DIRECT PURCHASE OF REAL ESTATE
This paragraph discusses the most important tax implications of the direct purchase of real estate. First, it discusses the impact for resident individuals and non-resident individuals. Thereafter it discusses the impact for resident companies and non-resident companies.
Resident Individuals
Transfer Taxes
Real Estate Transfer Fees are imposed by the Land Registry Office in order to transfer freehold ownership to the name of the Purchaser. The transfer fees are due for payment when the transfer of the Title Deed in the name of the Purchaser takes place. The Purchaser is solely responsible for the payment of the Transfer Fees. The rates are on a graduated scale.
Transfer fees do not apply on transactions of real estate on which VAT has been imposed. A discount of 50% is provided on acquisitions of properties that are not subject to VAT. In the case of companies' reorganisations, transfers of immovable property are not subject to transfer fees.
Value added tax
As a main rule, the acquisition of real estate on resale terms is exempt from VAT. However, the acquisition of a new immovable property is subject to a standard VAT rate of 19%. "New" immovable properties are those which are supplied for first use. As from 1 October 2011, contracts conducted that relate to acquisitions and/or constructions of residential properties to be used as primary place of residence of any citizen (Cypriot or not), attract a reduced VAT rate of 5%. The residents shall prove that they intend to stay there for the next 10 years at least.
For such cases, the reduced rate of 5% applies to the first 200 square meters of the buildable area of the residence. In cases where the residence is of more than 200 square meters, the standard rate applies to the remaining. As from 8 June 2012, even residents of non-EU Member States are eligible persons, provided that the residence will be used as their primary and permanent place of residence in the Republic.
Stamp duty
In the case of a real estate acquisition, the acquirer is required to pay Stamp Duty on the contract at rates between 0%-2%.
Non-resident individuals
The non-resident individuals are treated in the same manner as the resident individuals.
Resident companies
Transfer Taxes
The same rules as for resident individuals apply.
Value added tax
The acquisition of new real estate is subject to a standard VAT rate of 19%. The reduced rate of 5% as described in resident individuals, is not applicable on companies.
Non-resident companies
Transfer Taxes
The same rules as for resident companies apply.
Value added tax
The acquisition of a new real estate is subject to a standard VAT rate of 19%, and it is a liability of the acquirer to pay the VAT.
INDIRECT PURCHASE OF REAL ESTATE
This paragraph discusses the most important tax implications of the indirect purchase of real estate. First, it discusses the impact for resident individuals and non-resident individuals. Thereafter it discusses the impact for resident companies and non-resident companies.
Resident individuals
Transfer taxes
No rules apply for transfer taxes when a purchase of real estate is executed indirectly.
Personal income tax
No rules apply for personal income taxes when a purchase of real estate is executed indirectly.
Dividend withholding tax
No rules apply for dividend withholding tax when a purchase of real estate is executed indirectly.
Non-resident individuals
The same rules as for the resident individuals apply.
Resident companies
The same rules as for resident individuals apply.
Non-resident companies
The same rules as for resident companies apply.
Originally published 15 March 2021
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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