Real Estate and Taxation in Cyprus: A Comprehensive Guide

October 31, 2023by sales

Cyprus, a Mediterranean gem with its stunning landscapes and idyllic climate, has been an attractive destination for real estate investment. However, when delving into the world of real estate in Cyprus, it is crucial to understand the tax implications that come with it. In this comprehensive guide, we will explore the key tax considerations for real estate transactions in Cyprus.

  1. Property Transfer Fees:

When purchasing property in Cyprus, one of the primary taxes to consider is the Property Transfer Fee. This fee is imposed on the transfer of property ownership and is based on the property’s market value at the time of transfer. The rates are progressive, with higher-priced properties incurring higher fees. It’s essential to factor these fees into your budget when buying real estate.

  1. Value Added Tax (VAT):

For new residential properties in Cyprus, Value Added Tax (VAT) is a critical tax to be aware of. VAT is levied on the purchase price, and the standard rate is 19%. However, there are reduced rates and exemptions for specific situations, such as first-time homebuyers and permanent residents. Understanding the VAT rules is essential to determine the overall cost of your property.

  1. Immovable Property Tax:

Cyprus has abolished the Immovable Property Tax for properties owned and registered in an individual’s name since 2017. However, it’s important to note that properties owned by legal entities or corporate structures may still be subject to a relatively low annual levy.

  1. Capital Gains Tax:

When selling property in Cyprus, you may be liable for Capital Gains Tax (CGT). The rate is 20%, and you’ll be taxed on the profit from the sale. Various exemptions and allowances are available, including a once-in-a-lifetime exemption for the sale of a private residence. Additionally, the disposal of property between family members is exempt from CGT.

  1. Rental Income Tax:

If you plan to rent out your property in Cyprus, you must report rental income and pay tax on it. The tax rate depends on your total annual income and can range from 20% to 35%. Deductions for certain expenses related to property maintenance and improvements are also available.

  1. Inheritance and Gift Tax:

In Cyprus, there are no inheritance or gift taxes for close family members (spouses, children, parents). However, for non-relatives, there may be inheritance and gift taxes applicable, with rates varying depending on the value of the inherited or gifted property.

  1. Property Ownership Structures:

Understanding the tax implications of different property ownership structures, such as owning property through a company or a trust, is essential. These structures can affect your overall tax liability and should be considered carefully.

Navigating the real estate market in Cyprus requires a comprehensive understanding of the associated tax obligations. It’s advisable to consult with a tax professional or legal expert who specializes in Cypriot real estate taxation to ensure compliance with the ever-evolving tax regulations. Being well-informed about these tax considerations will help you make sound investment decisions and manage your real estate assets effectively in this picturesque Mediterranean paradise.
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