Expenses of purchase
Expenses Of Purchase
After the contract of sale is signed, the purchase is liable for the payment of stamp duty at 0.15% of the value up to €170.860. Thereafter, the rate becomes 0.2%. Payment is due within 30 days of signing the contract sale.
Stamp duty is calculated on the value of the purchase agreement and remains unchanged at the rate of:
€0 to €5,000 – zero
€5,001 to €170,000 – 0.15%
Greater than €170,000 – 0.2%*
* Capped at a maximum of €20,000.
Upon transfer of the property and registration in the purchaser’s name, the district Land Registry Office will charge transfer fees, which are based on market value of the property at the time of the purchase and are calculated as follows:
|Property Value €||Fees -%||Transfer fee €|
|Up to €85,000||3%||€2,550|
|€170,001 and up||8%|
If the property is transferred in 2 or more names, on the name of individuals, then the purchase value is split into the parts which results in reduced transfer fees.
The fees mentioned above are calculated per person (per share owner)
NOTE: New legislation reducing the Cyprus Property Transfer Fees for transfers that take place before 31 December 2016 that is as follows:
- If VAT was paid on the property, no Property Transfer Fees are payable.
- IF VAT was not paid on the property, the Property Transfer Fees are reduced by 50%. However if the Director of the Land Registry considers that the price stated on the contract of sale does not reflect the market value of the property at its date of purchase he may, at his discretion, charge the full Property Transfer Fees based on the market value of the property at its date of sale less the price stated on the contract of sale.
In addition, where a property is transferred from parent to child, Property Transfer Fees have been abolished. Those who have or will purchase property between December 2, 2011 and December 31, 2016 will benefit from the reduced Property Transfer Fees regardless of when the transfer takes place.
Property Transfer Fees reduction permanent
For those who applied for the Title Deeds under the provisions of the ‘trapped buyers’ law and who were concerned that they would be unable to benefit from the 50 per cent reduction in their Property Transfer Fees if the transfer did not take place by 31st December 2016 – and everyone else waiting for their deeds, the Finance Ministry announced that it has lifted the temporary arrangement to reduce Property Transfer Fees by 50 per cent, which was valid until 31st December 2016. The 50 per cent reduction is now permanent; the law implementing the change, ‘Land and Surveys Department (Fees and Rights) (Amendment) (No. 2) Law’, was passed on 14th July 2016 at a plenary session of the Cyprus parliament.
Value Added Tax on Property Purchases
Acquisition of a new immovable property in Cyprus is subject to VAT (Value Added Tax). In cases of a resale immovable property as well as a new immovable property where an application for a town permit was filed before the 1st of May 2004, VAT will not be charged.
If the town planning application has been filed after the 1st of May 2004, VAT is charged on the sales price at a rate of 19%. First-time buyers can apply for VAT reimbursement in cases where they paid the full amount of VAT on single properties purchased after the 1st May 2004.
No VAT is charged on the purchase of land.
A reduced rate of VAT (5%) has been introduced for properties purchased by permanent residents of Cyprus, provided that the property will be used as the main residence of the purchaser for 10 years (minimum). This is applicable only to contracts of sale that are conducted from October 1st 2011 onwards. The rate applies for the first 200 m2 of residences of total covered area of up to 275 m2.
VAT is paid when paying a newly built property 5% for a permanent first house residence and 19% for other use (to be rent etc.).
New VAT Law Imposes 19% on Purchase of Land
This new legislation has been in force since January 2nd, 2018. The new law introduces VAT at the standard rate for the sale of building land and the leasing/rental of business premises as per the conditions included in the law. It also introduces the reverse charge mechanism for VAT-subject supplies of land and property under a loan restructuring/force-sale arrangement, which will mostly impact financial institutions.
Imposition of VAT at the standard rate of 19% on building land
The standard VAT rate of 19% will be imposed in all of the following cases:
- transfer of ownership
- transfer of indivisible land portion
- transfer of ownership via contract or sale agreement or agreement which specifically provides that the ownership will be transferred at a future date or leasing agreement with buyout option
The above shall apply to non-developed building land which is intended for the construction of one or more structures in the course of carrying out a business activity.
The meaning of non-developed building land was clarified as land which is not located in designated livestock zones or areas which are not intended for development (such as zones/areas under environmental protection, as well as archaeological and agricultural protection).
Additionally, another criterion which needs to be considered is whether the transfer of ownership of land is included in the business activities of the transferor of the land. If not, then the transaction is not subject to VAT of 19%.
Furthermore, it has been clarified that no VAT will be imposed on the disposal of shares or shareholdings in companies, resulting in transfer of ownership of related immovable property. The aforementioned provisions are effective as from 2 January 2018.
Transfers under loan reorganizations or forced transfers are normally made without any consideration by the Bank to the taxpayer. Under the new VAT Law, such transactions create a VAT liability; however, the taxpayer clearly would not be in a position to pay. For this reason, a new article was introduced in the main VAT Law which stipulates that the obligation to discharge VAT in such situations is transferred from the taxpayer to the recipient (the bank).
The provisions apply to immovable property including land and/or buildings which are transferred along with the land on which they are built, provided that the transaction takes place before the first occupation of the building.
The new reverse charge provisions came into force as of 2 January 2018 and will remain in force for a limited timeframe, currently until 31 December 2019.
Fees for the deposit of a sales contract in the Land registry office
Deposit of the sales contract is needed in order for the purchaser to exercise the right of Specific performance against the seller and benefit from the property tax exemptions. The purchaser has the right to deposit the sales contract within 6 months after signing of the contract of sale is may be the most important for the protection of his legal rights on the specific property.
The sales contract must be stamped within 30 days after signing. After this period a small penalty is imposed. The contract stamp fees are 1.5‰ for values up to €170.860 and 2.0‰ for values more.