LEGAL & FINANCIAL

Legal System

The legal system in Cyprus is modelled on the British system due to its colonial legacy. In addition, with EU membership, Cyprus has harmonized its laws and regulations in line with the acquis communautaire. In effect, this means that EU citizens can now buy more than one property in Cyprus.
 
The Land Registry system is one of the most advanced and reliable systems in the world, being based on the British equivalent. Purchasers of property in Cyprus will be far more secure with regards to matters such as title deeds than they might be in other Mediterranean countries. All legal information regarding the legal procedures associated with purchasing property in Cyprus is available from the Leptos Estates Legal Department.
 

Personal Income Tax

All Cyprus tax resident individuals are taxed on all chargeable income accrued or derived from all sources in Cyprus and abroad. Individuals who are not tax residents of Cyprus are taxed on certain income accrued or derived from sources in Cyprus.

Personal tax rates 
The following income tax rates apply to individuals:  
Chargeable income for the tax yearTax rateAccumulated tax
%
First 19.500NilNil
From 19.501 - to 28.000201.700
From 28.001 - to 36.300253.775
From 36.301 - to 60.0003010.885
Οver   60.00035 
Foreign pension income is taxed at the rate of 5%. An annual exemption of €3.420 is granted. The taxpayer can however elect to be taxed at the normal tax rates and bands set out above. This is a choice which may be made year-on-year.
 

Corporation tax

All Cyprus tax resident companies are taxed on their income accrued or derived from all chargeable sources in Cyprus and abroad. A non- Cyprus tax resident company is taxed on income accrued or derived from a business activity which is carried out through a permanent establishment in Cyprus and on certain income arising from sources in Cyprus. A company is a resident of Cyprus if it is managed and controlled in Cyprus.
 

 

Foreign taxes paid can be credited against the corporation tax liability. The corporation tax rate for all companies is 12.5 % There are several tax deductions for expenses There are several exemptions and deductions.



 

Value Added Tax

VAT is imposed on the supply of goods and provision services in Cyprus, as well as on the acquisition of goods from the European Union (EU) and the importation of goods into Cyprus. Taxable persons charge VAT on their taxable supplies (output tax) and are charged with VAT on goods or services which they receive (input tax).
 


If output tax in a VAT period exceeds total input tax, a payment has to be made to the State. If input tax exceeds output tax, the excess input tax is carried forward as a credit and set off against future output VAT. Imposition of the reduced rate of 5% on the acquisition and/or construction of residences for use as the primary and permanent place of residence.


 

VAT rates


The legislation provides for the following four tax rates:
Zero rate (0%)
Reduced rate of five per cent (5%)
Reduced rate of nine per cent (9%)
Standard rate of nineteen percent (19%)

 

Registration to the VAT


Registration is compulsory for businesses with (a) turnover subject to VAT in excess of €15.600 during the 12 preceding months or (b) expected turnover subject to VAT in excess of €15.600 within the next 30 days. Businesses with turnover of less than €15.600 or with supplies that are outside the scope of VAT but for which the right to claim the amount of the related input VAT is granted, have the option to register on a voluntary basis.
 

VAT declaration - payment/refund


VAT returns must be submitted quarterly and the payment of the VAT must be made by the 10th day of the second month that follows the month in which the tax period ends.
 
 

Social insurance

Contributions 

%

By the Employer 7,8
By the Employee 7,8
By the State 4,6
Total 20.2
  
 



The contribution rate for employees will change on 2019,2024,2029,2034 and 2039. The contributions of self-employed persons are 14.6% of their income.

Social insurance contributions are restricted to a maximum amount that is usually increased annually. In case that the wage or salary is higher than the maximum amount, no contribution is paid on that higher amount.
 
 
 

Property taxes/fees


Property Transfer Fees: these are necessary in order to transfer FREEHOLD ownership to your name.

This can be done as soon as the relevant Government Authority has issued the title deed and the purchase has been settled.

The Property Transfer Fees are payable once only to the Land Registry Office according to the following scale:
 

Value of Property in Euros

Transfer fee Rate

Up to € 85,0003%
From € 85,431 - € 170,0005%
Over - € 170,0008%

For example Purchase price in Euros € 200,000

1st € 85,0003% = € 2,500
2nd € 85,0005% = € 4,250
3rd € 30,0008% = € 2,400

Total € 9,200
However, if the property is purchased jointly by a couple (as is often the case) the property purchase price is split equally into two parts and then taxed, which is beneficial to the purchasers as the following example shows:
 
1st € 85,0003% = € 2,550 x 2 = € 5,100
Balance € 15,000  5% = € 750 x 2 = € 1,500
Total € 6,600 Saving: € 2,600
 

Immovable Property Tax:

The registered owner of the property is liable for this annual tax which is based on the value of the property as at 1st January 1980.
 

Property Value (as at 1/1/1980) €  

 %
                    - € 40,000*0.6
€ 40,001 - € 120,0000.8
€ 120,001 - € 170,0000.9
€ 170,001 - € 300,0001.1
€ 300,001 - € 500,0001.3
€ 500,001 - € 800,0001.5
€ 800,001 - € 3.00,0001.7
More than € 3.000.0001.9

*Owners of properties whose total 1980 value is no more than €12,500 are exempted. Owners of properties whose 1980 value exceeds €12,500 will have to pay tax on their total 1980 value and not benefit from the €12,500 exemption. The taxable threshold pertains to the aggregate value of properties registered under a person. Exemptions i.e.: schools, embassies, agriculture land, public hospital etc.
 

Capital Gains Tax:

Capital Gains Tax is imposed (when the disposal is not subject to income tax) at the rate of 20% on gains from the disposal of immovable property situated in Cyprus including gains from the disposal of shares in companies which own such immovable property, excluding shares listed on any recognised stock exchange.
The following disposals of immovable property are not subject to Capital Gains Tax:

- Transfers arising on death
- Gifts made from parent to child or between husband and wife or between up to third degree relatives
- Gifts to a company where the company’s shareholders are members of the donor’s family
- Gifts by a family company to its shareholders
- Gifts to charities and the Government
- Exchange of properties

Liability is confined to gains accruing since 1 January 1980. The costs that are deducted from gross proceeds on the disposal of immovable property are its market value at 1 January 1980, or the costs of acquisition and improvements of the property, if made after 1 January 1980, as adjusted for inflation up to the date of disposal on the basis of the consumer price index in Cyprus. Expenses that are related to the acquisition and disposal of immovable property are also deducted, subject to certain conditions e.g. transfer fees, legal expenses etc.

Individuals can deduct from the capital gain the following:
- Disposal of private residence (subject to certain conditions) 85.430
- Disposal of agricultural land by a farmer 25.629
- Any other disposal 17.086
 
The above exemptions are lifetime exemptions subject to an overall lifetime maximum of €85.460
Logo footer

31 B Vasileos Pavlou , Larnaca,6023, Cyprus
357+99570796 -357+99142973
357+24400346
info@invest-estates.com
Back to top winter logo