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 benefits, for example:
•Relative low cost of property •Lower cost of living than most European countries •Pensions from abroad subject to a 5% flat rate of tax (with an initial exempt annual allowance of €3,417). •Investment income from abroad subject to a flat rate of 5% (with an initial annual exempt allowance of €3,417). •Company tax for local businesses is at an attractive rate of 10%. •Employees tax for those who will be taking up employment is on a sliding scale for earnings above €17,086 (below which is exempt from any tax). •Duty free car allowance for retirees.
There are many specialist qualified accountants and financial advisors in Cyprus who can provide advice and practical assistance in many areas - for example, transferring of pensions, tax affairs and asset and wealth protection.
Financing & Mortgages
All commercial banks in Cyprus offer mortgage facilities to assist (non-Cypriots) in the purchase of property. The amount that the banks are prepared to loan is discretionary, but typically 60% 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).
The cost of a reputable solicitor experienced in property conveyancing in Pafos is approximately €1,700 - €2,300 per contract of sale transaction, depending what is specifically involved. Remember to ask for a quote in advance.
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. 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 €170,860 charged @ 0.15%
Over €170,860 charged @ 0.2%
Therefore for a property purchased for €260,000 the Stamp Duty would be calculated as follows:
€170,860 @ 0.15% =€255
€ 89,140 @ 0.2% = €178
Total Stamp Duty = €433
Immoveable Property Tax
Immoveable Property Tax is somewhat of a legacy from the past, as the tax itself is based upon the value the property as at 1980. This is obviously considerably lower than current market value. Given that the first €170,860 (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 €170,860 is exempt
Between €170,861 and €427,150 is charged @ 0.25%
Between €427,150 and €854,300 is charged @ 0.35%
Over €854,300 is charged @ 0.4%
Household Building and Contents insurance, vehicle insurance and private health insurance can all be obtained at very competitive rates.
Utilities & Municipality Levies
Charges for electricity use are payable to the respective authority at regular intervals throughout the year and are based upon unit consumption. An estimate for a family in an average sized 3 bedroom house with a private pool would be between €600 and €900 per year depending on use of air-conditioning units. 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 between €150 - €250 per year.
Some properties will have communal facilities such as swimming pools, private roadways, gardens and parking. In order that these facilities are maintained, a communal maintenance charge (service charge) is levied which may amounts to between €400 - €1,200 per annum depending on the size of the property and the facilities included. Good advice is to ask in advance for an estimate of the common expenses when considering a purchase of a property with communal facilities.
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 €85,430 charged @ 3%
Between €85,430 and €170,860 charged @ 5%
Over €170,860 charged @ 8%
Therefore an example purchase of €260,000, would be calculated as below:
€85,430 @ 3% = €2,562
€85,430 @ 5% = €4,271
€89,140 @ 8% = €7,131
Total Transfer Fee = €13,964
However, if a property is bought in joint names then each partner receives an equal allowance, which reduces the tax amount charged. The following is an example of the calculation for the same purchase price above of €260,000:
Partner 1 €85,430 @ 3% = €2,562
Partner 2 €85,430 @ 3% = €2,562
Partner 1 €85,430 @ 5% = €4,271
Partner 2 € 3,710 @ 5% = € 185
Total Transfer Fee = €9,580
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 whole project completion.
Capital Gains Tax
Upon the sale of your property in Cyprus you could be liable for Capital Gains Tax. A capital gain of €17,086 per person (therefore €34,172 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 €85,430 in total if the seller has resided in the property continuously for at least five years. Other allowances and exemptions may apply and it is advised that financial advice be sought to clarify these, given a sellers own personal circumstances.
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.