Publications

TABLE OF CONTENTS

• Cyprus
• Criteria of selecting a jurisdiction to buy property
• Legislation related to immovable property
• Legal Formalities
• Immovable Taxes

Cyprus

General: Cyprus is a beautiful island in the northeastern basin of the Mediterranean Sea, at the crossroads of Europe, Asia and Africa. Throughout the centuries, Cyprus has been a meeting place of civilizations and cultures. Cyprus is the third largest island in the Mediterranean with a population of approximately 700,000. The island has superb mountain scenery, forests, fascinating coastlines and beaches, and a rich historical and archaeological heritage bearing witness to its long and diverse history.

Cyprus and the EU: The Republic of Cyprus is a member of the European Union as from 1 May 2004. The accession of Cyprus in the EU and the adoption of the acquis communittaire have given rise to new challenges and opportunities in the business world in Cyprus. Moreover a number of new funding opportunities became available from EU funds aiming mainly to support the development of business activities in the area of manufacturing, agriculture and agrotourism as well as the promotion of human resource development and the development of the rural areas of the island. In January 2008, Cyprus joins the Euro zone.

Climate: Cyprus enjoys a wonderful Mediterranean climate with long dry summers from mid May to mid October and abundant sunshine throughout the year. Variations in temperature and rainfall are governed by altitude and, to a lesser extent, distance from the coast.

Economy: The country's economy is booming and over the last few years, Cyprus has emerged as one of the leading business and financial centers in the region. Various sectors of the economy like tourism, banking, insurance and telecommunications provide the economy with a leading edge.

Language:The official languages of the Constitution of Cyprus are Greek and Turkish, but English is widely spoken. English is also the language of instruction in the Private Institutions of Tertiary Education for the vast majority of their programmes of study.
Location: Privileged to enjoy one of the most strategic geographical locations in the world, being situated in the Eastern Mediterranean area at the crossroads of Europe, Asia and Africa, Cyprus is a centre of democracy and stability where businessmen from all nations are able to conduct their affairs in an harmonious, stable and friendly environment.

Banking System: Cyprus’ banking industry is well developed and plays a predominant role and acts as an effective intermediate between savers and investors. The banking system in Cyprus follows the British model and the monetary policy and the policy relating to credit and balance of payments is controlled by the Central Bank of Cyprus. All commercial banks are able to offer any kind of international financial transaction due to a well built correspondent network and are capable of adapting to an aggressive and competitive market. They are currently providing all the up-to-date electronic facilities that most international banks provide.

Criteria of selecting a jurisdiction to buy property

Property in Cyprus remains a good value. In recent years, Cyprus has become a popular place for the acquisition of property. This increase in demand is attributed to many factors.
Further down find important criteria to consider:

• Political and economic situation
• No crime
• The professional and management services
• Communication
• The cost of living is much lower than at the most European countries.
• Cyprus is a full member of the E.U, a member of the UN, of the Council of Europe, of the British Commonwealth and also a member of the Non-Aligned Movement.
• Around 30 airlines connect Cyprus directly with most European and Middle East countries, from two international airports at Larnaca and Paphos.
• English is the second language and ninety percent of Cypriots speak it fluently moreover the Russian language becoming very popular.
• Cyprus is a welcoming island with friendly people.
• Cyprus has a British-based legal system and a British-based banking system, thus making the choosing of mortgages and managing of your money similar to the UK.
• The Cyprus economy is characterized by robustness and stability that is evidenced by the favourable evaluations of the European Commission and the International Monetary Fund.
• Tourism is predicted to grow by 4.6% over the next 10 years, contributing about 13.9% to the country's GDP by 2014. This is good news to property investors looking for a ready market.
• Cyprus boasts a very efficient land registry system with straightforward and well administered procedures, making property purchase a safe option.
• Cyprus has a British-based legal system, where English-speaking lawyers abound. A British-based banking system in Cyprus makes choosing mortgages and managing your money similar to the UK.
• Taking advantage of Cyprus' privileged and strategic geographical location at the crossroads of 3 continents, Cyprus cooperates with neighbouring countries such as Greece, Israel, Lebanon, Syria, and Egypt.
• Investors can take advantage of fiscal incentives and a relatively low level of taxation.
• Special tax incentives offered by the Government (e.g., the Double Taxation Treaty existing between the U.K. and Cyprus, allows a U.K. citizen to receive their pensions and investment income in Cyprus, with exemption from U.K. taxes).

Legislation related to immovable property

The legal system in Cyprus follows the English Legal structure and consequently all statutes relating to business matters and procedures are very similar to those of the English system. Most laws have been officially translated into English allowing foreign entrepreneurs to easily come to terms with the Cyprus Legal System.

The Contract Law and the Civil Procedure Law

These laws are to a large extent modeled on their English counterparts and they regulate all kinds of transactions, including those relating to immovable property and the court procedures in resolving disputes arising therefore.
It is advisable that contracts referring to immovable property be made in writing, duly stamped and properly signed and witnessed.
All disputes arising from transactions concerning immovable property are governed by the laws of Cyprus and are subject to the jurisdiction of the courts of Cyprus.

The Immovable Property (Tenure, Registration and Valuation) Law

This law was enacted in 1946, dealing with all matters concerning the tenure, registration, disposition and valuation of immovable property, within the framework of the Land Registry system of Cyprus, which comprises all the works and means by which immovable property is technically defined and drawn, legally recognized, secured and financially valued.

