Cyprus, known for its stunning landscapes, pristine beaches, and vibrant culture, has long been a sought-after destination for property investors, particularly those seeking the allure of the Mediterranean. However, with property ownership comes the responsibility of understanding and managing associated taxes. In this comprehensive guide, we will investigate the complexities of property taxation in Cyprus, focusing specifically on villa owners.
Whether you’re considering purchasing a villa, already own one, or are contemplating selling or renting out your property, this blog aims to provide clarity on the Cyprus property tax obligations. As a premier property management company and trusted partner for Cyprus property owners, we are here to assist you every step of the way.
Property Tax in Cyprus for Buyers
For those considering buying a villa or apartment in Cyprus, it’s crucial to be aware of the various taxes involved before completing a purchase. In this section, we will outline the Cyprus property tax requirements to consider when buying a property on this Mediterranean island.Â
Stamp Duty
When purchasing property in Cyprus, buyers typically bear the responsibility of paying stamp duties, which are required for the purchase agreement and related documentation. This Cyprus property tax is paid to the Inland Revenue, also known as the Cyprus Tax Department. In this section we will explore Contacts of Purchase and Power of Attorney requirements.
Contracts of Purchase
Stamp duties for contracts of purchase are calculated based on the purchase price outlined in the contracts. Stamp duty exemptions are granted for the first €5000, followed by a rate of 0.15% for amounts between €5001 and €170000, and a rate of 0.2% for any excess over €170000.
Power of Attorney
Power of attorney documents, commonly utilised by both buyers and sellers to authorise legal representatives to act on their behalf throughout the transaction process, also require stamp duties. A general power of attorney attracts a stamp duty of €6, while a specific power of attorney, also known as limited or special power of attorney, is subject to a stamp duty of €2.
Property Transfer Fee
Property Transfer Fees are among the primary taxes buyers need to account for when purchasing a villa in Cyprus. These fees are imposed at the time of property transfer and are calculated based on the property’s market value at the time of the sale. Buyers are required to pay this Cyprus property tax to the Department of Lands and Surveys after a sale has been completed.
The authorities in Cyprus currently offer a 50% reduction on this Cyprus property tax. Furthermore, Property Transfer Fees can be waived if VAT has been paid on the property transaction. VAT is normally payable on new properties and can depend upon the number of buyers. In the next section we will explore the VAT Cyprus property tax for buyers of villas on the island.
VAT
Value Added Tax (VAT) is a significant consideration for buyers of villas in Cyprus, particularly for newly constructed properties or those undergoing significant renovation. The current VAT rate for properties in Cyprus is 19%. However, it’s crucial to note that specific exemptions or reduced rates may apply, especially for first-time buyers or permanent residents.
The VAT rate when buying a property in Cyprus could be reduced to 5% if the villa will be the permanent residence of the applicant. Although this will not be the case for people renting out villas in Cyprus, it is important to note that this Cyprus property tax can be reduced. This could be a significant consideration for people considering buying multiple properties in Cyprus. This discount would apply to people buying property to live as well as property to rent out.
Property Tax in Cyprus for Sellers or Those Renting Out
For people looking to sell or rent out their villa with Ezoria there are a number of Cyprus property tax implications that must be considered. Whether you are looking to sell a villa you own or seek to gain property rental income, this section explores the Cyprus property taxes that are applicable.
Property Rental Income
For villa owners intending to generate rental income from their property, rental income tax is a consideration. Rental income derived from immovable property located in Cyprus is subject to a Cyprus property tax, with rates varying based on the level of income accrued annually.
Below is a breakdown of the Property Rental Income tax:
- 0% for up to €19,500
- 20% for €19,501—€28,000
- 25% for € 28,001—€36,000
- 30% for €36,001—€60,000
- 35% for over €60,000
Short Term Property Tax
Additionally, villa owners are subject to short term Cyprus property taxes. These levies include a VAT on rentals, Income Taxes, GESY tax and may also include a Special Defence Contribution (SDC). These Cyprus property taxes can vary by region so if you are uncertain about which taxes are applicable it is recommended to contact your local authority or seek professional Cyprus property tax advice.
Capital Gains Tax
If you are considering selling your villa, it’s essential to understand the capital gains tax implications. Capital gains is a Cyprus property tax which is applicable on the profit earned from the sale of immovable property and is calculated based on the market value of that property at the time of acquisition and disposal. Currently, the local authorities have set capital gains tax at 20%. This is applicable for both residential and commercial properties in Cyprus.
However, certain exemptions and deductions may apply. Sellers are exempt from this Cyprus property tax on the first €17,086 gains for a lifetime, until that allowance is consumed.
Expenses For Provision Of Documents
In Cyprus property sales, sellers are required to provide buyers with essential documents and services. These include a Land Registry Search, costing €10 to €50, for identifying mortgages or charges, as well as copies of Architectural & Site Plans and previous contracts, available from the Land Registry for €5 to €40. A fee of €50 may be incurred for lodging a general power of attorney. Additionally, sellers must furnish the energy certificate as required.
Property Tax in Cyprus for OwnersÂ
Owners of villas in Cyprus are subject to various ongoing taxes and fees. Immovable Property Tax (IPT) is an annual obligation payable to the Tax Department. Additionally, municipal taxes may apply, which contribute to the upkeep of local infrastructure and services.
Immovable Property Tax
Although this Cyprus property tax was abolished in 2017, owners of villas in Cyprus before this date are still liable to pay the duty. Immovable property tax is calculated based upon the market valuation of the villa on the 1st January 1980. This levy is charged per owner and not per property.
Local Taxes
Owners of villas on the island will be subject to a Cyprus property tax which is set by the local municipality. This levy can vary depending on which area of the island the villa is situated. Typically, this tax is charged at around €100-300 annually and depends on the property size.
Property Maintenance Fees
Although not a direct tax, property maintenance fees are an important consideration for villa owners in Cyprus. These expenses are for resources and services including water, electricity and refuse collection. This will vary depending on the size of the property and the destination.
InsuranceÂ
Again, not a direct Cyprus property tax but a cost worth considering if you own a property in Cyprus. Insurance protects owners from the financial implications if an accident or injury takes place. Luckily, Cyprus has one of the lowest insurance costs in Europe at around €50 per month.
Cyprus Property Tax – A Summary
In summary, property ownership in Cyprus comes with various tax considerations for villa owners. Whether you’re a buyer, seller, or landlord, understanding these tax obligations is essential for effective financial planning and compliance with Cyprus property tax laws. From property transfer fees to rental income tax, each aspect of property taxation requires careful attention and consideration. By staying informed and seeking professional advice when necessary, villa owners can navigate the complexities of property taxation in Cyprus with confidence.
Rent your Property with Ezoria
Looking to rent out your Cyprus villa and benefit from a strong revenue stream throughout the holiday season? Look no further than Ezoria! For more information about how Ezoria can facilitate villa rentals and manage your property visit our property management page. Still have questions about Cyprus property tax or the logistics of renting out your property with Ezoria? Contact our team today.Â