Introduction
Selling property in Cyprus offers a unique opportunity to engage with one of the Mediterranean’s most vibrant real estate markets.
Whether you are looking to sell a holiday home, an investment property, or a family residence, understanding the local processes and legal requirements is crucial. Cyprus is renowned for its picturesque landscapes, rich history, and welcoming climate, making it a sought-after destination for buyers from around the world.
Our law firm specializes in guiding home owners through the property sale process in Cyprus process, ensuring that every transaction is handled with the utmost professionalism and efficiency. With our support, you can navigate the sale of your property seamlessly, even from abroad.
Benefits of Selling Property in Cyprus
Selling property in Cyprus comes with a host of benefits:
- Strong Demand: Cyprus attracts a wide range of international buyers, ensuring a steady demand for real estate.
- Attractive Market: With favourable tax conditions and a growing economy, Cyprus remains an attractive market for property investors.
- High Property Values: The scenic beauty and strategic location of Cyprus contribute to high property values, maximizing your returns.
- Efficient Legal Framework: The property sale process in Cyprus is well-regulated, providing security and transparency for both sellers and buyers.
- Diverse Buyer Base: Cyprus attracts a wide range of buyers, such as Europeans, Middle Eastern buyers, and others, which ensures a diverse pool of potential buyers.
The Sale Process
The Sale Process starts when the buyer’s offer to buy a property is accepted and finishes when the buyer pays the full purchase price to the seller, receives the keys, and / or gets the titled deed registered in their name(s).
You do not need to be in Cyprus to sell your property. We can deal with almost everything for you by using a power of attorney.
Outlined below are the steps involved, each of which will be further detailed:
- Acceptance of Offer: The sale process starts with the acceptance of the purchaser’s offer.
- Reservation Agreement: Signing of Reservation Agreement and payment of reservation deposit.
- Document Collection: Gathering and providing all necessary documents and information to the buyer’s lawyer during the reservation period.
- Contract Negotiation: Negotiating and finalizing the terms of the contract of sale and purchase with the buyer’s lawyer.
- Contract Signing: Arranging and proceeding with the signing of the contract of sale and purchase.
- Tax Clearance: Submitting the necessary documents to the Inland Revenue to obtain a tax clearance certificate following the signing and stamping of the contract of sale and purchase.
- Land Registry Submission: Collecting all required documents and submitting them to the Land Registry to secure an appointment for completion.
- Completion at Land Registry: Making the necessary arrangements and attending the Land Registry to sign all documents required for the completion of the sale.
Estimated Timeline for the Sale Process – How Long Does It Take?
The timeline for completing a property sale in Cyprus can vary based on several factors. Generally, the process includes the following steps:
- Reservation Period: Typically lasts 45 days, unless otherwise agreed.
- Issuance of Tax Clearance: May take up to two months.
- Issuance of Council of Ministers’ Approvals: May take up to four months.
- Appointment at the Land Registry for Completion: Can be scheduled within up to six weeks.
Given these steps, the entire sale process in Cyprus may take up to six months to complete, depending on the specific circumstances of each party and transaction.
Selling Property in Cyprus: A Streamlined 5-Step Guide
Offer Acceptance and Reservation
Every conveyancing process starts with the purchaser selecting a property they wish to acquire and proposing an offer to the seller. Typically, this proposal is made to the property’s advertising agent. If the seller agrees to the offer, the purchaser is then asked to provide a reservation deposit.
Occasionally, the buyer pays the reservation deposit directly to their attorney, who then organizes the payment to either the marketing agent or the seller’s legal representative. This initiates the process.
After the execution of a reservation contract or the issuance of a reservation receipt, along with the payment of the reservation fee, the Seller typically removes the property from the market for approximately 45 days (or as mutually agreed by both parties). During this time, the buyer’s attorney conducts thorough investigations on the property.
Collection of Documents & Contract Drafting
During the reservation period, the buyer’s lawyer requests documents and information from the seller’s lawyer in relation to the property. Such documents and information usually consist of recent Land Registry search results, copies of title deeds, inventory list etc.
The seller’s lawyer obtains information from the buyer’s lawyer to prove where the money the buyer will use to purchase the property in Cyprus has come from, due to changes in Anti-Money Laundering Legislation worldwide. This is commonly known as “source of funds” or “source of wealth”.
Therefore, simultaneously with the due diligence searches, the seller’s lawyer requests from the buyer’s lawyer to explain the source of their buyer’s funds, and to provide them with the relevant supporting documents. This information is being passed to the Bank for them to approve and consequently to accept the funds.
