Agreeing Price and Payment Schedule:
Having agreed the purchase price of your chosen property with the vendor, a reservation fee of 3418 euro is generally required as a minimum to take the property off the market. Payment is normally preferred by credit card and constitutes a legally binding contract. From this point, the price is secured and the vendor may not enter into negotiations with any other prospective purchaser.
Payment schedules will have been discussed and agreed between Purchaser and Vendor. In Cyprus this is usually based on stages reached during the build period. Should finance be required for the purchase, it is important to have a full understanding of the implications of interest accrual during the build period up to completion. Taking advice from an independent financial advisor well versed in Cypriot purchases is recommended most strongly, and may save money in the long-term.
A Contract of Sale is drawn up and once accepted and signed, the balance of the deposit is requested, depending on the terms agreed.
Lawyers in Cyprus:
Before entering into a purchasing agreement it is wise to appoint a disinterested lawyer, one who is acting independently of your chosen developer. The practice is a free initial consultation, agree the lawyer’s fees upfront, and ensure that all your questions are answered to your complete satisfaction. Your lawyer may be given Power of Attorney to act and sign on your behalf, not only for the property acquisition, but also for ensuring that the utilities are switched on in your name. The lawyer is responsible for conducting all the necessary searches, drawing up the contract, protecting your interest by inserting appropriate clause, for example, compensation with regard to late completion, exempting Acts of God! And carrying out the “Specific Performance” and Council of Ministers application, as described later on. The lawyer will also be able to carry out official business with your chosen Bank and Government Authorities.
Banking:
In order to transfer funds from the UK for any purpose, e.g., Making your stage payments, paying utilities, transferring, pension, investment or other income, it will be necessary to set up a Bank Account in Cyprus. You may have both a Sterling Account and a Cyprus Pounds account. This may be set up on your behalf by your lawyer. Opening an account is a very straightforward process and will allow all the modern Banking Services, including Internet Banking, and Mortgages.
Specific Performance:
Specific Performance is a process by which the Purchaser is protected from the Vendor/Developer re-selling a property to another party, giving an absolute safeguard until such time as the application to the Council of Ministers has been made and approved. The appointed lawyer will register the Contract of Sale on behalf of the Purchaser within two months of being signed and sealed.
Approval of the Council of Ministers:
An application to the Council of Ministers is required to be made by the responsible lawyer on behalf of any non-Cypriot buying what is termed to be “immovable property” once the Contract of Sales has been authorized by all concerned.
This is a standard procedure and so far it is unknown for any U.K. citizen to be declined. Although the procedure may take up to a year to complete, full possession may be taken until Approval is given.
Therefore it is worth knowing that not only may you live in your property until Approved, but you can re-sell your property during this time. In the unlikely event that Approval is not granted, you may re-apply and what is more if refused Approval, you have seventeen years in which time to sell.
Inheritance Tax:
Inheritance Tax or Death Duty does not apply in Cyprus.
Capital Gains Tax:
Capital Gains Tax is due at 25% on profits from the sale of a property. There are however allowances and tax exemptions to be taken into account for overseas owners, which your IFA will discuss with you and advise accordingly. Any gains made will also take into account inflation as well as monies spent on property improvement (Receipts must be kept) and estate agents commissions.
Purchasing Costs – Ongoing Expenses
- Cost of Property
- Mortgage Fees
- Any Accrual of Interest
- Lawyer’s Fees. Allow between 855 euros – 2564 euros
- Council of Ministers Application 170 – 340 euros. Verify with Lawyer.
- Property Transfer Tax*
- Stamp Duty*
*Property Transfer Tax:
The payment of Property Transfer Tax enables you to transfer the Freehold ownership into your name and
becomes due once the property has been registered in your name at the Land Registry Office. This
procedure can only be completed once the approval from the Council of Ministers has been granted.
Therefore because of time delays it may take up to three years after purchasing your property before this
tax is due to be paid to the Land Registry on a once off basis.
Property Transfer Tax is calculated thus:
Value of Property (Euros) Transfer Fee Rate %
Up to 85470 3%
From 85471 to 170940 5%
Above 170940 8%
It is worth knowing that should a property be co owned, the tax is split and apportioned
according to each owner’s equity share.
e.g. A property of 170940 euros with 4 owners would be only 3% tax. Each person having 85470 euros take.
Stamp Duty:
The Tax Office stamps the Contract of Sale prior to it being lodged in the Land Registry Office for Specific Performance. The Duty is as follows:
1.5% to 170940 euros.
2% Thereafter.
