Overview Cypriot Real Estate

Introduction

Value-added tax is a tax based on the supply of goods and on the provision of services within Cyprus, as well as on the acquisition of goods from Member States of the EU and importation of goods from third countries.

Through the relevant legislation, taxable persons charge VAT on their taxable supplies (output tax) and are charged by other taxable persons with VAT on goods and services they receive (input tax). Where output tax is in excess of the input tax, a VAT tax liability is created, and a payment is due to the VAT authorities. If the opposite is true, a credit is created, and either it is set off against future VAT liabilities or an immediate refund is issued to the taxpayer.

Liability to tax

Rental income and the supply of real estate and non-developed buildable land are subject to Cyprus VAT, subject to conditions.

Basis of tax

Rental income

Generally, the lease of immovable property for residential purposes is exempt from VAT. However, VAT at the standard rate of 19% must be charged on the lease of immovable property when the lessee is a taxable person and is engaged in taxable activities by at least 90%.

Sale of real estate

Normally, a sale of real estate which does not qualify as a new immovable property is not subject to VAT. However, VAT is charged when the real estate qualifies as new immovable property, or the risks and rewards of ownership are transferred. “New” immovable property is that which is supplied for first use. A new immovable property is not:

• A property that was leased or rented out.
• Self-occupied.
• A transformed. converted, renovated building. 

Provided that an immovable property is supplied as a “new” immovable property, a reduced VAT rate of 5% is eligible to any citizen (Cypriot or not), who acquires such property with the intention to use this as their primary permanent place of residence in Cyprus. 

However, this is subject to the following conditions. The reduced rate is imposed only after obtaining a certified confirmation.

The eligible person must submit an application which will state that the house will be used as the primary and permanent place of residence.

The applicant must attach several documents supporting the ownership rights on the property and evidencing the fact that the property will be used as the primary and permanent place of residence.

The application must be filed prior to the actual delivery of the residence to the eligible person. 

As of 8 June, 2012 eligible persons include residents of non-EU Member States, provided that the residence will be used as their primary and permanent place of residence in the Republic.

The documents supporting the ownership of the property must be submitted together with the application. The documents supporting the fact that the residence will be used as the primary and permanent place of residence (copy of telephone, water supply, or electricity bill or of municipal taxes) must be submitted within six months from the date on which the eligible person acquires possession of the residence.

In cases where persons who cease using the residence as their primary residence before the lapse of the 10 years, must notify the Tax Commissioner within a period of 30 days. In such cases, the person must pay the difference between the reduced and standard VAT rates for the remaining 10-year period, during which the property will not be used as a primary residence.

The lessor has the irrevocable right to opt not to impose VAT on the specific property.

Sale of non-developed building land

As of 2 January 2018, the sale of a non-developed building land attracts VAT at the standard rate of 19%. The definition of non-developed land includes land intended for use in carrying out business activities. VAT does not apply to the purchase or sale of land located in livestock zones or areas not intended for development.

Leases of immovable property which effectively transfer the risks and rewards of ownership of immovable property

From 1 January 2019, leases of immovable property that effectively transfer the risks and rewards of ownership of immovable property are considered supplies of goods. They also become subject to VAT at the standard rate.

Interaction with the transfer tax

On transactions of immovable property on which VAT has been imposed, no transfer fees apply. 

On acquisitions of properties that are not subject to VAT, a 50% discount on transfer fees is allowed.

The same rules as for individuals apply.

Introduction

The Department of Land and Surveys charges the acquirer of immovable property transfer fees for the transfer of ownership of the immovable property.

Liability to tax

The transfer fees are due when the Title Deed is transferred in the name of the Purchaser. The Purchaser is solely responsible for the payment of the Transfer Fees. The rates are on a graduated scale.

Basis of tax

The value of the immovable property is taxed at 3%/5%/8%, based on the value of the property on a scale. ‘Value’ in these cases refers to market values as of 1 January 2013, as these were estimated by the Department of Land and Surveys.
 

Exemptions

In the case of companies’ reorganisations, transfers of immovable property are not subject to transfer fees.
 

Interaction with VAT

On transactions of immovable property on which VAT has been imposed, no transfer fees apply.
For acquisitions of properties that are not subject to VAT, a 50% discount on transfer fees is allowed.

The same rules as individuals apply.

Introduction

In accordance with the amendments of the Central Agency for the Equal Distribution of Burdens Law, a levy of 0.40% is payable to the Tax Department. The Central Agency for the Equal Distribution of Burdens Law was enacted following the acknowledgement of the need to assist Cypriot refugees who were forced to leave their properties following the Turkish invasion of 1974.

Liability to tax
The levy is due when the real estate is transferred. The Seller is solely responsible for the payment of the levy, subject to conditions.

Basis of tax

The levy applies upon:

a)    The transfer of immovable property situated in the Republic, or
b)    Disposal of shares in a Company not listed on a Stock Exchange, which directly or indirectly owns immovable property situated in Cyprus, for which a recorded general valuation exists under a General Valuation and Revaluation Survey.
 

The calculation of the levy differs, accordingly:
a) In the case of immovable property transfer, the levy is calculated on the sale amount;

and

b) In the case of disposal of shares, the levy is calculated on the latest general valuation of the property attributed to the shares disposed of.

The same rules as individuals apply.