Legal & Financial

Legal System

The legal system in Cyprus is modelled on the British system due to its colonial legacy. In addition, with EU membership, Cyprus has harmonized its laws and regulations in line with the acquis communautaire. In effect, this means that EU citizens can now buy more than one property in Cyprus.
 
The Land Registry system is one of the most advanced and reliable systems in the world, being based on the British equivalent. Purchasers of property in Cyprus will be far more secure with regards to matters such as title deeds than they might be in other Mediterranean countries. All legal information regarding the legal procedures associated with purchasing property in Cyprus is available from the Leptos Estates Legal Department.
 

Personal Income Tax

All Cyprus tax resident individuals are taxed on all chargeable income accrued or derived from all sources in Cyprus and abroad. Individuals who are not tax residents of Cyprus are taxed on certain income accrued or derived from sources in Cyprus.

Personal tax rates
The following income tax rates apply to individuals:  
Chargeable income for the tax year Tax rate Accumulated tax
%
First 19.500 Nil Nil
From 19.501 - to 28.000 20 1.700
From 28.001 - to 36.300 25 3.775
From 36.301 - to 60.000 30 10.885
Οver   60.000 35  
Foreign pension income is taxed at the rate of 5%. An annual exemption of €3.420 is granted. The taxpayer can however elect to be taxed at the normal tax rates and bands set out above. This is a choice which may be made year-on-year.
 

Corporation tax

All Cyprus tax resident companies are taxed on their income accrued or derived from all chargeable sources in Cyprus and abroad. A non- Cyprus tax resident company is taxed on income accrued or derived from a business activity which is carried out through a permanent establishment in Cyprus and on certain income arising from sources in Cyprus. A company is a resident of Cyprus if it is managed and controlled in Cyprus.
 

 

Foreign taxes paid can be credited against the corporation tax liability. The corporation tax rate for all companies is 12.5 % There are several tax deductions for expenses There are several exemptions and deductions.



 

Value Added Tax

VAT is imposed on the supply of goods and provision services in Cyprus, as well as on the acquisition of goods from the European Union (EU) and the importation of goods into Cyprus. Taxable persons charge VAT on their taxable supplies (output tax) and are charged with VAT on goods or services which they receive (input tax).
 


If output tax in a VAT period exceeds total input tax, a payment has to be made to the State. If input tax exceeds output tax, the excess input tax is carried forward as a credit and set off against future output VAT. Imposition of the reduced rate of 5% on the acquisition and/or construction of residences for use as the primary and permanent place of residence.


 

VAT rates


The legislation provides for the following four tax rates:
Zero rate (0%)
Reduced rate of five per cent (5%)
Reduced rate of nine per cent (9%)
Standard rate of nineteen percent (19%)

 

Registration to the VAT


Registration is compulsory for businesses with (a) turnover subject to VAT in excess of €15.600 during the 12 preceding months or (b) expected turnover subject to VAT in excess of €15.600 within the next 30 days. Businesses with turnover of less than €15.600 or with supplies that are outside the scope of VAT but for which the right to claim the amount of the related input VAT is granted, have the option to register on a voluntary basis.
 

VAT declaration - payment/refund


VAT returns must be submitted quarterly and the payment of the VAT must be made by the 10th day of the second month that follows the month in which the tax period ends.
 
 

Social insurance

Contributions 

%

By the Employer  7,8
By the Employee  7,8
By the State  4,6
Total  20.2
  
 



The contribution rate for employees will change on 2019,2024,2029,2034 and 2039. The contributions of self-employed persons are 14.6% of their income.

Social insurance contributions are restricted to a maximum amount that is usually increased annually. In case that the wage or salary is higher than the maximum amount, no contribution is paid on that higher amount.
 
 

PROPERTY OWNERSHIP

  
Compared to many countries Cyprus has flexible property buying procedures. People of Cypriot origin and EU citizens are allowed to purchase however much property they choose. A non-EU citizen is entitled to FREEHOLD ownership of a villa, apartment, or a piece of land of up to 4,014 m2.
International business units may also acquire premises for their activities or for residence of their foreign employees.
 

Paying for property


It is a requirement to pay for your property in Euro. Personal cheques, bank drafts and telex transfers might be acceptable.

Leptos Estates can deal with all your money transfers ensuring that the necessary certificates relating to the property purchase are obtained from the Central Bank of Cyprus.

Approval of the Council of Ministers


Having signed a contract of sale for your property, it will be necessary to make an application to the Council of Ministers to grant its approval for a non-Cypriot to acquire immovable property.

Leptos Estates will assist in the processing and monitoring of your application at no extra cost.

Selling your property


In case of selling property, foreigners are allowed to repatriate the funds immediately to the value of the purchase price (including any amounts spent on improvements and/or additions to the property).

Profits can also be repatriated.
 

Property taxes/fees


GOOD NEWS FOR PROPERTY BUYERS Property Transfer Fees reduction of 50% is now permanent.

