SALE AND PURCHASE OF PROPERTY IN CYPRUS


 

In General

The law governing the acquisition of immovable property in Cyprus by foreigners is the Cypriot Acquisition of Immovable Property (Foreigners) Law, Cap. 109 of the Laws of Cyprus (hereinafter referred to as “the Law”), as amended from time to time.

Section 2 of the Law - Definitions

It should first be noted that for the purposes of the Law, “foreigner” means a person who is not a citizen of the Republic and includes a company controlled by foreigners, a foreign company and a trust created for the benefit of a foreigner.

But does not include the following:

  1. A foreigner Cypriot;
  2. A foreigner wife of a citizen of the Republic of Cyprus who is not divorced from her husband by decision of a competent court;
  3. European Union National

 

Subject to a recent amendment of the above Law a Cyprus Company, regardless of who the shareholder is, does not fall within the above definition and can buy any property in Cyprus. For example a Cyprus Company with a foreigner shareholder can buy any kind and as many immovable properties in Cyprus without the need of the permission of the Council of Ministers.

Section 3(1) of the Law - Prohibition

Section 3(1) of the Law, provides that:

“A foreigner is prohibited from acquiring immovable property (in the Republic) by cause of death (i.e. inheritance) or otherwise, except with the prior license (i.e permission) of the Council of Ministers.” A foreigner, though, can acquire only one property in Cyprus i.e. one house, flat, land etc. In case of land this shall not exceed 4014 sq. m. in extent.

 

In Practice – Procedure including permit issued by the Council of Ministers

In practice, the foreigner who wishes to proceed with the acquisition of immovable property in Cyprus will attend to the following matters:

1.    Drafting and execution of an Agreement for the Acquisition of Immovable Property (hereinafter referred to as “the Agreement);

The above mentioned Agreement will set out the terms and conditions of the acquisition of the immovable property in question and regulate the relationship between the “seller” and the foreigner as “buyer”, but in the eyes of the Law, it will not confer on the foreigner, an ownership right to the immovable property:

Section 3(3) of the Law, provides that:

“A valid agreement, written or oral, drafted in accordance with the Contract Law or any other law in force, which provides for the acquisition of immovable property in Cyprus by a foreigner, does not provide the foreigner with any ownership rights to the immovable property, up until the issue of a permit (license) by the Council of Ministers pursuant to Section 3(1) (which is set out above).”

 

This agreement must be officially stamped within one month of its signing (in case of default penalties are imposed) and it must be deposited within 6 months from its signing, to the Land Registry Office of the district where the purchased property is situated. The depositing of the Contract in the Land Registry is a security to the Purchaser that the Property is his property obstructing the Vendor of selling it or transferring it to someone else or even mortgaging it. This is done to cases where a separate title deed has not yet been issued for the Purchased Property. This applies to Properties under construction or to new properties. The title deed for those properties is issued within 3-4 years approximately after completion. The lack of a separate title deed for the Purchased Property in the name of the Vendor does not prevent the Purchaser   from selling the Purchased Property. In such a case a cancellation can be signed between the Vendor and the Purchaser simultaneously with the signing of a new Contract of Sale between the Vendor and the New Purchaser. It is advisable for the Purchaser at the time of the negotiation to agree with the Vendor his cancellation fee and include it in the Contract of Sale.  Also in accordance with new amendments in the relevant law instead of a cancellation an assignment can be signed between the Purchaser and the New Purchaser and can be deposited at the Lands Registry Office for specific performance purposes. The assignment is only signed by the Purchaser and the New Purchaser. The assignment must be deposited in the Land Registry within 2 months from its signing.

The depositing of the Contract of Sale in the Land Registry is also being done for specific performance reasons. Cap 232 Sale of Immovable Property (Specific Performance) Law provides among others that in order to be able to bring an action to Court for an order for specific performance the Contact of Sale must be deposited in the Land Registry within 6 months of its signing.

