What you need to know from a tax perspective
As a permanent resident of Cyprus, you are taxed on your worldwide earnings. These rates are some of the lowest in Europe. Cyprus also has double-taxation treaties with many countries, which are designed to ensure that income that has already been taxed in one country isn’t taxed again in another. Other advantages of living in Cyprus are that there are no inheritance, gift or wealth taxes.
Any person resident in Cyprus for more than 183 days per tax year (1st January to 31st December) is liable to pay tax there on their worldwide income. Non-residents are taxed only on income earned in Cyprus. Residents and non-residents must pay tax on property income at standard income tax rates, and property income must therefore be included in your annual income tax declaration.
In comparison to many other countries the process of purchasing property in Cyprus by foreigners is very simple. Non Europeans are entitled to a freehold ownership of a villa, an apartment or a piece of land, with maximum of 4014 sq.meters (four thousand and fourteen square meters). Europeans are entitled to a freehold ownership of a villa or an apartment. The above restriction, in respect of Europeans, will hopefully soon be abolished because Cyprus entered the EU.
It is very possible that such a change in the legal system will increase demand of real estate sharply with the related reflection on property prices. In respect of plots of land, Europeans can purchase as many and for any extent. This was one of the changes which took place because of the entry of Cyprus to the EU. Foreign companies can acquire premises for their business or for holiday home for their directors.
Europeans who acquire permanent or temporary permit can register in their name as many properties as they want provided that they sign a confirmation to the government that they will stay for the following five years in Cyprus. Properties in Cyprus are on average 20% - 30% lower in prices than Portugal, 30% - 40% lower than Spain and 50% - 60% lower than Italy and France.
|Most commercial banks in Cyprus are authorized to offer mortgage facilities to local as well as foreign applicants to assist in the purchase of their property. Yiannakas Real Estate , using its strong relationships with most of the local banks, and in an attempt to reduce finance costs for its customers as well as to speed up the application process, has managed to set up special finance schemes which are on offer for all our customers. |
For the majority of its projects Yiannakas Real Estates has managed to set up finance schemes with local banks with minimal security requirements resulting in substantially lower costs.
- Assignment of the Purchaser’s rights deriving from the Contract of Sale in favor of the Bank.
- In certain cases a corporate guarantee is provided by Yiannakas Real Estates to the banks as a security to the clients’ mortgages.
Documents/Information required by the banks:
- Customer’s profile (Personal details, occupation-duration of your employment contract if any with your current employers).
Passport copies (the page with the photograph & personal information).
- Statement of existing debt (if any).
- A reference Letter from the Bank you maintain an a/c with.
- Completion of the Declaration of Personal Income form.
- Evidence of income either pay slip or confirmation of remuneration from your employer, or P60 or business accounts.
- Purchase agreement.
Copies of bank statements for the last three months.
- Copies of payments already made by the applicant for the property.
- To open and activate an account with the bank.
The Title Deed
| ||Transfer of ownership from Vendor to Purchaser is undertaken by a simple procedure through the Cyprus Land Registry Office, either by the buyer in person or by appointing a third party with a Power of Attorney. The transfer of ownership requires a permit from the Council of Ministers. |
Taxation of Property Income. How much is tax on property income?
Residents and non-residents must pay tax on property income at standard income tax rates, and property income must therefore be included in your annual income tax declaration.
However, a 20 per cent deduction from letting income is allowed, as is any interest on a loan taken out to purchase or improve the property; there’s a further 3 per cent deduction for depreciation.
Residents must pay an additional tax at 3 per cent (known as Special Contribution for Defense) on 75 per cent of their total rental income.
Immovable Property Tax. Who needs to pay it?
This is an annual tax payable by all property owners in Cyprus, irrespective of their residence status. It’s imposed on the market value of the property as of 1st January 1980 and is calculated on the immovable property owned by the tax payer on 1st January each year.
|Value of Property Tax (€) |
|Rate (%) |
|Tax (€) ||Cumulative (€) |
|0 - 170.860,14 |
170.860,15 - 427.150,36
427.150,37 - 854.300,72
854.300,73 And over
Immovable property tax is payable annually on 30th September.
These are paid on the transfer of immovable property and are calculated on the market value of the Property as estimated by the Land Registry department.
|Market Value (€) |
|Percentage (%) ||Fees (€) ||Cumulative Fees (€) |
|1,71 - 85.430,07 |
85.430,08 - 170.860,14
170.860,15 And over
If the property is in joint names e.g. of a couple (husband and wife) or two individuals, then the purchase value is divided into two parts which results in reduced transfer fees.
Capital Gains Tax
On gains from disposal of immovable property situated in Cyprus, capital gains tax will be imposed at the rate of 20% with the first €17.086,01 being exempt for each person. The gain is the difference between the sales proceeds and the original cost of the property. In the case of a property which was purchased before 1/1/1980, the gains are the difference between the sales proceeds and the market value of the property as of 1/1/1980.
The seller is entitled to a further allowance regarding the transfer fees paid, inflation rate per year and the cost of any additions made to the house.
Gains from the disposal of a private residence are exempt up to € 85.430,07 in total if the owner resides in it continuously for at least five years prior to disposal.
Gains from the disposal of a dwelling house are exempt up to € 85.430,07 in total if the owner resides in it continuously for at least five years prior to disposal.
Stamp Duty on Contracts
The purchaser is liable for the payment of stamp duty on the purchase price of the property as follows:
|up to €170,860.14 |
| 0,15 % |
| From above |
| 0,20 % of anything above € 170.086,14 plus €256,29 |
This should be paid within 30 days from signing of the contract of sale, otherwise a penalty fee is paid which is usually double the stamp duty applicable.
Estate Duty tax has been abolished as from the first of January 2000 (Statute No.78(1)/2000).
Since 1/5/04 a new statute in respect of VAT on properties has been introduced. Disposals of newly-constructed properties for which a proper application for planning permit has been submitted with the relevant authorities after 1/5/04 are subject to VAT at standard rate. Under certain conditions, a grant is given to entitled persons for the purchase of newly-constructed properties that are used as the main permanent residence.
The application for the grant is submitted to the Ministry of Finance by any physical person citizen of the Republic of Cyprus or of any other EU member state who resides permanently in the Republic of Cyprus. The grant is for properties whose total covered area does not exceed 250 m2 and is restricted to 130 m2. For more details you may contact a local accountant.
Cyprus is unique when it comes to the taxation aspects of living on the island.
The following income tax rates apply to individuals:
|Taxable Income (€) |
|Tax Rate (%) ||Tax (€) ||Cumulative Tax (€) |
|0 - 19.500 |
19.501 - 28.000
28.001 - 36.300
36.301 And over
Retirees who become residents in Cyprus are taxed on their pensions from abroad at the rate of 5% per annum while an annual exception for the first € 3417.20 is granted.
Cyprus has established Double Taxation treaties with the majority of European and non-European countries, safe-guarding that its residents will avoid paying tax in both countries. This gives the option to the citizens of these countries to take advantage of the very low rates in Cyprus.Double Taxation treaties are with Austria, Bulgaria, Canada the People's Republic of China, the Czech Republic, Denmark, Egypt, France, Germany, Greece, Hungary, India, Ireland, Italy, Kuwait, Malta, Norway, Poland, Romania, Russia, (Armenia, Belarus, Kurdistan, Moldova, Tajikistan, Turkmenistan and Ukraine) Slovakia, South Africa, Sweden, Syria, the United Kingdom, the United States, Yugoslavia (Serbia and Montenegro) and other countries.