Taxes on Buying Residential Property in Cyprus

Published on 17th of October, 2024

Taxes on Buying Residential Property in Cyprus

When purchasing property in Cyprus, buyers are responsible for several taxes, depending on whether the property is new or resale:

VAT (Value Added Tax) for properties on the primary market (newly built).
Transfer Fee for properties on the secondary market (resale).
Stamp Duty on both primary and secondary market transactions.

VAT on New Properties

For newly built properties, the VAT is 19% of the purchase price, and it is usually included in the total price of the property.

However, the VAT can be reduced to 5% if:

This is the buyer's first property purchase in Cyprus.
The property will be used as a primary residence.

To qualify for the reduced rate, the property must:

Have a maximum area of 190 sq.m..
Be priced at €475,000 or less.

The reduced 5% VAT applies to the first 130 sq.m. of the property. The remaining area will be taxed at the standard 19% rate.

Example 1:

Apartment of 100 sq.m. costing €300,000: The entire purchase will be taxed at 5% VAT since it is within the size and price limits.

Example 2:

Villa of 180 sq.m. costing €500,000: The first 130 sq.m. will be taxed at 5%, and the remaining area will be taxed at 19%.

Example 3:

Studio of 60 sq.m. priced at €200,000: This property will be taxed fully at 5%, as both the size and price fall within the eligible limits.

If a buyer decides to sell the property or rent it out within 10 years, they must repay the difference between the reduced 5% VAT and the standard 19% VAT for the remaining years.

Transfer Fees for Resale Properties

For properties on the secondary market (resale), buyers are required to pay a Transfer Fee, which depends on the market value of the property:

3% for properties up to €85,430.
5% for properties between €85,431 and €170,860.
8% for properties over €170,860.

Example 1:

If you purchase a property for €200,000, the transfer fee will be calculated as:
- €85,430 x 3% + €85,430 x 5% + €29,140 x 8% = €8,262.4.

Example 2:

For a property valued at €600,000, the transfer fee will be:
- €85,430 x 3% + €85,430 x 5% + €429,140 x 8% = €32,700.

Stamp Duty

Stamp duty is paid when the sales agreement is submitted to the Land Registry. The rates are as follows:

0.15% for properties up to €171,000.
0.20% for properties above €171,000.

Example:

If you purchase a property for €750,000, the stamp duty is calculated as:
- €5,000 x 0% + €165,000 x 0.15% + €580,000 x 0.2% = €1,407.50.

Capital Gains Tax on Property Sales

When selling property in Cyprus, if you make a profit (selling at a higher price than you purchased), the capital gains tax is 20% on the profit. However, the first €17,068 of profit is tax-exempt.

Example:

If you bought a property for €300,000 and sold it for €350,000, the profit is €50,000. However, if you spent €10,000 on upgrades and €28,000 on realtor fees, you can deduct these from the profit. The taxable amount would then be €12,000, which is below the tax-exempt threshold, meaning no capital gains tax is owed.

Inheritance and Gift Tax

There is no inheritance tax in Cyprus. However, a transfer fee of 3% to 8% based on the market value is applied when transferring ownership through inheritance or a gift.

For gifts, the following rates apply:

0% for gifts from parents to children.
0.1% for gifts between spouses or close relatives.
A flat fee of €50 for gifts to trustees.

Understanding these taxes helps in better planning for buying or selling property in Cyprus.