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Understanding Property Transfer in Cyprus Navigating Legal Procedures and Tax Implications

Property Transfer in Cyprus

Transferring real estate ownership in Cyprus, involving both legal and tax aspects, is primarily handled through the district lands office (DLO) of the Republic of Cyprus. This process, typically located in the same district as the property, can also occur in a different district for convenience, requiring double entry at the property’s district DLO.

A unique aspect in Cyprus involves property ownership through a Cyprus company. Here, shareholders might opt to sell their shares instead of the property itself, leading to a change in company ownership while avoiding certain transfer formalities and fees. This method, exempt from taxes except for capital gains in specific scenarios, is a popular means of holding immovable property in Cyprus.

Recent legislative changes, effective since February 22, 2021, introduced a new tax by the Equal Burdens Agency. This 0.4% tax on real estate sales, including shares of property-owning companies, is levied to support Cypriot refugees displaced in 1974. The Tax Department began collecting this tax from November 18, 2022.

When it comes to the actual transfer of property, buyers pay transfer fees based on the DLO’s valuation. These fees vary from 3% to 8%, depending on the property’s value. The valuation process is independent and may affect fees if the formal valuation exceeds the sale price.

The procedure for title transfer involves several steps:

  1. Prospective buyers should conduct due diligence, starting with DLO searches to identify legal ownership and any encumbrances like mortgages or memos.
  2. In cases of mortgages, the lending institution must consent to the transfer and be ready to release the mortgage upon full repayment.
  3. For properties under construction, buyers should verify planning and building permits, architectural drawings, and technical specifications.
  4. Both seller and buyer typically conduct property valuations and technical surveys.
  5. Anti-money laundering (AML) and ‘know your client’ (KYC) compliance with respective banks are essential.
  6. Foreign sellers may require a permit from the Council of Ministers, which is usually a formality for average residential or retail properties.
  7. A sale and purchase agreement, reflecting commercial and legal terms, is signed and may be lodged with the local land registry for specific performance.
  8. Obtaining tax clearance certificates and clearing municipal taxes and fees is necessary.
  9. Stamping the sale agreement within 30 days is mandatory for lodging it with the land registry. Stamp duty rates apply.
  10. The sale agreement specifies the completion date for title transfer at the DLO.
  11. The DLO calculates and collects transfer fees from the buyer.
  12. Post-transfer, the DLO updates ownership records, and title deeds are issued.

Other taxes involved in property transfers include VAT (standard rate at 19%), Capital Gains Tax (CGT) at 20% on profits, and income tax for land developers or frequent traders. The new owner also becomes liable for annual property taxes like municipal taxes and service-related taxes.

Notably, Cyprus imposes no inheritance or estate tax, making it an attractive destination for property investment and transfer.