Michael Kyprianou & Co LLC
Can anyone (including foreigners) own and occupy real estate in your jurisdiction (including shares in property owning companies)? Are there any restrictions?
Anyone can own and occupy real estate. Nonetheless, there are some restrictions that apply to certain types of property and certain categories of buyers. These are areas that are designated as military or strategic zones, or as areas of environmental or cultural protection.
Buyers who are not citizens of Cyprus or of any other member state of the European Union (EU) require a prior approval from the Council of Ministers.
In cases where a company that is registered in Cyprus or in any other member state of the EU the limit does not apply.
Are there restrictions on lending for the purchase of real estate by foreign companies? If so briefly give an outline?
Foreign companies that want to buy real estate in Cyprus may face some restrictions on lending funds from local banks. According to the Cyprus Investment Promotion Agency (CIPA), foreign companies need to obtain a permit from the Council of Ministers before they can acquire immovable property in Cyprus. This process may take several weeks and requires various documents and fees. In addition, foreign companies may have to comply with the anti-money laundering regulations and the Central Bank of Cyprus's directives on lending criteria and interest rates. Therefore, foreign companies should consult legal and financial experts before applying for a loan to buy real estate in Cyprus.
Buying
Please provide a short summary of the fees and costs (including tax) relating to buying real estate in your jurisdiction.
Transfer fees: These are paid to the Land Registry and depend on the property value and the number of buyers. They range from 3% to 8% of the property value.
Stamp duty: This is a one-time tax paid to the Tax Department within 30 days of signing the contract of sale. It is calculated as 0.15% of the property value up to €170,000 and 0.2% for the excess amount.
VAT: This is a value-added tax that applies to new properties or properties under construction. The standard rate is 19%, but there are reduced rates of 5% or 0% for certain categories of buyers and properties.
Other fees: These may include fees for valuation, survey, mortgage, insurance, utilities, and maintenance. They depend on the specific circumstances of each buyer and property.
Owning
Are there taxes applicable to owning real estate and can the burden of the taxes be passed to someone else (e.g. a tenant or an occupier - not being the owner
Owning real estate in Cyprus comes with certain tax obligations that vary depending on the type, value, and use of the property.
Immovable property tax (IPT) is an annual tax levied on the market value of the property as of 1 January 1980. The tax rates range from 0.6% to 1.9% depending on the value of the property. The IPT is payable by the registered owner of the property as of 1 January of each year. However, the IPT was abolished in 2017, so no IPT is due for 2018 and onwards.
Local authority taxes and fees are payable by the owner of the property to the municipality or community where the property is located. These taxes and fees cover services such as garbage collection, sewerage, street lighting, etc. The owner of the property is responsible for paying these taxes and fees, unless there is a contractual agreement with the tenant or the occupier to pass the burden to them.
Capital gains tax (CGT) is a tax imposed on the profit from the sale of immovable property or shares of a company that owns immovable property in Cyprus. The CGT rate is 20% and it is payable by the seller of the property. There are some exemptions and allowances that reduce the taxable gain, such as the lifetime exemption of €17,086 for individuals, The CGT cannot be passed to the buyer or any other person, as it is a personal liability of the seller.
Income tax is a tax levied on the income derived from immovable property in Cyprus, such as rental income, interest income, or dividends. For individuals, the income tax rates range from 0% to 35% and there are some deductions and allowances that reduce the taxable income, such as the personal allowance of €19,500, the interest expense, and the depreciation of the property. For companies, the income tax rate is 12.5% and there are also some deductions and allowances. The income tax is payable by the person who receives the income from the property, unless there is a contractual agreement with the tenant or the occupier to withhold and pay the tax on their behalf.
Tax Breaks
Are there tax breaks or other incentives for foreigners to buy real estate in your jurisdiction? If so, what are they?
Cyprus offers several attractive benefits for foreigners who want to invest in real estate on the island. Some of these are:
- A low corporate tax rate of 12.5% for companies that own or manage properties in Cyprus.
- A reduced VAT rate of 5% for the purchase of a first residence in Cyprus, subject to certain conditions and criteria.
- A permanent residency program that grants a residence permit to investors who buy properties worth at least €300,000.
These incentives make Cyprus an attractive destination for foreign real estate buyers who want to enjoy the island's climate, culture, and business opportunities.
How is the ownership of Real Estate evidenced in your jurisdiction?
The ownership of real estate is evidenced by the title deed, which is issued by the Department of Lands and Surveys. The title deed contains the details of the property, such as the location, area, boundaries, and any encumbrances or restrictions. The title deed also shows the name and identity of the owner, as well as the date and mode of acquisition. The title deed is the official and conclusive proof of ownership, and it can be used for any legal or financial transactions involving the property.
Is it possible to keep the identity of owners of real estate confidential in your jurisdiction?
In Cyprus it is possible to keep the identity of Real estate owners confidential from the public, by using structures such as Cyprus Registered Companies or International Trusts. These legal entities appear on public records, not the individual owners, however, under EU Anti-Money Laundering Law, the beneficial ownership must be reported to Government registries. While public access to this registry is restricted, Authorities and certain professionals, e.g. Lawyers, can access them if they have a legitimate interest. So, while full anonymity isn’t possible, a high degree of privacy can be maintained through proper legal structuring and compliance