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Cyprus Property Tax Legislation is changing

The rules and rates governing Cyprus property tax have been in place for thirty years. Now, however, the government is planning some big changes, and causing much confusion.

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At the moment, Cyprus property tax is what it's always been, but...

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In Cyprus, property tax is currently calculated on the home's value in 1980. Consequently, the vast majority of properties in the Republic carry little or no tax burden.

In a heavily criticised move, however, the government, has proposed a major restructuring of the real estate taxation system, with forthcoming property taxes based on today's market values. We take a quick look at the potential impact.
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So how will the new property tax system affect home owners?

Nobody seems to be quite sure as yet. What is certain is that for the government of Cyprus, property tax rate and regulation changes have become something of a sore subject. Since the plans were first announced towards the end of 2009, the, as yet, extremely nebulous plans have drawn heavy criticism from political opponents, as well as the Cypriot real estate and financial sectors.

What's more, after announcing the sweeping changes in the Republic's real estate taxation laws, and the subsequent outcry, the government announced on April 10th 2010, that the new system would take at least three to five years to calculate and implement. Many believe this to be no more than a thinly veiled attempt to stem the tide of criticism, at least in the short-term.

For the moment, however, stay tuned. Aphrodite will update you on developments, as and when these happen.

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Here's how property taxes are currently calculated in Cyprus

The immovable Cyprus property tax is paid by all owners of immovable property situated in the Republic. Its rate is based on the value of the property as it was valued by the Land Registry Office on 1st January 1980. Therefore, as it stands now, a home's taxable value is much lower than its actual market value on the date of its acquisition, which is the date of the Purchase Agreement's signing.

In Cyprus, Property Tax is calculated according to the following rates:
Value of property as at 01.01.1980:   Tax Rate:
up to C£100,000
@ Exempt
C£100,001 to C£250,000

(€170,801 - €427,000)
@ C£2.50 per C£1,000
(€4.27 per €1,708)

C£250,001 to C£500,000

(€427,001 - €854,000)

@ C£3.50 per C£1,000
(€5.98 per €1,708)
Above C£500,000
@ C£4.00 per C£1,000
(€6.83 per €1,708)

Cyprus Stamp Duty:

It is recommended that a Purchase Agreement is always stamped for two reasons:

a) The Purchaser may deposit the Purchase Agreement with the Land Registry Office to protect his or her interest. If the Purchase Agreement is not stamped it is not accepted by the Land Registry Office.

b) For the Purchase Agreement to stand as a legal document before Cypriot law.

In Cyprus, stamp duty is due within two months from the time of signing the Purchase Agreement, and is usually paid by the Purchaser.

Cyprus stamp duty is levied at the rate of 0.15% for current property values up to €170,800, and 0.2% for current property market values above €170,800.

For example, if a home's value is €200,000 in Cyprus, stamp duty is calculated as follows:

  • €170,800 x 0.15% = €256.20
  • €29,200 x 0.2% = €58.40

Total Stamp Duty payable in this case is : €314.60

Cheaper International Currency Transfers

No matter how you choose to fund your property purchase in Cyprus, it will become necessary at some stage to transfer substantial amounts of money to the seller's account. At this stage, most buyers simply use their high street bank for the task without realising that there is a lot of money to be saved on international currency transfers by using the services of a foreign currency broker.
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  Real Estate Transfer Tax is calculated according to the following rates:
Property Value   Tax Rate
Up to €85,400 @ 3%
€85,401 to €170,800
@ 5%
€170,801 and over @ 8%

In Cyprus, transfer tax is levied upon the transfer and registration of the property into the name of the purchaser. The transfer tax is based on the market value of the property at the time of purchase, which is determined by the Cypriot Land Registry Office.

Let us give you an example in order to understand how the transfer tax system works:

Let's assume a house is purchased by you for €200,000, and this amount is accepted by the Land Registry Office as the market value as well.

The calculation of transfer taxes is as follows:

  • €85,400 @ 3% = €2,562
  • €85,400 @ 5% = €4,270
  • €29,200 @ 8% = €2,336
    ------- -------
  • Total Transfer Tax payable €9,168
    The same computation also applies if the purchaser is a limited liability company.

The transfer fees can be reduced if you purchase the house jointly with your wife or husband.

In this case the computation is made as follows:

The home's value (€200,000), is broken down into two €100,000 increments (1/2 shares)
===== =====

  • €85,400 @ 3% = €2,562
    (partner 1 share)
  • €14,600 @ 5% = €730
    (partner 1 share)

  • €85,400 @ 3% = €2,562
    (partner 2 share)
  • €14,600 @ 5% = €730
    (partner 2 share)

    ------- -------
  • Total Transfer Tax payable €6,584

The Joint-Purchase approach provides a transfer tax saving of €2,584 on a €200,000 property purchase.

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Important Information about Cyprus

Life in the Republic of Cyprus

Each year, the Republic still sees a great many people arriving on its shores, whose dream is living in Cyprus. And yet, this dream all too often turns sour, simply because not enough research was carried out prior to moving.

It seems that too many people forget to consider whether or not the way life on Aphrodite's Isle even suits them, or whether they can make an adequate living once they get here. And, due to this general lack of planning and forethought, the failure-rate is quite high, with many of those who come here invariably leaving within a year.

Let's face it for a moment, moving to Cyprus, or any other country, is a major step which should be well thought out.
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Disclaimer. Please note that the tax information given on this website is displayed for guidance purposes only. It does not replace the need for professional advice by a qualified accountant. E&OE


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