As one of the most renowned countries for investment immigration in the world, Cyprus has gained significant popularity among investors from around the globe, attracting substantial investment immigration funds in recent years. By investing in a property worth 2.5 million euros for a single unit or 3 million euros for multiple units (including a 500,000 euro primary residence) in Cyprus, one can apply for citizenship without worrying about political risk or going through cumbersome citizenship requirements and long waiting times, thus obtaining an EU passport in one step. But aside from the investment costs, are there any other expenses?
1. Taxes and Fees Related to Land and Property Transactions
1. Value Added Tax (VAT)
Purchasing property requires the payment of VAT.
Note: The following two articles provide detailed explanations of VAT and practical records of tax refunds by community members.
The VAT rate in Cyprus was 18% until December 31, 2013, and increased to 19% starting January 1, 2014.
A. VAT Preferential Policy
Homebuyers can apply for a reduced VAT rate of 5% for one self-occupied residence under their name.
This preferential policy has very strict additional conditions: the applicant must guarantee in writing that the property will only be used for self-occupation and not for rental or any other purposes.
The VAT office may conduct random checks on the usage of properties benefiting from the reduced VAT rate. If it is found that the property is rented out or used for other purposes, the applicant will be required to pay back taxes and may also face fines.
2. Transfer Fees
This is the fee for registering the land and changing the ownership of the property during the purchase.
The temporary policy is as follows: Properties registered before December 31, 2012, for which VAT is payable, do not incur this fee (Transfer Fee), meaning that new properties do not have this fee, while properties exempt from VAT (second-hand properties) pay half the transfer fee.
The first 85,430 euros of the contract price is taxed at 3%;
The second 85,430 euros of the contract price is taxed at 5%;
The remaining amount is taxed at 8%.
For example: If the contract price of a piece of land is 5 million euros, the transfer fee payable by the buyer would be:
85,430*3% + 85,430*5% + (5,000,000 - 2*85,430)*8% = 2,562.9 + 4,271.5 + 386,331.2
= 393,165.6 euros
(The rates above apply per person)
Please note that the above rates are based on the value of the property under each applicant's name. If the property you purchase is priced at 340,000 euros and needs to be registered under both spouses' names, since each person's property value does not exceed 170,861 euros, each person only needs to pay at the 5% rate and does not need to pay at the 8% rate. The registration fee mentioned above is also referred to as the "transfer fee." New properties (first-hand properties) were exempt from transfer fees before 2013.
For example, for a property with a contract price of 300,000 euros, the transfer fee would be: 85,430*3% + 85,430*5% + (300,000 - 2*85,430)*8% = 17,166 euros.
In early 2012, to rescue the severely shrinking real estate industry affected by the financial crisis, the government introduced a series of policies to encourage both local citizens and foreigners to purchase properties, mainly including:
A. Transfer Fee Exemption Policy
Newly purchased properties (for which VAT is payable) are exempt from transfer fees. Properties exempt from VAT (referring to properties for which construction permits were obtained before May 1, 2004) pay half the transfer fee.
This transfer fee exemption policy is valid until December 31, 2014, meaning that properties registered with the Land Registry before this date enjoy the transfer fee exemption policy. If the purchase contract date is before December 31, 2014, but the property is registered with the Land Registry after December 31, 2014, it will not enjoy this exemption policy.
Property registration can generally be completed within one working day.
There are reports that the government intends to extend this preferential policy until December 31, 2016, but as of September 2014, no official documents have been issued.
3. Stamp Duty:
If the title deed has not yet been issued, the buyer must register the purchase contract at the Land Registry and pay the following stamp duty:
1. For amounts not exceeding 170,860 euros, the buyer should pay stamp duty at a rate of 0.15%;
2. For amounts exceeding the above, pay at a rate of 0.2%.
This must be registered and paid within 30 days after the contract is signed.
4. Inheritance Tax:
Inheritance tax was abolished on January 1, 2000. In Cyprus, there are no taxes incurred when parents transfer property to their children or when children inherit property after the parents' death.
2. Property Holding Taxes
Cyprus has the following five types of property holding taxes:
1. Real Estate Tax (Property Tax)
(Amendment Supplement 2016: Cyprus property tax will decrease to the previous 25%)
In 2016, Cyprus property tax will decrease, requiring only the previous 25% to be paid. After 2017, property tax may no longer be applicable.
This move is interpreted as a measure benefiting the public after improvements in Cyprus's economic data.
Cyprus has a very low property tax rate, and the current property tax law has been in effect since September 2013. Property tax is levied based on the value of the property as of January 1, 1980 (rather than the current contract price) and is calculated using a progressive tax rate, with a threshold of 5,001 euros.
Specifically:
5,001-40,000 euros, tax rate of 0.6%;
40,001-120,000 euros, tax rate of 0.8%;
120,001-170,000 euros, tax rate of 0.9%;
170,001-300,000 euros, tax rate of 1.1%;
300,001-500,000 euros, tax rate of 1.3%;
500,001-800,000 euros, tax rate of 1.5%;
800,001-3,000,000 euros, tax rate of 1.7%;
Above 3,000,000 euros, tax rate of 1.9%.
(For a property valued at 300,000 euros, calculated based on the value as of January 1, 1980, which is approximately 30,000 euros, the property tax would be approximately: 30,000*0.6% = 180 euros/year)
2. Municipal Tax
Municipal tax is also calculated based on the property's value as of January 1, 1980, with a tax rate of 0.15%.
For a property currently valued at 300,000 euros, with a value of 30,000 euros in 1980, the municipal tax would be 45 euros/year.
3. Sewage Tax
Sewage tax is also calculated based on the property's value as of January 1, 1980, with a tax rate of 0.5%.
For a property currently valued at 300,000 euros, with a value of 30,000 euros on January 1, 1980, the sewage tax would be 150 euros/year.
4. Garbage Collection Fee
The fee varies slightly by city, ranging from 125 to 160 euros/year per property.
5. Property Management Fee
Local developers in Cyprus generally do not provide property management for real estate projects. The so-called property management fee only refers to expenses for common electricity bills, maintenance of public gardens and/or swimming pools, etc., generally ranging from 20 to 50 euros/month/unit, while villas do not incur these fees; special real estate projects by local developers (only one yacht property and two golf properties) have higher property fees, ranging from 1,500 to 3,000 euros/year, depending on the type of property (apartment, townhouse, or villa) and its size.
The above five types of taxes, based on a property currently valued at 400,000 euros (with a value of 40,000 euros as of January 1, 1980), would require the property owner to pay annually:
Apartment: 240 + 60 + 200 + 160 + 600 = 1,260 euros,
Villa: 240 + 60 + 200 + 160 = 660 euros.
If the property is rented out, the tenant is responsible for the garbage collection fee and property management fee.