The Legal & Tax System in Cyprus

The legal system is based upon the same principles as those applicable in the United Kingdom and all statutes regulating business matters and procedures are based essentially on English law, which makes property purchase and other legal transactions understandable to most expatriates.

Seeking Expert Advice & buying a property

Expert advice should be sought before entering into any transaction for acquiring property in Cyprus. Your lawyer will check the following points:

  • A search with the Lands Office must be made to ensure that the seller has a valid title to the property and that there are no mortgages over the property, which would present problems with the transfer of ownership.
  • In the cases of property under construction it must be checked that the planning and building permits can be obtained and separate title deeds can be issued. In the contract provisions must be made to provide for remedies in the failure of the Vendor to do so.
  • It must be ensured that the land is suitable for building purposes i.e. zoning restrictions, building regulations, access to an official road, and availability of water supply, electricity and telephone lines.

Real Estate transfer tax-fees

Real Estate Transfer tax-fees are necessary in order to transfer FREEHOLD ownership to the name of the purchaser. This can be done as soon as the relevant Government Authority has issued the title deed and the purchase has been completed. The Transferee is responsible for the tax payment.

The rates are on a graduated scale.

Value of property CY£Transfer fee rate %
Up to 50,0003
50,000 to 100,0005
Over 100,0008

Example: purchase price CY£ 90,000

The First 50,000 @3% = CY£1,500
Next 40,000 @5% = CY£2,000
Total = CY£3,500

Should the purchase be made in joint names (provided the price is more than CY£50,000) the effective value for circulation is halved

For example if the purchase price is CY£ 90 000:
1st Buyer CY£45,000 @3% = CY£1350.00
2nd Buyer CY£45,000 = CY£ 1350.00
Total = CY£2,700

Transfer of ownership takes place by a simple process of registration at the Land Registry Office and the issuing of a title deed after completion and delivery. This can be done either by you personally or by a Power of Attorney to your Solicitor.

Stamp Duty

The purchaser is liable for the payment of stamp duty at the rate of 1.50 pounds per thousand up to the value of 100,000 CY Pounds thereafter the rate is 2.00 pounds per thousand. This should be paid within 30 days of signing the contract.

For example if the purchase price is CYŁ 150 000

Value of property CY£Stamp Duty Rate
First CY£100,000@ 1.5%CY£150.00
Next CY£50,000@ 2%CY£100.00
TotalCY£250.00

Immovable property tax

The annual immovable property ownership tax is based upon the value of the property. Certain immovable properties are exempt.

Value of property CY£Rate %
Up to 100,000Exempt
100,000 to 250,0002%
250,000 to 500,0003.5%
Over 500,0004%

Immovable property tax is based upon the value of the property in 1980 which is much lower than the current market value. So there is no immovable property tax for the majority of properties in Cyprus.

Wills

It is imperative that expatriates have wills that are appropriate to the national laws of the country in which they are living. Needless to say, English law is not entirely the same as the law of Cyprus jurisdiction. Owners of holiday homes outside the UK are sensibly advised to make a local will to deal just with that property, either for reasons of local law, or because it makes things easier, when the time comes to wind up the estate, to deal with a property under a local will. The cost of making a will in Cyprus can vary from lawyer to lawyer, however as a guide: CY£50 - CY£150

Inheritance Tax

Cyprus does not have any inheritance tax, making it an ideal place to invest your money as you can be assured that any person inheriting the property will NOT be liable for any taxes when the owner has deceased.

Importing personal goods & pets

There is generally no problem for an EU citizen importing furniture for their house in Cyprus, it is however usually better to have a professional removal firm deal with the move unless you are only taking a few "special" items. Suncroft Villas has a good working relationship with shipping companies both in the UK & Cyprus, so please feel free to speak with us before you make your arrangements, as we have found our contacts to be the most cost effective & reliable in the past.

Personal Tax

Following the recent tax reforms, as from 1 January 2003 liability to income tax will be based on residence or Cyprus source income. If you live in Cyprus for more than 183 days in a tax year (January to December) you will be resident and tax will be levied on your world wide income whether you bring it to Cyprus or not.

For expatriates retiring in Cyprus there will be a choice as to the system of taxation. Either the first CY£2.000 is exempt and all the remaining will be taxed at 5% or the first CY£9.000 is exempt and the remaining income will be taxed at 20%, 25% and 30% depending on the amounts and which income bands apply to you. Husbands and wives are to be taxed separately.

Interest and dividends are exempt from income tax but they will be subject to defence contribution, 10% in the case of interest and 15% for dividends. Residents of a contracting state can of course take advantage of the Double Taxation Agreements Cyprus has entered into, so that foreign income can be received in Cyprus without deduction of tax.

Foreign employees and Cypriot will be treated the same, the distinction now will be between residents and non-residents. Foreign employees working wholly in Cyprus will be subject to tax under the same system as other residents.

Personal Tax Rates 2004/2005

Income CY£Rate %
Up to 10,0000%
10,000 to 15,00020%
15,000 to 20,00025%
Over 20,00030%

Company Income Tax

Under the new legislation, companies will considered resident in Cyprus if they are managed & controlled in Cyprus. The taxation of companies will be based on tax residency unlike before when International Business Companies were considered residents of Cyprus & taxed in Cyprus irrespective of the place of their management & control.

Double Tax Treaties

Cyprus has entered into a considerable number of double-tax treaties (unusually for a low-tax jurisdiction). The general effect of these treaties is that Cyprus-registered offshore entities that have tax exemptions in Cyprus will have the same exemptions in the treaty countries.

Most treaties follow the OECD Model Convention, although the US Treaty follows the most recent model of United States Agreements. Normally speaking, therefore, the country of residence will give a credit for taxes paid in the other treaty country. The Cyprus offshore entity qualifies for treaty protection under all the extant treaties except those with Canada, France, the UK and the USA, and even in those cases the limitations apply only to flows of income to Cyprus, and not to income flows from Cyprus to the countries concerned.

Revisions to Cyprus corporate tax regime consequent upon its accession to the EU, and the abolition of the offshore sector as such, have made Cyprus attractive as a tax treaty partner, and the island will need to revise many of its treaties as a result, as well as entering new treaties with additional countries.

map of Cyprus

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