LEGAL INFORMATION
General
The legal system in Cyprus is based mainly on the English Legal System. Legal fees and costs are very reasonable and have a tendency to be much lower than in other European countries.
Lawyers
It is always wise to seek the advice of a Lawyer for all legal matters although it is not imperative in the purchase of a property. Some Developers have their own pre-printed Contract of Sale but for peace of mind it is advisable to secure the services of a reputable Lawyer. Ask around or use one from personal recommendation. Fees vary so always ask at the outset what the likely charges are to be – they are however much less than the UK. They work on your behalf to ensure Building and Planning Permits have been granted to the Developer and will make all necessary searches about your proposed purchase.
Cypriot Will
It is advisable to make a will if you are a full time resident in Cyprus otherwise upon death, property and estate is received by the Government. You will need a copy of your original will.
Reservation Agreement
This is the first step toward purchasing a property. A deposit of usually CYP2,000 is paid which takes the property off of the market for a specified time. Within the reservation period the appointed Lawyer will carry out an investigation at the Land Registry office to ensure that the vendor is the owner of the property/land. The reservation money is as a rule non-refundable.
Contract of Sale
This is a legally binding agreement which clearly lays out who the vendor is, name of purchaser, type of property purchased and project/location along with any additional alterations to the original plans or “extras” that have been negotiated into the final price of the property. Terms of payment are also laid out in the contract. Once all parties are in agreement with the Contract it is signed and the Lawyer has a duty to present it to the Land Registry Office. Stamp duty is payable at this time and is a one off payment – the Lawyer normally pays this on your behalf and is payable as follows: value of property up to CYP100,000 – 0.15% and over CYP100,000 – 0.20%.
Land Registry
This is most probably the most advanced and reliable system in the world for purchasers of property in Cyprus. A “specific performance” is employed for all new build projects whereby a Developer has to meet certain criteria throughout the building procedure. This ensures that Title Deeds will be issued when the building works are completed – although in reality this can take several years.
Title Deeds
Title Deeds are issued once a project has been completed and inspected by the various governmental bodies. As previously mentioned this may take several years due to the huge volume of applications received by the Land Registry office. Once you have been notified they are ready, there is a fee to be paid called the Land Transfer fee. This is calculated on a sliding scale upon the market value at the time of purchase. Property valued at up to CYP50,000 - 3%, from CYP50,001-100,000 the fee is 5% and over CYP100,000 – 8%. This figure can be significantly reduced if more than one name appears on the Contract of Sale.
Taxes
Stamp duty and Land Transfer have previously been discussed, additional to these are Immovable Property Tax and Municipal tax. The former is an annual payment based upon the value of the property as of 1980 and is calculated thus: property value up to CYP100,000 – zero; CYP100,001-250,000 is 0.25%; CYP250,001-500,000 is 0.35% and finally over CYP500,000 – 0.40%. Again this can be significantly reduced if there is more than one name on the Contract for Sale. Municipal tax is the tax paid to the local authority for refuse collection and street lighting/cleaning and fluctuates throughout each municipality. As an average it is normally around CYP100 per annum which is notably less than UK council tax!
Residency Permit
If planning on spending more than 90 days per year in Cyprus you must apply for a Residence Permit – even though Cyprus is in the EU. You are required to go to the Immigration Department to make an appointment to start the process of gaining an Alien Registration Card (ARC). The required paperwork is as follows: copy of passport, 4 x passport size photos and a copy of Contract of Sale. This can be a rather long procedure with several appointments necessary; however your “pink” slip (which in actual fact is yellow now) will take several months before you receive it. There is an expiry date on the form and it is down to the holder to renew it upon expiry you are not automatically reminded.
Work Permits
As Cyprus is now in the EU, work permits are not required for any EU citizens who wish to take up employment or start up their own business. Bear in mind though that certain formalities must be observed. Non EU citizens intending to work in Cyprus require a work permit as well as a visa. In order that a permit may be issued, the Ministry of Labour must be satisfied that a Cypriot or an EU citizen is not available for the job. When granted, a permit usually lasts for three months or a year.
Utilities
Water bills are paid at the Municipal offices or via standing order/direct debit from your bank. A deposit is required for connection which is refundable upon departure from the property. A standing charge is payable on top of consumption costs. Electricity operates in a similar manner, although there is a move to include the deposit in the first bill – monies owed are paid direct to the Electricity Authority or via standing order/direct debit. There is a standing charge and cost is KW/h with peak hours and off peak (23:00 -07:00). All gas on the Island is bottled – there is no mains gas supply at this time although offshore exploration is in progress.
Communal Expenses
These are incurred when a property is purchased on a managed development with communal areas. The amount payable is calculated upon the square metres of the property and the amenities available. Costs vary immensely and are usually payable twice yearly.
Building Insurance
Building Insurance is payable to the Developer for managed developments until such time as the Title Deeds are received. Until that time, the insurance is calculated upon the square metres of the property. Once Title Deeds are received the property owner is entitled to choose an Insurance Company of their own preference.
Contents Insurance
Immediately after delivery of the property it is advisable to take out contents insurance. There are many companies from which to choose, we can advise you on the most popular ones.
Selling a Property without Title Deeds
This is a simple process but does bear fees. A charge is made for cancellation of the original Contract of Sale and issuance of a new contract. Charges are usually stipulated in the Contract of Sale if not then there may be a fixed fee or % value of the property payable.
Value Added Tax - VAT
The rate at which VAT is charged is 15%. Having said that there are reduced figures of 5% and 8% applicable mainly to food and agricultural products, books and newspapers, rural transportation etc. VAT is charged on assets and services in Cyprus as well as imports into Cyprus. Exports are not liable for VAT. A business turnover of more than CYP9,000 per annum is liable for VAT payments. For buildings for which a Town Planning Permit was submitted prior to the 1st May 2004 no VAT is charged in the event of a sale. For application after the aforementioned date 15% is applicable. For land/building plots purchased prior to 1st January 2008 there is no VAT.
Claiming Back VAT
It is possible to claim back some of the VAT you have paid on a property, if the application for the building permission was submitted after 1 May 2004. You need to be over 18 and a Cypriot citizen, or a citizen of a member state of the European Union who is permanently residing in the Republic of Cyprus and has no other property in Cyprus that is used as a permanent residence. The building must be new and used for the first time, with total area, not exceeding 250sq.m., with some allowances. The amount of the grand depends on the type and size of the residence.
Provided that the application is complete the whole process takes up to three months and, upon receipt of the grand the beneficiary is obliged to use the property as his/her main and permanent residence for a ten-year period. In case the beneficiary decides to buy or build a new residence before the expiry of the ten-year period he/she may apply again for the special grant.
An application forms must be submitted, accompanied by the relevant documentation to:
Permanent Secretary, Ministry of Finance, Grants and Benefits Service, 1489 Nicosia
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