchase of property. The loan will be in foreign currency and will be to a maximum of 70% of the value of the property, with a repayment period of usually not more than 20 years.
Contract of Sale of Immovable Property
Under Cypriot Law, such contracts must be in writing. It is also advisable that Contracts of Sale be deposited at the relevant District Lands Office within 2 months of signing the contract, so that the buyer's right to pursue the remedy of specific performance in the event of breach, are protected. Ownership in Cyprus is denoted by title deeds issued by the District Land Office. Therefore, all contracts must provide for the transfer and registration of the property in the buyer's name and to ensure title deeds are obtained.
Transfer of the Title Deed
Once the Council of Ministries has granted permission to the buyer's application to acquire property, transfer of ownership can be done. Transfer tax fees based on the value of the property, are payable by the buyer and are as follows:
| Value of property in Cyprus Pounds(CYP) | Transfer fee % | | | | | Up to: CYP 50,000 | 3% | | From: CYP 50,001 - 100,000 | 5% | | Over: CYP 100,000 | 8% | For example, a property purchased by an individual at CYP 90,000; the transfer fee would be:
The first CYP 50,000 x 3% = CYP 1,500
The next CYP 40,000 x 5% = CYP 2,000
Total Transfer Tax Fee Due = CYP 3,500
However, should the purchase be made in joint names (provided the prices is more than CYP 50,000), the transfer tax would then be as follows:
For example, on a property purchased at CYP 90,000 the transfer tax would be:
The first CYP 45,000 x 3% = CYP 1,350
The next CYP 45,000 x 3% = CYP 1,350
Total Transfer Tax Fee Due = CYP 2,700
Immovable Property Tax
The annual immovable property ownership tax is based upon the market value of the property in 1980, which is much lower than current market values. So for many properties in Cyprus, there is no immovable tax due.
| Value of property in Cyprus Pounds(CYP) | Annual Property Tax | | | | | Up to: CYP 100,000 | Exempt | | From: CYP 100,001 - 250,000 | 2.5% | | From: CYP 251,000 - 500,000 | 3.5% | | Over: CYP 500,000 | 4% | Stamp Duty
A one-off duty is levied on the purchase of property in Cyprus and rates are dependant on the contractual purchase amounts. The amount is payable to the Tax Authorities and should be paid within 30 days of signing the contract. | Value of property in Cyprus Pounds(CYP) | Stamp Duty | | | | | Up to: CYP 100,000 | 0.15% | | Over: CYP 100,000 | 0.20% | Inheritance Tax
This was abolished as of 1st January 2000.
Local Authority Tax
This tax covers the cost of refuse disposal, street lighting etc. and ranges from approximately CYP 30.00 - 100.00 per annum, dependent on the size of your property.
Basic utilities such as electricity, water and telephone are payable direct to the relevant suppliers and charges are based on meter readings.
Tax Issues
(a) Permanent Residents
An individual who spends at least 183 days in Cyprus in the tax year will be considered to be a Cyprus resident for tax purposes. These are people who: -
Either they settle permanently in Cyprus upon retirement. -
Or are foreigners who live indefinitely or for a fixed period of time in Cyprus are employees. Either of their own International Businesses (Offshore Company) or of a local or offshore firm, and who chose to purchase their own property in Cyprus rather than live in rented premises. -
Or are business people who wish to take advantage of the tax and other fiscal advantages offered when having Cyprus tax residency.
A series of incentives is given by the Cyprus Government to these people, including very low taxation of their income which emanates from abroad.
Individuals are taxed in Cyprus on the Following Types of Income -
Profits from a business activity in Cyprus, including rent etc. from property. Profits earned from a permanent establishment abroad, are fully exempt from corporation tax. -
Worldwide employment income. -
Pensions in respect of past employment exercised in Cyprus. -
Pensions exercised outside Cyprus will be taxed either at normal income tax rates as shown on the following table, or at the option of the taxpayer, at the flat rate of 5% on the excess of CYP 2,000.
| Income Tax Rates applicable from 2004 | Rate | | | | | Up to: CYP 10,000 | Nil | | From: CYP 10,001 - 15,000 | 20% | | From: CYP 15,001 - 20,000 | 25% | | Above: CYP 20,000 | 30% | Deductions and Allowances
The following can be deducted in calculating the tax liability: -
There will be a deduction of 20% for the first 3 years in Cyprus, limited to CYP 5,000 per annum. -
Life assurance premiums -
Contributions to stale social security and welfare fund and pension funds
Expatriate Tax and Social Security Contributions
Expatriate employees are taxed as follows: -
Individuals who perform all their employment duties abroad will not be taxed on their earnings. -
Those who are present for 183 days or more in Cyprus in the tax year will be taxed on their worldwide earnings. -
Those who are present for less than 183 days in Cyprus in the tax year will be taxed on their earnings attributed to their days work in Cyprus. -
Individuals who originate from countries (including E.U. countries until such time that Cyprus becomes a full E.U. member) where a social security agreement has not been signed between their country and Cyprus, will be liable to social security contributions. UK citizens can opt out for a period of three years, as relevant agreement has been signed between the two countries.
Contributions are Currently Payable by Both Employer and Employees, at the Rate of 6.3%
Individuals are not taxed in Cyprus on interest or dividends received from sources either within Cyprus or from abroad, except for Defence Fund Contribution as explained below.
Defence Fund Contributions are Payable in the Following Cases
-
10% tax charge on interest from investments in Cyprus or abroad. -
3% tax charged on 75% of the gross rental income from real property, wherever it is located. -
15% tax charged on dividends received from both Cypriot and non-Cypriot companies. -
Relief in the form of tax credit, is given for any foreign taxes paid on the above.
Gains from Disposal of Securities
Any gains made from the disposal of securities are not subject to taxation in Cyprus. The exemption applies for all gains, including those that arise from trading in securities.
Double Tax Treaty
It is the policy of the Cyprus Government to encourage tax incentives for foreigners in order to develop Cyprus as a financial centre in its area, without proclaiming or promoting itself as a tax haven. Individuals or companies who choose to reside in Cyprus may also enjoy, under certain circumstances, the benefits of the Double Taxation Treaty of their country of origin with Cyprus, if there is one in place. The main objective of the Double Tax Treaty is to avoid the double taxation of income earned in any of the two contracting countries.
Cyprus has signed 32 such treaties, in effect regulating tax regulations with over 40 countries. For example, United Kingdom citizens may take advantage of the Double Taxation Treaty between the U.K. and Cyprus. This enables you to receive your pensions and investment income in Cyprus free of U.K. withholding tax. This Treaty is unique to Cyprus, since it includes both public and private sector pensions.
Insurance pensions can be paid to retirees in Cyprus on a similar tax-free basis, and are index-linked by virtue of the Reciprocal Agreement, compared to their "frozen" status in other overseas destinations.
(b) Non Residents
These are people who: -
Either are holiday makers who purchase properties in Cyprus as holiday homes or for possible permanent living upon retirement, or for the sale thereof with a reasonable profit at a later stage. -
Are Business investors and companies who acquire property in Cyprus for tourist or industrial purposes, making use of the location and climate of Cyprus, the excellent infrastructure and the various incentives offered for these purposes, especially in the area of taxation.
Individuals are Taxed in Cyprus on the Following Types of Income -
Employment income for work performed in Cyprus -
Profits from a business activity, which is carried out through a permanent establishment in Cyprus. -
Pensions in respect of employment exercised in Cyprus, except for pensions paid from a fund established by the Cypriot Government or any local authority.
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Key Investments 