The Cyprus Finance Ministry announced that the temporary arrangement to reduce Property Transfer Fees by 50 per cent, 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.

In its announcement the Finance Ministry stated “The above arrangement aims to boost additional growth in the construction industry and attract new investments from both the domestic, and the foreign markets.”

Property Transfer Fees: these are necessary in order to transfer FREEHOLD ownership to your name.

This can be done as soon as the relevant Government Authority has issued the title deed and the purchase has been settled.

The Property Transfer Fees are payable once only to the Land Registry Office according to the following scale:
 

Value of Property in Euros

Transfer fee Rate

Up to € 85,000 3%
From € 85,001 - € 170,000 5%
Over - € 170,000 8%

For example Purchase price in Euros € 200,000

1st € 85,000 3% = € 2,500
2nd € 85,000 5% = € 4,250
3rd € 30,000 8% = € 2,400

 Total € 9,200

 New Fees Payable € 4,600

 
 However, if the property is purchased jointly by a couple (as is often the case) the property purchase price is split equally into two   parts and then taxed, which is beneficial to the purchasers as the following example shows:
 

 

1st € 85,000 3% = € 2,550 x 2 = € 5,100
Balance € 15,000   5% = € 750 x 2 = € 1,500
   
 

 Total  € 6,600

 New Fees Payable € 3,300

 

 

Immovable Property Tax:

Cyprus Immovable Property Tax Reduction of Over 70% in 2016

The legislation also provides the abolition of the tax from January 1st 2017 onward.


The plenary of the House of Representatives voted on July 14 to reduce immovable property tax between 72.5% and 75% for 2016 and to abolish it from 2017 onward, Cyprus News Agency reports. The legislation passed by a majority vote of 29 for, 18 against and 5 abstentions.

In particular MPs voted for a legislative proposal jointly submitted by ruling part DISY and opposition parties DIKO, social democratic EDEK and the Solidarity Movement which stipulates that the payable immovable property tax from 2016 will be at 25% of the amount calculated with the existing provisions in place, that is to say its value on January 1st, 1980 provided that it is paid until October 31st 2016.

The new legislation also provides that in case the tax is fully paid between November 1st and December 31st the tax, which has to be paid, will be at 27.5% of the taxable amount on the basis of existing provisions in place.

It further includes the imposition of a penalty of 10% on the 27.5% of the taxable amount if it is not settled by December 31st 2016. The legislation also provides the abolition of the tax from January 1st 2017 onward.
 

Capital Gains Tax:

Capital Gains Tax is imposed (when the disposal is not subject to income tax) at the rate of 20% on gains from the disposal of immovable property situated in Cyprus including gains from the disposal of shares in companies which own such immovable property, excluding shares listed on any recognised stock exchange.
The following disposals of immovable property are not subject to Capital Gains Tax:

- Transfers arising on death
- Gifts made from parent to child or between husband and wife or between up to third degree relatives
- Gifts to a company where the company’s shareholders are members of the donor’s family
- Gifts by a family company to its shareholders
- Gifts to charities and the Government
- Exchange of properties

Liability is confined to gains accruing since 1 January 1980. The costs that are deducted from gross proceeds on the disposal of immovable property are its market value at 1 January 1980, or the costs of acquisition and improvements of the property, if made after 1 January 1980, as adjusted for inflation up to the date of disposal on the basis of the consumer price index in Cyprus. Expenses that are related to the acquisition and disposal of immovable property are also deducted, subject to certain conditions e.g. transfer fees, legal expenses etc.

Individuals can deduct from the capital gain the following:
- Disposal of private residence (subject to certain conditions) 85.430
- Disposal of agricultural land by a farmer 25.629
- Any other disposal 17.086
 
The above exemptions are lifetime exemptions subject to an overall lifetime maximum of €85.430
 

Stamp Duty:

Based on the new modified law for stamp duties 173 (1) 2013 which is in force as from 1st March 2013, stamp duty payable on the Contracts of Sale will be as follows:

The first 5,000 NIL
5,001-170,000 1,50 ‰ on the value or part thereof
Over 170,001 2,00 ‰ on the value or part thereof with a MAXIMUM LIMIT of €20,000

Example Contract of Sale value €250,000

First €5,000 NIL
For next €165,000 will be paid €1,50 ‰ i.e. € 247,50
For remaining €80,000 will be paid €2,00 ‰ i.e. €160,00
  €407,50
There is a maximum limit of stamp duty to be paid for one Contract of Sale/ agreement which is €20,000.
 





Estate Duty

Estate Duty has been abolished since 1 January 2000. The executor/ administrator of the estate of the deceased, is required by the Deceased Persons Estate Law, to submit to the tax authorities a statement of assets and liabilities of the deceased within six months from the date of death.






Disclaimer
The information contained in these pages are considered accurate and reliable at the time of release without guaranteeing absolute accuracy and completeness at any time.
 
 


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