The law also provided that purchasers who submit applications under the provisions of the Town Planning Amnesty will enjoy the same benefit.

Following the expiration of the 6 months it is expected that new legislation reforming the taxation of real estate in Cyprus will apply.

Pekris & Theodorou LLC is a Cyprus law firm with Cyprus lawyers and other legal experts on legal matters involving Cyprus law, EU law and international law. The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

Further Property Law related information is available here.

The legislation passed provides that eligible persons will be subject to a lower VAT rate of 5% on the purchase or construction of a first residence. The rate will apply for the first 200 square meters of residences of total covered area of up to 300 square meters and takes force as of 1 November 2011.

Under the legislation an “eligible person” is defined as any individual who fulfills the following conditions:

(i) has completed 18 years of age at the time of submission of his application,

(ii) is a citizen of the Republic of Cyprus or any other Member State of the EU, and

(iii) does not own any other place of residence in Cyprus.

It should be noted that the reduced rate applies only for properties which are used as the primary and permanent place of residence.

The current VAT refund scheme will cease to apply once all pending applications are examined. Applications for VAT refund can be submitted up until the 1 November 2011.

Pekris & Theodorou LLC is a Cyprus law firm with Cyprus lawyers and other legal experts on legal matters involving Cyprus law, EU law and international law. The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

Further Property Law related information is available here.

Update: Legislation rejected by President and not enacted. Amending Law 129(I)/2011 enacted, which can be can be viewed (Greek language) here.

The European Commission has today asked Cyprus to respect EU rules that give nationals from the EU, as well as from Iceland, Norway and Liechtenstein, the right to buy a second home in Cyprus without restrictions.

Since the accession of Cyprus to the EU in 2004, transitional measures were in force that could restrict such acquisitions but these measures expired in 2009. As Cyprus has not yet repealed these restrictions, the Commission is sending Cyprus a reasoned opinion, the second step in the infringement procedure. If the Cypriot authorities fail to take satisfactory measures to remedy the infringement of EU law within two months, the Commission may decide to refer the case to the EU Court of Justice.

What is the aim of the EU rule in question?

Free movement of capital is at the heart of the Single Market and constitutes one of its “four freedoms”. It allows for more open, integrated, competitive and efficient markets and services in Europe. For citizens it means the ability to undertake a range of operations abroad, such as opening a bank account, buying shares in nondomestic companies, or purchasing real estate. For companies it means the ability to invest in and own companies in other European countries, and to play an active role in their management.

How is Cyprus not respecting these rules?

According to the 2003 Accession Treaty, Cyprus was allowed to maintain transitional measures that imposed restrictions on buying second homes for EU/EEA nationals.

These measures would apply for five years after the Accession Treaty entered into force and thus expired on 1 May 2009. By that date, the Cypriot authorities were obliged to repeal the transitional measures. However, this has not been the case.

Since Cyprus has not adopted any new legislation repealing or amending the abovementioned restrictive rules, the Commission is of the opinion that Cyprus infringed its obligations under the EU Treaty rules on the free movement of capital. In this context, the Commission refers to the jurisprudence of the Court of Justice, according to which any incompatibility of national rules with Treaty provisions can only be redressed by adopting other binding domestic provisions, having the same legal force as those which require to be amended, and providing for sufficient legal certainty.

The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

Further Property Law related information is available here.

What type of Immovable Property is subject to VAT in Cyprus?

New built residences

Where the planning permit for property was issued following the 1.05.2004 the sale will be subject to VAT at the current rate of 15%. Conversely, if the relevant planning permit was issued prior to the 1.05.2004 no VAT is payable.

Land

The sale of land is currenlty exempt from VAT,  although it is expected that this wil exemption will cease in the near the future.

Used residences - “resales”

The sale of used property (i.e. resales) will not attract VAT. The original owner (seller) will have either paid the VAT for the property or the property may have been exempt for the reason stated above.

