Cyprus

Why Buy Property in Cyprus?

Attractive taxation laws make it particularly appealing to retirees. The Turkish-occupied part of the island (called by its government the Turkish Republic of Northern Cyprus - TRNC) is not internationally recognised as a legal territory. Because of this, we do not endorse purchasing property there.

Popular property locations – an overview

Interest from overseas property purchasers has traditionally been divided between Paphos on the western end of the south coast, Limassol on the central south coast, and Larnaca on the eastern outpost of the south coast. In more recent years, the relative outposts of Polis in the far west and Agia Napa in the island’s far east have drawn widely differing crowds to their shores.

Paphos

Paphos is arguably the most popular town in Cyprus with British buyers of second homes.

Paphos is an archaeological treasure trove, being home to several tombs of ancient kings and a number of important mosaics from Ancient Greek times. Contemporary life revolves around a bustling restaurant and beach scene, particularly in the popular Coral Bay area, 10 minutes’ drive from the town centre.

Limassol

Cyprus is at its most urban in Limassol.

Limassol is also home to Cyprus’s largest docks, a working area located to the west of the city centre. Nearby, plans to build a new marina to entice wealthy yacht owners to moor locally are afoot, as part of a government initiative to position Cyprus as a more upmarket destination. Similar thinking is behind plans to develop several golf courses dotted around the island, including one on Limassol’s outskirts.

Naturally, property for sale will be a feature of the new golf course developments – modelled on the hugely successful and prestigious Aphrodite Hills Golf and Spa resort, located between Limassol and Paphos. This hilltop development is the island’s property benchmark.

Larnaca

Cyprus’s third town and the location of its main scheduled airline airport, Larnaca, on the southeast coast, is a waterfront town that has its supporters. The nearby beaches are amongst the island’s best. Property prices are a little higher than on the west coast, primarily because there is less land and new build development taking place here than elsewhere on the island.

Buying a property in Cyprus

The purchase process in Cyprus

The legal system in Cyprus is based on the English legal system, as is the Land Registry. As you would in the UK when buying a property, engage the services of a reputable, independent solicitor.

Permission to buy a property in Cyprus must be obtained from the Council of Ministers by written application.

Transfer of ownership is accomplished by a straightforward procedure through the Cyprus Land Registry Office.

Property Costs, Fees and Taxes

Several fees and taxes are payable when buying property in Cyprus. These generally amount to between 6 and 7 per cent of the purchase price and include:

• Transfer fees on the purchase of a new or resale property, at 3 per cent on the first £60,000, 5 per cent on £60,000–£120,000, and 8 per cent on amounts above that

• Stamp duty at 0.15 per cent of the purchase price up to the value of £120,000, and thereafter at 0.20 per cent for every additional £1,200

• VAT (at 15 per cent) on new build properties only

• The fee for the application to the Council of Ministers – £180

• Legal fees – Allow 1 per cent of the purchase price

• Surveyor’s fee (optional)

• Mortgage fees (if applicable)

• Foreign exchange costs (if applicable)

Mortgages & Financing property in Cyprus

Purchasers requiring finance have the choice of remortgaging their UK home, thus releasing equity built up in it, or arranging a mortgage on the Cyprus property. Remortgaging is often the preferable route for buyers, as releasing equity in a UK property means that the second home can be purchased for cash, effectively, without the need for another mortgage. However, rising property prices in Cyprus may mean remortgaging is not an affordable or viable option for everyone.

Euro mortgages

Euro mortgages are now available in Cyprus the island has now fully adopted the European currency.

Taxation

Cyprus’s taxation system is similar to that of the UK. Personal taxation: non-residents

Non-residents are subject to income tax only on income earned in Cyprus. This includes income from letting property, which is taxed at progressive rates of up to 30 per cent, depending on the amount.

Non-residents may also be liable for capital gains tax (CGT) on the profit from the sale of a property, according to individual circumstances. Property sales are subject to CGT at a rate of 20 per cent on the gain, although the first £12,000 of the gain is exempt.

In Cyprus, for non-residents and residents alike, there is no gift tax or inheritance tax.

Personal taxation: residents

For tax purposes, a foreign national staying in Cyprus for more than 183 days during a tax year (1 January to 31 December) is considered a resident. Residents of Cyprus are subject to progressive taxation on worldwide income. Income of £12,000–£24,000 is taxed at bands of between 20 and 25 per cent. The highest rate payable is 30 per cent on income over £24,000.

Residents of Cyprus are also subject to other taxes, including a contribution for ‘passive’ income, for example rental income. VAT at a rate of 15 per cent is levied on most goods; a reduced rate of VAT of 5 per cent is charged on some products, mainly food and agricultural products.

Local taxes

The annual Immovable Property Ownership Tax amounts to approximately £60–£180 sterling, depending on the value of the property.

Money matters

Cyprus changed to using the Euro as official currency on 1st January 2008, putting it in line with the majority of Europe, and making Euro mortgages the standard on the island.

Banks, bureaux de change and ATMs are available in larger towns and tourist resorts.

Passports, visas and residency

Passports and visas

To enter Cyprus, British citizens need a passport, which must be valid for the duration of their stay. Residency

Cyprus does not require EU citizens (including British nationals) to have residence permits.

A non-Cypriot who owns property in Cyprus is entitled to a residence permit.

The Cypriot economy

The Republic of Cyprus has a capitalist economy dominated by the service sector, which accounts for 76 per cent of GDP. The financial services sector is key, and the island is also heavily dependent on tourism to fill its coffers.

Traditionally, Cyprus has exported large quantities of citrus fruits and olives, significantly to the UK.

Cyprus acceded to the EU in May 2004, and joined the European Exchange Rate Mechanism (ERM2) in May 2005.

Communications

Telephone

Telephone communications are generally excellent in Cyprus, both for landlines and mobile reception. Public telephones are available in most towns and post offices. The country dialling code is +357.

Internet

Internet access in Cyprus can be obtained through dial-up service, cable-modem, dedicated lines and DSL. The Cyprus country suffix is .cy

And finally…

Buying a home abroad for pleasure or profit is a major decision and one that should not be taken lightly. It is vital to ensure you have researched all aspects thoroughly and have all the relevant facts to hand before committing to a purchase.

Individual circumstances will vary widely, so it is essential to obtain professional advice and guidance tailored to your particular situation, especially in areas such as property purchase, potential rental returns, taxation and mortgages.