Firstly a due diligence is conducted on the property. This is a very important aspect of the purchasing procedure owing to the large number of distressed sales.
The deposit is then paid (generally around 10%) and the option agreement signed.
Depending on whether the purchase is financed with the banks or not, the closing on the property can take from 2 weeks to 2 months following which transfer fees are paid and the Title Deeds received.
FEES AND COSTS
The main costs involved in a property purchase transaction are the following:
1. Legal fees the legal fees for an ordinary purchase, are usually in the range of €1.500 - €2.000 plus VAT. The legal fees cover (i) the original requisite due diligence checks, i.e. a search at the Lands Office, checking of planning and buildings permits, liaising with mortgagee bank to obtain a waiver letter, if applicable, etc. (our fees for carrying out the said due diligence are for the amount of €500), (ii) preparation or review of all requisite documentation (i.e. Preliminary Agreement or Option Agreement if required, Sale and Purchase Agreement and, in the case of a re-sale, Cancellation Agreement or Assignment Agreement, Power of Attorney if required), (iii) meetings and liaising with the client, the other side's lawyers and/or the developer, (iv) any requisite stamping of documentation at the Department of Inland Revenue, (v) attending at the Land Registry on behalf of client for any requisite filings and/or transfer of title deed.
2. Stamp duty fees they are always payable by the purchaser and are calculated by reference to the purchase price specified in the Sale and Purchase Agreement or in the Assignment Agreement, as the case may be. Calculation is as follows:
VALUE OF PROPERTY
|Up to €170,860.00||0,15%|
|No fixed sum||34,17%|
|Over €8,550,000.00||Fixed maximum stamp duty €17,100.00|
3. Transfer fees are, subject to Note 2 below, paid to the Land Registry by the purchaser of immovable property on the date of transfer to his/her name. Transfer fees are calculated on the market value of the property on the date of purchase as estimated by the Land Registry department on the basis of comparative sales of properties in the vicinity of the area of the sold property. Transfer fees are calculated as follows:
MARKET VALUE OF PROPERTY
|Up to €85,430||3%|
|Between €85,431 to €170,860||5%|
Note 1: Given that the Real Estate Transfer Tax is a personal tax, if the property is purchased and registered in joint names (e.g. husband and wife or any other two persons), the purchase value is divided between the two and each is assessed separately. This means that, unless the purchase price is below €85,430, both persons save taxes as these are calculated on a lower price, namely on respectively 50% of the actual purchase price.
Note 2: For the period from 2/12/2011 - 31/12/2012 the following apply:
(i) There is an exemption from transfer fees if the transfer relates to a transaction that is subject to VAT.
(ii) In case a transaction is not subject to VAT, the legislation provides for an exemption of 50% of the transfer fees. This applies to transactions where transfer fees apply or are due and the transfer relates to plots of land, buildings or interests in land or indivisible interests that are sold for the first time from the date of issue of the relevant planning permit or building permit and the relevant contract is prepared and submitted for the first time to the local District Land Registry prior to 31/12/2012.
4. VAT since 1st May 2004 when the Republic of Cyprus joined the E.U., VAT must be paid on all new properties by the purchaser thereof (except for those properties where the application for planning permission was submitted to the Planning Department before 1st May 2004). Thus a resale is not subject to VAT when it can be proved that the property has been used and that the original owner has paid the VAT. Furthermore as from 01/10/2011 and subject to certain conditions stated in the relevant Law being met, a reduced rate of VAT (5%) applies on the acquisition or construction of a first residence by Cypriots or EU members that are permanent residents of Cyprus provided, inter alia, that the property will be used as the main residence of the purchaser for 10 years (minimum).
No VAT is paid on the purchase of land.
ONGOING PROPERTY COSTS TO BE EXPECTED
1. Immovable Property Tax it is an annual tax payable to the Government by all property owners in Cyprus. Immovable Property Tax is imposed on the market value of immovable property as at 01/01/1980 and it is calculated on the immovable property owned by the taxpayer on 1st January of each year as follows:
Value of property Rate Tax Cumulative Tax
|0 - 120,000||0||0||0|
|120,001 - 170,000||0.4||200||200|
|170,001 - 300,000||0.5||650||850|
|300,001 - 500,000||0.6||1.200||2,050|
|500,001 - 800,000||0.7||2.100||4,150|
|800,001 and over||0.8|
2. Immovable Property tax imposed by Municipality or other Local Authority this is annual tax payable by the registered owner of immovable property to the relevant local authority and is calculated at the rate of 1.5% over a thousand on the estimated market value of the relevant property. Unless there has been a recent revaluation of the relevant property particularly as regards new properties with the issue of the relevant title deed, the market value of the property used is that as at 01/01/1980.
3. Other Local Authority Taxes an owner of immovable property is also liable to pay taxes under other laws, such as municipality or village regulations. These taxes are paid annually and vary from area to area. They are calculated according to the type of the property (land, residential house, commercial property etc.) and the size of the property and cover sewerage and refuge collection. In case of a commercial property, an annual license must be paid for professional premises and if such premises are used by a legal entity, then in addition a professional tax must be paid.
4. Other Expenses water, electricity and telephone supply and fees are based on consumption or usage of the relevant unit or property.
In case of an owner of a flat or a house which is part of a development, communal expenses will have to be paid according to agreement and which vary from development to development depending on the area and type of the relevant property. The communal expenses cover an immovable property owners share of the cost of cleaning and maintaining common areas and gardens, communal swimming pool expenses, if applicable, electricity in common areas, management fees and repairs.