Tax and Fees

Cyprus Tax Facts and Figures

Cyprus is one of the most attractive locations worldwide of doing business, purchasing property or retire seeing from a tax point of view.

• • A uniform corporate tax rate of 10% - the lowest in Europe.
• • Extensive network of double tax treaties.
• • Probably the most favourable holding company jurisdiction.
• • Dividends can flow through the Cyprus entity totally tax free.
• • Reasonable company incorporation and operating costs.
• • No withholding tax on dividends.
• • Able to register for VAT purposes.
• • Exemption of estate duty on inheritance shares.
• • Low income tax for expatriates.
• • Advantageous tax system for pensioners.

Cyprus Double Tax Treaties

Cyprus has entered into more than 40 double-tax treaties with other countries. The general effect of these treaties is that Cyprus-registered entities that have tax exemptions in Cyprus will have the same exemptions in the treaty country.

Capital Gains Tax

Capital Gains Tax is levied at the rate of 20% on gains arising from the disposal of immovable property or the disposal of shares of companies, the assets of which consist mainly immovable property.

Inheritance Tax

Inheritance Tax was abolished as from 1/01/2000.

Stamp Duty

In the case of a sales contract, you, as the purchaser, are liable for the payment of Stamp Duty at the rate of 0.15% on any property with a value of up to €170.860,14. Thereafter the rate becomes 0.20%.

Stamp Duty is payable within 30 days of signing of the contract of sale.

Example Purchase Price: €200.000
1st	€170.860,14	at	0,15%	=	€256.30
remaining	€29.139,86	at	0,20%	=	€58.28
TOTAL Stamp Duty payable					€314.58

Annual Property Taxes and Fees

A. Immovable Property Ownership Tax

As the registered owner of the property, you are liable to an annual Immovable Property Ownership tax calculated on the market value of the property as at 1st of January 1980 (paid by the 30th of September in the year). Immovable Property Tax is payable to the Inland Revenue Department of the Republic of Cyprus.

Rates are as follows:

Value of property (as of 1/1/1980)	Rate
Up to €170.860,14	0
€170.860,15 – €427.150,36	0,25%
€427.150,37 - €854.300,72	0,35%
Over €854.300,72	0,40%

B. Local Authority Fees

Depending on the size of your property, local authorities charge between €85 – €256 per annum for regular refuse collection, street lighting, sewerage and similar community services. Communal Services fees are payable to your local municipal authority.

C. Municipality Tax 

As the registered owner of the property, you are required to pay an annual Municipality Tax, calculated on the market value of the property as at 1st of January 1980. Rates vary from 1‰ - 2‰. Municipality tax is payable to your local municipal authority.

D. Sewerage Tax 

As the registered owner of the property, you are required to pay an annual Sewerage Tax, calculated on the market value of the property as at 1st of January 1980. Rates vary from 3‰ – 3,5‰. Sewerage taxes are payable annually to your local sewerage board.

Property Transfer Fees

Upon transfer of the property and registration in the purchaser’s name, the District Land Registry Office will charge transfer fees. These are based on the market value of the property at the time of purchase and are calculated as follows:

Value	Rate
Up to €85.430,07	3%
€85.431,08 - €170.860,14	5%
Over €170.860,15	8%

Example 1

Purchase price of property, in one name: €200.000

1st	€85.430,07	at	3%	=	€2.562,90
next	€85.430,07	at	5%	=	€4.271,50
remaining	€29.139,86	at	8%	=	€2.331,19
TOTAL fees payable					€9.165,59 (4,58% of the purchase price)

For properties owned by a couple or by two individuals, each buyer pays transfer fees on 50% of the property value for each, bringing financial benefit on any property with a value exceeding €85.430,07.

Example 2

Purchase price of property, in two names: €200.000

1st	€85.430,07	at	3%	=	€2.562,90	(share of A)
2nd	€85.430,07	at	3%	=	€2.562,90	(share of B)
remaining of 1st	€14.569,93	at	5%	=	€728,50	(share of A)
remaining of 2nd	€14.569,93	at	5%	=	€728,50	(share of B)
TOTAL fees payable					€6.582,80 (3,29% of the purchase price)

Transfer fees – payable only once - are payable at the transfer and registration in the purchaser’s name of the title deed of the property (usually 3 – 5 years after final delivery).

Value Added Tax

Prior to Cyprus' accession to the European Union in 2004, the supply of immovable property was exempt from Value Added Tax (VAT).
Since that time, the law has changed and VAT has been imposed on the sale of all new property at the rate of 15%. However, a rebate scheme has been introduced enabling certain categories of buyers to claim a refund on certain types of properties.

On what type of Cyprus property do you pay VAT and at what rate?

The VAT laws relating to the acquisition of property in Cyprus are as follows:

• • Sales of land are exempt from VAT although it was anticipated that value added tax would be introduced on sales from 1st August 2008, the Cyprus Government negotiated a delay and it will now be introduced on 1st January 2009.
• • Buyers of custom homes pay VAT at the rate of 15% on the construction costs (this has always been the case).
• • Those who are buying a home from a property developer are liable for VAT if the application for a Town Planning Permit was submitted after 1st May 2004.
• • Sales of resale Cyprus property are exempt from VAT (assuming that the property has been used).

VAT refund scheme

The Cyprus Government introduced the VAT refund scheme to help lower income home buyers. The general provisions of the law are as follows:

1. The purchased property is the sole main residence of the applicant.
• 2. The applicant does not own any other property in Cyprus that is used as a main residence.
• 3. The applicant should be at least 18 years of age and must be an EU citizen.
• 4. The applicant must be permanently residing in Cyprus.
• 5. The applicant should fill in a special form issued by the Ministry of Finance and a statement must appear in the government’s Gazette that this property is a first home.
• 6. The application must be accompanied by a copy of the contract, a copy of the building permit (the same as the ones submitted to the Land Registry) evidence of the applicant’s residence, such as copy of a phone bill, copy of a water bill, copy of the electricity bill, copy of the sewage bill and any municipality’s tax bills.
• 7. In order to qualify, those who receive the VAT refund must keep the property for at least ten years, or return the refund.
• 8. Properties with a covered area greater than 250m2 do not qualify for a refund. (The Cyprus government considers that those buying a larger home can afford to pay the VAT in full).
• 9. The VAT refund is calculated on basic area, but for every family with more than three children, there is an additional provision of 15m2/child.
• 10. In addition to the 130m2:

• Up to 36m2 is allowed for covered parking
• Up to 5m2 for an engine/boiler room
• Up to 7m2 for storerooms
• Up to 40m2 for covered verandas
• The amount of the VAT refund will depend on the type of the property and its size, based on the 130 m2 calculation.

The amounts of the grant valid from 1 January 2008 are as shown in the table below:

• 1. Construction of house € 10,131.13.
• 2. One bedroom apartment € 19,249.28.
• 3. Two bedroom apartment € 19,249.28.
• 4. Three bedroom apartment € 17,729.63.
• 5. Semi detached house € 15,196.87.
• 6. Detached house € 20,262.38.

The VAT refund is calculated by taking the area of the house/apartment, multiplied by the purchase price per m2 multiplied by Value Added Tax rate of 15/115 and multiplied by the 10/15 refund rate.