Cyprus property taxes
When buying or investing in property in Cyprus, there will be many taxes and fees attached to the sale. Before you can add a Cypriot property to your portfolio, it is important to keep these charges and rates in mind.
Below, we have lined up a complete guide to applicable taxes and fees for Cyprus property owners. Of course, please keep in mind that some rates will be subject to change. Please also note that the following information and data are advisory. This means you must check all rates and fees with a licenced financial advisor before proceeding with a sale.
Should the following advisory data change in the future, we will update it as soon as physically possible.
Property transfer fees
For any property in Cyprus to transfer into your name or holding, you must pay a single, one-off fee. This fee is transferable to the Department of Land and Surveys.
You won’t have to pay transfer fees if you owe VAT on properties. We will cover VAT in a little more detail further down in this guide.
At the time of writing, you can expect to pay the following fees/rates on transfers—this data is based on the market valuation of the property in question.
- Properties worth up to €85,000: Rate of 3% applies (approx. €2,550)
- Properties worth up to €170,000: Rate of 5% applies (approx. €4,250, or €6,800 cumulative)
- Properties worth more than €170,000: Rate of 8% applies
Cyprus’ transfer fee will apply to each separate property or investment, should you purchase more than one.
Exemptions on transfer fees include those projects undergoing restructuring or reorganising within specific rules. You may also be exempt from transfer fees if property mortgaged is in play. Transfer fees also calculate at 0% between parents and children and 0.1% between spouses / between distant relatives.
STAMP DUTY FEES
Stamp duty is paid on Cypriot property in a single fee. This charge applies to the following extent depending on the value of the property in question:
- Properties valued up to €5,000: No stamp duty to pay
- Properties valued up to €170,000: Rate of 0.15%
- Properties valued more than €170,000: Rate of 2%
Stamp duty is payable via the local Municipality.
VAT is payable on property acquisition at a rate of 19%. This is Cypriot law and is enshrined since 2004 as a result of European Union membership.
However, there is a VAT reduction potential, which means property investors may only need to pay 5% in fees. This is in line with VAT Amendment Laws in Cyprus.
For the 5% rate to apply, the following conditions are expected:
- It must be the sole residence of the applicant in Cyprus.
- It must be the applicant’s primary address.
- The applicant must be over 18 years of age and must be acting as an individual.
The 5% rate will then apply to the initial 200 square metres of the property in question. Beyond this area, the standard rate of 19% will then apply.
The 5% rate may also apply to buyers from other countries. However, the property must be the main dwelling and not an investment. There must be no intent for economic gain for these buyers to benefit from the lower rate.
VAT authorities may also offer a discount of 14% on total rates on receipt of building permits. This means that, by default, the purchaser must make the payment of the total 19% ahead of permit acquisition.
VAT is payable to the Republic of Cyprus’s Government made in a single, one-off payment.
CAPITAL GAIN TAX
Capital Gains Tax is payable by the property seller. This is a one-off payment levelled at 20%. It does not apply to the first €17,086 sellers generate from the transaction.
The tax applies to net profit and does not apply to property sales between the 16th of July 2015 and the 31st of December 2016.
Exemptions can apply if the owner resides in the property for five years (minimum) before the sale. They are exempt on CGT up to a total of €85,430.
Proof of certain expenses may also ensure reductions in CGT. These may include cases of loan interest, stamp duty, IPT, licenced estate agent commission, inflation and legal fees. Planning permission costs may also be acceptable.
PROPERTY SALES TAX
Property Sales Tax, or PST, is a relatively recent measure that applies 0.4% tax to all immovable property in Cyprus, and this is payable by the property seller.
This tax pays towards support for Greek Cypriot refugees, specifically those affected by the invasions of 1974.
Immovable Property Tax
Immovable Property Tax, or IPT, is no longer payable. All properties bought after the 1st of January 2017 are not held to IPT demands.
Municipality tax is owner-paid and applies each year. Property buyers will need to ensure to pay rates based on the size of their investments or purchases.
For example, rates of at least €85 will apply per annum. These fees will increase to as much as €500 annually. This tax came into law in 2013 and generally levels between 1% and 2%.
Payments under this tax help to fund local services and facilities.
Rental Income Tax
Should you make income from letting property to tenants, you will also need to pay tax to the Cypriot state.
Income tax applies only to 80% of your gross rent income. The rate can reduce if you have capital allowances of up to 3%. Similar reductions apply if you pay interest on property purchase loans.
Defence fees of 3% also apply in some cases, applicable after 25% reductions on the gross. Non-Cyprus residents are exempt from paying this fee. What’s more, non-residents will only have to pay rental income tax on immovable properties.
Personal Income Tax
It is also worth considering the personal income tax rates that apply in Cyprus. Depending on the income you earn while in the country, you can expect to pay between 20%, 35% over a specific threshold. Please consult the following breakdown:
- Income up to €19,500 – No tax payable
- Income up to €28,000 – 20% tax payable
- Income up to €36,300 – 25% tax payable
- Income up to €60,000 – 30% tax payable
- Income above €60,000 – 35% tax payable
There are some exemptions to the above tax listings. For example, those resident paying tax in Cyprus – but who do not live there – will not need to pay defence fees. Defence fees of 17% do apply to tax residents earning dividends. However, they do not need to pay the income tax rate on this money.
Interest, too, is applicable for the special defence fee, though it is exempt from income tax. Defence rates on part sit at 30%.
However, business owners and investors will need to consider whether or not interest is business profit. Should this be the case, the same rates as above will apply.
It is also worth considering pensions in relation to the above mentioned. Foreign pensions have an exempt allowance of €3,420 but then receive flat taxes of 5% after that. Cypriot pensions receive the same deductions.
There are a variety of deductions made from personal income in Cyprus. It is a good idea to consult a financial advisor for more information on what to expect. Contributions likely to emanate for most people include pension payments, social insurance and trade union membership fees.
What is a Tax Resident?
Before buying a property in Cyprus, it is also worth considering the definition of a ‘tax resident’. Tax residency applies when you live and operate in Cyprus for 183 days or more in one calendar or tax year.
However, you can also be classed as a tax resident in the country under other means. For example, if you are not a tax resident elsewhere or run a business in Cyprus, you may be held to this status. The same may apply if you spend less than 183 days abroad, or at least 60 in total in Cyprus itself.
You should also keep tax residency in mind if you have a permanent domicile on the island. In some cases, if you are a tax resident but NOT domiciled in Cyprus, you may not need to pay special defence fees.
Tax residents pay income fees on all income within Cyprus and outside of it. Non-tax residents will only ever pay these fees on Cyprus income.
Preparing for Property Tax in Cyprus
In many ways, tax rates in Cyprus are desirable to property owners and investors. However, while rates may be preferable, there are still weights and measures in place for a reason.
It is always a good idea to consult a financial advisor or an estate agent or developer. Never invest in properties, or develop on them until you understand the ramifications of the taxes involved.
Do make sure to update yourself regularly on tax rules in Cyprus. There is nothing to say these taxes won’t change the in future, but as always, it is worth keeping an open mind.