The Acquisition of Immovable Property (Aliens) Law Cap 109

Permission to buy property

According to Cap 109 as amended foreigners (Non E.U. citizens) wishing to purchase property in Cyprus must apply to the Council of Ministers by written application, for permission and when permission is granted, they must proof that the purchase consideration is from foreign currency. In the meantime, however, purchasers may take possession of their property without restriction. The application to the Council of Ministers to acquire immovable property in Cyprus can be made within a reasonable amount of time after signing the contract of sale.
Non-Europeans are entitled to a freehold ownership of a villa, an apartment or a piece of land, with maximum allowed extention of 4014 sq.meters (four thousand and fourteen square metres).

All restrictions for Europeans (physical or corporate entities) who purchase property in Cyprus lifted by 2009.

Any Company that is registered in Cyprus or in any member country of the European Union, will be allowed to purchase immovable property in Cyprus without having to apply for the above said permissions/permits.

Lodging a copy of the Contract of Sale with the Land Registry Office

The buyer has six months from the date the contract of sale is signed in which to registered the contract with the Land Registry Office for 'specific performance purposes'. This is very important for the buyer's protection, for two reasons:
Firstly, once the contract has been registered, the buyer is recognized as the beneficial owner of that property until the day he becomes the beneficial and legal owner by transferring the title deed into his name. Therefore the buyer's interest is protected, because the Land Registry Office has a clear declaration that the buyer has bought the property and the Vendor can’t resale the property to other anyone else.
Secondly, it will ensure that the title deed will pass over to the buyer even if the vendor is not willing to act for that purpose. Title deeds are normally ready in approximately three years, after completion of the project, which is standard practice in Cyprus (unless the property sold was built some years ago and is a single project; in these cases the Title Deed is available when the contract is signed).
If the vendor is delaying or refusing to pass over the Deeds, the buyer can file an action against the vendor and ask the court inter alia for an injunction for specific performance, otherwise the buyer would have to take action for damages which is an undesirable, especially when the property could be worth maybe another 40% in three years’ time.

Legal Formalities

Land Registry Department

The Land Registry system in Cyprus was originally based on British standards. It was established during 1875. Throughout the years it has been updated making it one of the most sophisticated land registry systems in the world. The Land Registry system of Cyprus is unique, in that by its function the history of each piece of land is traced back to the date of the General Survey. The rights in land are defined and secured and all transactions relating to immovable property are safe and protected.

Cyprus is one of the 4 or 5 countries in the world which maintain such an accurate and effective Land Registry system.

Contract of Sale

The lawyer who is responsible for drafting the contract will examine carefully the Title Deeds to certify that all details are correct and that the property can actually be sold and registered in the buyers name without any problems.
Once the buyer is satisfied with the contract, he can either sign it himself or it can be signed by his lawyer by virtue of a Power of Attorney. The lawyer can use this Power of Attorney to sign any other necessary documents until the transaction is complete.

Transfer of ownership

Transfer of ownership from vendor to purchaser is accomplished by a simple procedure through the Cyprus Land Registry Office, either by the buyer in person or by appointed third party with a Power of Attorney. When issued, the title deed will be registered in the name of the buyer and will be recorded in the Government archives. The Government archives are confidential and will not be published or made accessible under any circumstances. At any time after the purchase, the buyer may sell or dispose of the property at will, provided that a valid contract exists.

Immovable Taxes

Real Estate Transfer Tax

Real Estate Transfer Tax fees are necessary in order to transfer FREEHOLD ownership to the name of the purchaser. The transfer fees will be paid when the transfer of the title deed in the name of the purchaser will take place. The Purchaser is responsible for the tax payment. The rates are on a graduated scale. This tax is payable some years after the purchase in many cases.

If the property is in joint names e.g. of a couple (husband and wife) or two individuals, then the purchase value is divided into two parts which results in reduced transfer fees. The following example clearly shows how this special case works:

For property purchased for €120,000 in one name, the fees payable are €4,291.50.

For property purchased for €120,000 in the names of two persons: Stamp Duty The Purchaser is liable for the payment of the stamp duty on the contract price in the following rate:

Stamp Duty

The Purchaser is liable for the payment of the stamp duty on the contract price in the following rate:

Immovable Property Tax

Tax is imposed on the owner (individuals and legal persons) of immovable property in Cyprus as at 1 January of every year. It is calculated on the market value of immovable property on 1 January 1980 and is payable by 30 September in the year.

Capital Gains Tax

Capital Gains Tax is levied at 20% on gains arising from the disposal of property if the property is owned personally. If you choose to sell then Capital Gains Tax is charged on disposals of property in Cyprus and also on shares in companies owning property in Cyprus. The base date for calculating the acquisition cost of property is 1st January, 1980 - if the property was built later than this it is calculated backwards.

Exemptions

• Transfer by reason of death.
• Gifts to relatives within the third degree of kindred.
• Gift to a company of which the shareholders are and continue to be members of the disposer’s family for five years after such gift.
• Gift by a company, of which all the shareholders are members of the same family, to any of its shareholders when the property gifted was also acquired by the company as a gift. The property must remain in the hands of the donee for a period of at least three years.
• Gift to the Republic or to a local authority for educational or other charitable purposes or to approved charitable institutions.
• Exchange or sale in accordance with the Agricultural Land (Consolidation) Laws.
• Exchange of properties where the values of the immovable properties being exchanged are equal.
• Gain on disposal of shares, which are listed on any Stock Exchange.
• Gains form transfer of property or shares in case of reorganisation.

Lifetime exemptions for individuals

VAT

Since 1/5/2004 a statute in respect of VAT on properties was introduced. In addition to other amendments, this statute introduced VAT at the rate of 18%.

Inheritance Tax

Inheritance tax is not imposed.

Legal Notice

In writing this reference our goal was to give a general picture of the legal framework within which Cyprus has developed its policy on matters of immovable property. The materials contained in this reference are provided for general information purposes only and do not constitute legal or professional advice. Each transaction must be handled according to all the circumstances.