VAT Refund

Provided that certain conditions are satisfied, a refund may be obtained for  VAT paid on property sales. An application must be made to the Ministry of Finance.

The actual value of the refund is made according to a calculation which takes into account the area of the property, the type of property and the cost of build per square meter.

The refund does not apply to “luxury properties”, which are clasified as properties which have a covered built area of more than 250 m2.

Qualifying for a VAT refund

In order to qualify for a VAT refund the following criteria must be satisfied:

• The property must be the main residence of the applicant, who should not own another second residence on the island;
• The applicant must be 18 years or older and must be an EU Citizen;
• The applicant must be permanently resident in Cyprus (i.e. reside in Cyprus for no less than 186 days per year). A utility bill should be presented with the application in order to prove this.
• It should also be noted that the property must be the a residence for at least ten years (if it is not then you will be liable to refund the payment proportionally according to the amount of time spent in the property);

Applying for a VAT Refund

An application will be made on the Ministry of Finance form and will need to be accompanied by:

• Contract of Sale;
• Utility bills proving permanent residency;
• Building permit.

Re-selling the Property

VAT is only payable once upon purchase. No further VAT is charged on resells.

Special consideration should be given to resale properties, which are sold under a cancellation and resale agreement, before the original purchaser had the opportunity to use the property. In such cases, the purchase may attract VAT and the developer will be liable to account for such VAT.  However, in the event that the property has been used then it may be considered to be a resale and VAT will not be due.

The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

Further Property Law related information is available here.

The ratesfor transfers of immovable property are on a graduated scale
are as follows:

If the property is in joint names e.g. of a couple (husband and wife) or two individuals, then the purchase value is divided into two parts which results in reduced transfer fees.

Example

For a property purchased for €200.000 in one name, the fees payable are approximately €9.166

For property purchased for €200.000 in the names of two persons, the fees payable are apoproximately € 6.582.

In the case of property transferred to a family company, transfer fees are refundable after five years if the property remains with the company and the shareholders remain the same.

In the case of property transferred from a company whose shareholders are spouses and/or their children, to one of the two spouses, or their children or to a relative up to third degree of relation the transfer fees are calculated on the value of the property as follows:

• if the transfer is to a spouse – 8%
• if the transfer is to a child – 4%
• if the transfer is to a relative – 8%

Transfers by way of gift

Also the following rates are applicable in the case of free transfers:

• from parents to children – 4%
• between spouses – 8%
• between third degree relatives – 8%
• to trustees €8,54

The above rates apply to the value of the Property as assessed on the 01.01.1980.

Mortgage registration fees

Mortgage registration fees are 1% of the current market value.

In the case of companies’ reorganizations, transfers of immovable property are not subject to transfer fees or mortgage registration fees.

The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.

Since Cyprus’ accession to the European Union on 1^st May 2004, property laws have been revised to conform to the provisions of the acquis communitaire. However, in order to protect the property market, Cyprus negotiated a 5 year transitional period with the European Union preventing EU citizens who are not permanent residents of Cyprus from owning secondary residences. This transition period expired on the 01.05.2009.

Although no specific legislation has as yet been enacted to remove this restriction it appears that the Cyprus authorities in practice no longer place restrictions on the acquisition of property by EU citizens. Legilsation is expected shortly.

Prior to the lifting of this restriction, non-resident EU nationals were permitted to purchase land,  however if they wished to purchase any other type of property, their purchase was restricted to one house or one apartment for which approval was required from the Council of Ministers.

It should be noted that non EU citizens are still required to seek approval from the Council of Ministers before they can own any type of property. Following approval, ownership for non EU citizens is limited to:

• An apartment
• A house
• A building plot or land of not more than approximately 4014 square metres

Furthermore, it shouldalso be noted that, in exceptional circumstances, the Council of Ministers will grant permission to non EU citizens to own more than one building. This can occur for example, were a property developer or a Hotel chain seeks to purchase property.

The above should be used as a source of general information only. It is not intended to give a definitive statement of the law and is subject to the disclaimer.