For old properties where there is a separate title deed issued a transfer of the title in the name of the Purchaser can take place immediately.

In Cyprus we have one of the best and reliable Land Registries in Europe

The stamps needed are as follows:

  1. 1, 5 per thousand up to €170860, 14 plus
  2. 2 per thousand from €170860, 14 up to €8543007, 21
  3. €17086, 01 fixed amount for a purchase deal of €8543007, 21 and over

 

2.    Application to the Council of Ministers for the issue of their permit and/or license for the acquisition of immovable property;

Upon finalization of the Agreement, which may or may not contain a clause as to the necessity for the granting of a permit by the Council of Ministers, the foreigner’s legal advisors, prepare an application to the Council of Ministers, requesting the issue of a permit pursuant to the provisions of the Law.

When the Council of Ministers receives such an application, it:

“…examines the said application, decides on the issue and provides the person who has submitted the application with a written notification of its decision…”

The time frame, within which such a decision is being notified, is 2 to 3 months approximately.

Until today all applications by foreigners to the Council of Ministers have been approved.

After the granting of the permission from the Council of Ministers and provided that a separate title deed has been issued for the purchased property then the vendor is obliged under the relevant Law (unless the contract of sale is not filed to the Lands office) to transfer and register the property in the name of the Purchaser.

3.    Registration of immovable property with the Land Registry in Cyprus;

When the permit and/or license for the acquisition of immovable property in Cyprus is granted to a foreigner, he/she must then visit the offices of the Land Registry in the district in which the immovable property concerned is located, and request that his/her ownership of the land, be recorder in the relevant Register.

The foreigner shall then be provided with the title deed to the property and this shall be the evidence of his/her ownership of the immovable property concerned.

The transfer fees payable for the registration of the immovable property in the name of the applicant purchaser are as follows:

  1. 3% up to €85430, 07 plus
  2. 5% from €85430 up to €170860, 14 plus
  3. 8% from €170860, 14 and over

A recent amendment of the relevant Law which became into force on the 2/12/2011 with issue for six months provides as follows:

 

1)      No registration fees are imposed when for the same transaction VAT is imposed and are sold for the first time from the date of issuance of the relevant planning permit or building permit and both the date of signing and deposit of the relevant sale agreement for the first time at the District Lands Office according to the relevant Law fall within the period of six (6) months from the date of commencement of the present Law.

 

2)      In cases where registration fees are imposed, but the transfer relates to building plots, buildings or their sections with their rights on the land or undivided shares, which are sold for the first time from the date of issuance of the relevant planning permit or building permit and both the date of signing and deposit of the relevant sale agreement for the first time at the District Lands Office according to the relevant Law fall within the period of six (6) months from the date of commencement of the present Law, the transfer fee will be reduced by fifty per cent (50%).

 

The registration fees are estimated by the District Land Registry Office at the time of the registration taking into consideration the value of the purchased immovable property at the time of the signing of the contact of sale provided that the contract of sale is officially stamped as provided above at the time of the signing. In case the contract of sale is not officially stamped at that time then the purchaser must prove to the Land Registration Office that the purchase took place on the date of the contract of sale.

Such proof may be receipts, payment slips, banker’s draft, remittances etc. and it is at the discretion of the Land Registry to accept such evidence or not.

4.     Other Taxes

a) Inheritance Tax: There is no Inheritance Tax in Cyprus

 

b) Capital Gains Tax: The capital gains tax is the tax imposed on the net profit proceeds from the sale. Net Profit means the profit of the sale after   deducting the following:

  1. transfer fees
  2. €17086 per person for first sale or €85430 when legally residing in the Property for more than 5 years
  3. Registered Estate Agents fees
  4. Any extras done on the Property
  5. Inflation etc.


c)  V.A.T.: For new Properties (that is for properties where the application for Town Planning Permission was filed after the 1/5/2004) V.A.T. is imposed.

Areti Charidemou & Associates LLC Law Firm