Cyprus offers an alluring combination of a high quality of life and a low cost of doing business. Local regions include the vibrant and cosmopolitan Limassol, the charming and archaeologically rich Paphos, the historic and transportation hub of Larnaca, and the bustling and culturally rich Nicosia. Purchasing real estate in Cyprus is a straightforward process. Below are the steps:
The process involved
It involves the following:
Reservation
The reservation fee depends on the purchase price and typically ranges between €5,000 and €10,000. Your agent or lawyer holds the reservation amount until the contract of sale is signed and executed. The reservation fee secures the property and locks in the sale price. If the sale proceeds, the reservation fee is applied towards the purchase price.
Lawyer appointment
Legal services could comprise due diligence, CoS review and/or preparation, contract negotiation, contract exchange/completion, registration of the CoS at the LRO, Representation at the LRO for the title transfer, Application to the Tax Authorities for reduced VAT, and application for permission to buy immovable property in Cyprus. For due diligence and conveyancing (from contract review to contract execution), legal fees typically range between €2,000 and €5,000, or 1% of the purchase price.
Due diligence
It is highly recommended that due diligence be completed prior to contract signing. Your lawyer will search the LRO to determine that the seller is the rightful owner of the property and whether the title has any legal encumbrances that could potentially inhibit a sale. For properties that do not yet have separate title deeds, your lawyer can check with the relevant authorities to verify that the necessary planning and building permits exist. Where the vendor is a company, your lawyer can complete the requisite search at the Registrar of Companies.
Contract negotiation and initiation
A CoS is a private agreement between you and the seller. The seller will typically provide the CoS for you (and your lawyer) to review. Occasionally, the buyer’s lawyer may need to draft the CoS. CoS are in English. Where necessary, your lawyer could arrange for a translation. Stamp duty: Within 30 days of contract signing, the buyer must pay stamp duty on the contract value as follows:
- Application for a reduced VAT rate
- In compliance with EU law, all new properties are subject to a standard VAT rate of 19%. However, a reduced VAT rate of 5% applies for the acquisition of a primary residence, subject to certain terms and conditions:
- Only physical persons aged 18 or older are eligible to apply.
- The property must be used as the primary and permanent residence for the next 10 years.
- The reduced VAT rate has not been previously used by the same person.
- The reduced VAT rate applies only to the first 200 sqm. The standard rate applies to the remaining sqm.
Registration on the COS at the LRO
Once contracts are fully executed and duly stamped, and provided the purchaser pays the first instalment (normally 30%-40% of the purchase price), the contract of sale (CoS) can be lodged at the Land Registry Office (LRO) for ‘specific performance’ (within six months of signing). At this stage, the LRO is essentially notified of the buyer’s details. The ‘Sale of Immovable Property (Specific Performance) Law’ protects the buyer by preventing the vendor from reselling or transferring the property elsewhere and from otherwise encumbering the property, for as long as the contract of sale is valid and legally effective.
Upon this registration, the buyer may resell their property, even prior to the separate title deed issuance.
Permission to acquire immovable property in Cyprus
Cypriots and EU citizens are entitled to buy immovable property without any restrictions. Non-EU citizens can buy immovable property. However, permission from the Council of Ministers is required. This is primarily a matter of process; the application is submitted along with the signed CoS, and approval is typically granted within a month. The Council of Ministers’ approval is not a precondition for taking possession of the property.
Transfer of title deeds
The process to issue separate title deeds for each unit in a development typically takes a few years after the development is completed. A title deed transfer is effected at the Land Registry Office provided that the buyer has paid all outstanding balances to the seller, pays any applicable transfer fees and taxes to the government and has the necessary permit from the Council of Ministers, if applicable. It is a simple procedure, and lawyers can act on the buyers’ behalf under a Power of Attorney.
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