Navigating Property Taxes in Cyprus: What Every Buyer and Seller Should Know
As an island country located in the eastern Mediterranean, Cyprus has become an attractive destination for both property investors and individuals seeking to own a piece of its picturesque landscapes. When considering buying or selling property in Cyprus, it’s imperative to be well-informed about the local property taxes to avoid unexpected financial pitfalls. This article provides a comprehensive guide to understanding and navigating property taxes in Cyprus for both buyers and sellers.
1. Transfer Fees
When a property changes hands in Cyprus, the Land Registry office charges a transfer fee based on the property’s market value at the time of the transfer.
- Rate Structure:
- Up to €85,000: 3%
- €85,001 – €170,000: 5%
- Over €170,000: 8%
If the property is in joint names (e.g., spouses), the value is split into two, allowing for a more beneficial rate application.
Note: There have been periods when the government offers reduced transfer fees as incentives, so always check for any current discounts or promotions.
2. Stamp Duty
Stamp duty is payable by the buyer within 30 days of signing the sales agreement. It’s a progressive rate applied to the contract value:
- Up to €5,000: Exempt
- €5,001 – €170,000: 0.15%
- Over €170,000: 0.20%
The maximum stamp duty payable on a single agreement is capped at €20,000.
3. Immovable Property Tax (IPT)
IPT was a significant property tax in Cyprus but was abolished in 2017. This is a mention for historical purposes and to clear any confusion for those who might come across outdated information.
4. Capital Gains Tax
If you make a profit when selling your property in Cyprus, you’ll be liable to pay Capital Gains Tax (CGT) at the rate of 20%. However, there are significant allowances and deductions:
- First-time sales exemption of up to €85,000
- For agricultural land, an exemption of €25,430
- For any other type of property, an exemption of €17,086
The above exemptions can be combined under certain conditions, potentially providing up to a €127,516 deduction.
5. Local Authority Taxes
These are annual taxes and are based on the property’s market value as of 1980. They range between 0.1% – 0.3% and cover garbage collection, street lighting, and other municipal services.
6. Value Added Tax (VAT) on Property
Newly built properties in Cyprus are subject to a 19% VAT. However, if it’s your first residence, a reduced VAT rate of 5% might apply for properties up to 200 square meters.
7. Rental Income Taxation
If you rent out your property in Cyprus, the income generated is taxed progressively. The first €19,500 is tax-free, and rates range from 20% to 35% for incomes exceeding €60,000.
Navigating the intricacies of property taxation in Cyprus can seem daunting, but with a clear understanding and, ideally, guidance from a seasoned commercial law firm, you can make well-informed decisions. As with any financial endeavor, it’s crucial to remain updated on the latest regulations and amendments to ensure compliance and benefit from any new incentives.