2017 Cyprus Tax Law for Immovable Property Overview

14/12/2016

2017 Cyprus Tax Law for Immovable Property Overview

Tax laws and regulations can sometimes be complex, convoluted, or outright confounding.  However, in Cyprus, tax laws are kept as straightforward as possible to avoid confusion and promote transparency in finance and business.  As a hub of international business, Cyprus has always prioritized clarity of legislation for the foreign investor and businessman.

The advent of 2017 sees one major change to Cyprus tax law for immovable property: the abolishment of the Immovable Property (IMP) Tax, based on changes to the Immovable Property Tax Law which were announced officially on the 25th of July, earlier this year.  This tax, which was previously a progressive tax with 9 brackets of annual rates, based on the value of the property, has been completely removed in favour of a less complex system.

The Cyprus Capital Gains Tax remains unchanged and is levied at the rate of 20% on profits gained from the disposal of immovable property or the disposal of shares of companies whose assets consist mainly of immovable property.  The difference in price between the original cost of the property and the sales price is used to calculate capital gain.

However, until the 31st of December, 2016, Cyprus has implemented a full exemption from the Capital Gains Tax for any purchases consisting of land or land with building(s).  The exemption will be granted if the property is acquired from an independent party at market value before the end of the year, regardless of when the property will be sold.  Therefore, if you have been thinking about acquiring property in Cyprus, you have a couple more weeks to take full advantage of the 2016 tax breaks.

Under Cyprus Law there are also quite a few situations that are free from the Capital Gains Tax.  Cyprus has no inheritance tax, therefore any transfers arising on death or gifts made from parent to child or between spouses or up to third degree relatives are exempt from Capital Gains Tax.

The transfer of immovable property does incur fees as imposed by the Department of Land and Survey to transfer ownership from the vendor to the purchaser.  These fees have three simple brackets:
  • Properties whose market value is €0 to €85,000 incur a fee of 3%
  • The additional value from €85,001 to €170,000 incurs a fee of 5%
  • Any additional value above €170,000 incurs a fee of 8%
However, these fees are not imposed for the transfer of any property that is subject to Value Added Tax (VAT) or, again, transferred from parent to child.

Value Added Tax (VAT) is quite straightforward in Cyrus and is levied on the purchase price of new properties.  The acquisition or construction of property to be used as a first, primary, and permanent residence in Cyprus can be subjected to the reduced rate of 5% after the submission of the relevant application and this reduced rate is applicable to both EU and non-EU citizens purchasing their first property in Cyprus.  All other properties have a VAT rate levied at 19%.

Additionally, once the Contract of Sale is executed between vendor and purchaser, it must be stamped within 30 days.  The stamp duty also varies in accordance with the purchase price of the immovable property with the brackets being as follows:
  • Sale amount of €0 to €5,000 has a stamp duty rate of 0%
  • Sale amount from €5,000 to €170,000 stamp duty rate of 0,15%
  • Sale amount above €170,000 stamp duty rate of 0.2%

Although this article may be a bit lengthy, Cyprus tax law for immovable property most certainly is not.  2017 looks to be a good year as Cyprus moves towards simpler, more streamlined tax regulations.  If you are wanting to buy soon, it could be worth your time to consider the tax breaks afforded to agreements made before the end of year, 2016.  If you have any questions or want to learn more about these tax incentives, please do not hesitate to contact us.

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