PURCHASING AND COSTS


The Purchase of Real Estate by Non-Cypriots

In recent years Cyprus has become a popular place for the acquisition by foreigners of holiday houses. This increase in demand is attributed to many factors, like low cost of living and its high standard, the hospitality of the local population, the attractive climate, safety, security etc.

Restrictions

Cypriots or persons of Cypriot origin are allowed to purchase real estate property without any restrictions.

Non-Cypriots, however, are only given permission to acquire one of the following:

  • Apartment
  • House
  • Building plot or land up to approximately three donums (4,013 sq.m).
  • Offshore entities may also acquire premises for their business or for the residence of their foreign employees.

In certain cases, it is possible that the Council of Ministers will grant approval for the acquisition by an alien of a larger area of land, if the land is to be used for touristic development (eg. hotel or hotel complex) especially if the intended project is in an area where the Government wishes to promote tourism. A similar stand is taken for certain industrial sectors.

Definition of Alien

Alien means any person who is not a citizen of the Republic and includes an alien controlled company. It does not include Non-Cypriots of Cypriot origin or the alien wife of a person who is a citizen of the Republic.

Definition of Acquisition

Acquisition of real estate includes:

  • Transfer of Registration
  • Long leases of more than 33 years
  • The acquisition and control of shares in a company which owns real estate, if such an acquisition results in the company becoming controlled by Non-Cypriots
  • The establishment of a trust or other set up for the benefit of an alien

Application to the Council of Ministers

The acquisition of real estate property by Non-Cypriots requires the approval of the council of Ministers under the Immovable Property Acquisition (Non-Cypriots) Law Cap.109.

Application Form Details

Are the following:

  • Personal details of the applicant
  • Financial standing of the applicant
  • Details of the real estate to be acquired
  • Particulars of the property
  • Particulars of the present owner
  • Terms of payment
  • The way of acquisition (ie. freehold, leasehold shares in property company etc)
  • Copies of government survey plans
  • The prescribed completed application form is submitted to the District Officer where the property is situated. The District Officer together with the other relevant government departments will take further enquiries and prepare a report which is submitted to Council of Ministers through the Minister of Interior

The letter of approval or refusal may take six to nine months, but in the meantime there is no restriction in taking possession of the property.

The permit for the acquisition of immovable property by an alien is granted only if:

  • The house will be used only for his own residence and the building plot or land does not exceed three donums (4,013 sq.m.)
  • It is used for professional or commercial business.
  • It is used in manufacturing in areas where the Council of Ministers believes that it will be for the benefit of the Cyprus Economy and the production of products that are related to the use of new technologies or technical knowledge

The permit has the following conditions and restrictions:

  • The transfer to be effected within a year from the date of the permit or within three years in case of construction of a building on the property
  • The costs to be paid in foreign currency
  • All taxes to be paid
  • The permit is given for the specific property and use only

Application to the Central Bank

The Central Bank will provide a certificate evidencing that the purchase consideration was paid in foreign exchange on submission of the following documents on form EC/NR/01:

  • Contract of sale
  • Copy of the Council of Ministers' approval to acquire property
  • Certificate from the commercial bank evidencing the importation of foreign exchange
  • Registration certificate of the property

Application to the District Land Office

The transfer of ownership is effected at the District Land Office on submission in person (or by appointing a third party by specific Power of Attorney) of the following documents:

  • Application form N.270
  • The registration certificate of the property
  • Copy of the Council of Ministers approval
  • Central Bank's approval
  • Evidence of payment of all property taxes to date

Central Bank Exchange Control Regulations

  1. The acquisition of real estate property in Cyprus by Non-Cypriots and offshore companies should be effected by means of foreign exchange imported into the Republic of Cyprus and surrendered to an authorised dealer (ie. a commercial bank).
     
  2. On sale of such real estate property an amount up to the original purchase value of the property paid as above in foreign exchange may be repatriated immediately. The remainder will be placed in a blocked account with an authorised dealer. Subsequently during each calendar year following the year of sale it will be released an amount from the principal of Cú5000 per annum plus interest earned during the year.
     
  3. Non-residents selling their real estate property to other non-residents on the basis of an agreement concluded abroad may receive the entire proceeds abroad without prior Exchange Control permit. But in such circumstances the new non-resident owner, when he disposes of his property shall not have the right to receive foreign exchange but the entire proceeds from such sale shall be directed to a blocked account with releases of Cú5000 per annum plus interest.
     
  4. The above rights regarding repatriation of funds do not apply to real estate property acquired in contravention of any law or regulation of the Republic of Cyprus.
     
  5. Applications for the first rebates shall be submitted to the Central Bank through the authorised dealer accompanied by the following documents:
    • Copy of the title deed
    • Contract of original purchase and subsequent sale
    • Certificate evidencing importation of Foreign Exchange issued by the authorised dealer
    • Confirmation of an authorised dealer that the alien is considered for exchange control purposes as non resident
    • Clearance Certificate from the Inland Revenue department confirming that no taxes are due by the account holder

Capital Gains Tax

On disposal of the property, there will be capital gains tax at the rate of 20% on the gain but the first Cú10,000 will be exempt and there is also an indexation allowance. However there is no tax if the property was acquired between 1st August 1980 and 13th July 1990 with foreign exchange imported into the Republic.

Estate Duty

There will be no estate duty payable on death in the case of a retirement home because the property was acquired with foreign exchange.

Transfer Fees

When the immovable property is registered in the name of the purchaser by the Land Registry office he has to pay the transfer fees at the following rates:

Value of Property Transfer Fee per CYP 1000
Up to CYP 50,000 3%
CYP 50,000 to CYP 99,999 5%
CYP 100,000 and over 8%

The purchaser is liable to the payment of transfer fees on the basis of the value of the property as assessed by the District Land valuers.

Stamp Duty

In order to avoid the payment of a fine the purchase contract should be stamped within 30 days of its signing at the rate of 1.5 per thousand up to Cú100,000 and thereaffer at the rate of 2.0 per thousand.

Mortgage Fees

1% of the amount secured, plus the relevant stamps on the various documents.

Mortgage Finance

Some banks can offer mortgage facilities in connection with the purchase. The maximum amount that can be borrowed is the equivalent of 60% of the purchase price. Facilities cannot be arranged in Cyprus Pounds. A first mortgage will be required and the mortgage will be granted for 5-7 years. Normally the interest rate charged will be 2.5% above sterling base rate or dollar prime rate. There is also an additional arrangement fee of 1% payable on the amount of the advance.

Necessary Action

The necessary action to be taken by persons acquiring real estate is as follows:

  • Advice should be obtained from qualified and trustworthy property consultants
  • To ensure that the land is suitable for building purposes, ie. zoning restrictions, building regulations, access to an official road, availability of water supply, electricity and telephone lines
  • It must be made certain that the seller has a valid title to the property and that there are no encumbrances which will present problems with the transfer of ownership
  • In the case of purchase of an apartment or house it must be checked that the seller has secured the building and other permits and can be delivered with vacant possesion
  • Legal advice to be obtained
  • In the contract of sale a provision should be made that the money already paid must be refunded should the Council of Ministers refuse the application
  • A copy of the contract of sale should be filed with the District Land Office
  • When buying an apartment, house etc it is very important to enquire as to the reputation and reliability of the developer

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