Property prices have seen significant growth over the last few years and it is widely accepted that this trend is expected to continue in the near future, with Capital Growth expected to be in the region of 12-18% per annum.
Entry into the EU in 2004 has resulted in a significant economic uplift, as well as a higher demand for property from both the existing and new EU member countries looking to invest in the Cyprus property market.
In order for Cyprus to adopt the Euro in 2008 it will have to decrease interest rates from the current 5.5% (Central Bank of Cyprus base rate) to the European Central Bank rate of 2%. This can only serve to strengthen the rising property market.
The high price of property in Spain is encouraging people to consider alternative, more price effective locations such as Cyprus for their second homes, resulting in a very large upturn in the number of people selecting Cyprus, as extensively covered by the press in recent weeks. There is significant investment in the infrastructure, including new golf courses, marinas and casinos.
The cost of living is substantially lower than most European countries.
Residents in Cyprus enjoy a crime-free environment with very little corruption.
The legal system is modelled on the British system and all administrative (i.e. utility bills) and legal dealings (contracts of sale) are conducted in English.
The banking system is also British based.
One of the overriding factors that make Cyprus the ideal location to purchase property is simply the climate. It is regarded by many as the best in Europe with an average of 340 days of sunshine per year. Holiday rentals can enjoy up to 9 months’ income and with the mild winter climate there is a strong market for out of prime season rentals, providing an all year rental opportunity.
The Buying Procedure
Compared to some countries the buying procedure in Cyprus is quite straightforward.
A deposit of Cyp £2.000 withdraws the property from the market. Within 5 weeks the contract must be signed and a deposit of 30% paid. At this time the contract is lodged with the Land Registry and the client becomes the beneficiary owner of that property. The outstanding balance is then divided into instalments paid according to the progress of the construction, such as;
20% on completion of the foundations 20% on completion of the brickwork and plastering 20% on completion of the flooring 10% on delivery According to Cyprus Law, the Contract exists in written format and it should be registered at the Land Registry Office within two months from the date of signature to guarantee the protection of the legal rights of the purchaser, in the event of nonobservance of the Contract. Once the Contract of Sale is signed and registered at the Land Registry the ownership of the purchaser is protected until the Title Deeds are issued and transferred to his name.
Tax
Cyprus is a very tax-efficient country in which to either invest or to have as a permanent place of residence. Despite recent tax reforms due to Cyprus’s accession to the EU, taxation in Cyprus is still low in comparison to other European Countries.
Cyprus has a double taxation treaty with the UK. The main purpose of this is the avoidance of double taxation on income earned.
If you reside in Cyprus for more than 183 days a year, you are considered a resident and you will be subject to taxation on your worldwide income as follows:
Up to CY£ 10,000 nil CY£ 10,001 to CY£ 15,000 20% CY£ 15,001 to CY£ 20,000 25% Over CY£ 20,000 30%
Pension Income from abroad is taxed at the rate of 5% on amounts that exceed CY£2,000. Capital Gains Tax – this applies to income gained by the sale of immovable property and the rate is 20%. However, there is an indexation allowance and other generous exemptions. Inheritance Tax – this tax was abolished in January 2000.
If you are trading in multiple properties or contracts then a Cypriot Limited Liability Company is a very tax-efficient method of conducting this business with Corporation Tax on the profit at 10%.
We strongly recommend taking advice from an accountant or Independent Financial Advisor to ascertain the best strategy to take.
Stamp Duty is then due on the property as follows:
Up to CYP 100,000 0.15% (CY£1.50 per 1000) 2. Over CYP 100,000 0.2% (CY£2.00 per 1000). For example: Purchase Price of CYP 180,000 1. Up to CYP 100,000 CY£ 150 2. CYP 100,001 to 180,000 CY£ 160 - Total Stamp Duty CY£ 310
Property Transfer fees are necessary to transfer the property to your name as soon as the government authority has issued the Title Deed and the purchase has been settled. Transfer Fees are as follows: a. Up to CYP 50,000 3% b. From CYP 50,001 to 100,000 5% c. Over CYP 100,000 8%. For example: Purchase price:CYP 180,000 up to CYP 50,000 CYP 1,500 CYP 50001-100,000 CYP 2,500 CYP 100,001- 180,000 CYP 6,400 - Total CYP 10,400