What if the seller does not have a personal bank account in Cyprus, and the funds MUST be received in Cyprus?
We can open a sub-account in the name of the seller(s) within our law firm’s Clients Account in order for our firm to be able to receive the proceeds of sale (over €14.999). This sub-account will serve only for a particular transaction and shall be closed once the funds have been sent back to the seller’s nominated bank account(s).
Owing to the ever-evolving worldwide scenario concerning anti-money laundering, Cypriot banks have become exceedingly watchful. They now demand a substantial amount of paperwork (for both the purchaser and the vendor) to facilitate the creation of a bank account and the deposit of money.
The contract are being drafted and negotiated simultaneously with the collection of the documents and information and the due diligence searches on the property.
We draft and negotiate the terms of the contract of sale and purchase with the buyer’s lawyer, considering always the circumstances of each transaction and each party, until we agree on all the terms and produce a final draft. The lawyers then send the final draft of the contract to the seller(s) and the buyer(s) for their comments and / or final approval.
One of the most important terms of the contract is the payment structure relating to the sale price.
Payment Structure
- Reservation fee.
- Signing Fee – usually 30% of the agreed sale price (minus any reservation fee paid) which is payable with the signing of contracts.
- Balance – this is due on the finalization date of the sale transaction, which is the day when we, acting as the seller’s legal representatives, and the buyer’s attorney, convene at the District Land Registry to finalize the transaction. This involves transferring the title deed to the buyer’s name, receiving the remaining sale price, handing over the keys, and so on.
When we receive confirmation that both the seller and the buyer have agreed and approved the terms of the contract, we make all necessary arrangements to proceed with the signing of the same. The seller’s lawyer must ensure that the buyer or the buyer’s lawyer holds the funds to pay the signing fee on the signing of contracts.
Signing of Contracts and Next Steps
Following the signing of the contracts, it is the responsibility of the buyer to pay the stamp duty and get the contracts stamped at the Inland Revenue. After the contracts are signed and stamped by the Inland Revenue, the purchaser’s attorney will subsequently file the stamped contract at the Land Registry for the purpose of Specific Performance.
As soon as the buyer’s lawyer receives the stamped contract, they must send it to the sellers’ lawyer.
The seller’s lawyer will submit the signed and stamped contract, along with other documents with the Inland Revenue for the issuance of the Tax Clearance Certificate for the particular sale.
Submission of Documents & Issuance of Tax Clearance
The Inland Revenue reviews the submitted documents and make their calculations to determine whether there is any tax due to be paid by the seller(s).
TAX which the Seller may be required to pay are as follows:
A) 0.4% Levy – New Tax
As of November 2022, a new tax of 0.4% on the sale price has been imposed and must be paid by all sellers of immovable properties in Cyprus.
The introduction of the 0.4% levy is aiming to compensate the Greek-Cypriot refugees who are unable to possess, access, or rightfully use their properties after the Turkish invasion in 1974.
B) Capital Gains Tax (CGT)
CGT is charged at a rate of 20% on the profit one makes from the sale of their property in Cyprus. The purchase price that the seller(s) paid for the property is being deducted from the sale price in order to calculate the profit.
There is also an indexation allowance which will be taken into account by the Inland Revenue when they are calculating any CGT for the sale.
(Original price + indexation) – sale price = profit
There is currently a personal tax-free allowance of €17.086 if the seller has not sold immovable property previously in Cyprus. There is a chance for this allowance to increase to a total of €85.000 if the seller has not sold property in Cyprus before, and if it can be proven that they have been living permanently in the property for a minimum of 5 years (substantial evidence has to be submitted to the Inland Revenue for this).
Calculation of CGT
There are certain costs which can be deducted from the profit before calculating the CGT, which are:
- Transfer fees – The amount that was paid to the Land Registry for the transfer fees to get the title deed transferred into the seller’s name is deductible from the CGT.
- Estate Agent’s Fees – Commission paid to a registered estate agent in Cyprus is also CGT deductible. Any amount paid to a non-registered estate agent for marketing fees or otherwise is not CGT deductible.
- Legal Fees – Legal fees payable to the legal representatives of the seller for the particular sale of the property are CGT deductible.
- Interest paid to the Bank – If the seller obtained a loan in order to purchase the property, the interest that the seller paid to the Bank is CGT deductible as well.
- Extras or extra works done to the Property – Extras or extra works done to the property may be taken into consideration by the Inland Revenue subject to proper invoices and receipts being submitted. The Inland Revenue requires the invoices and receipts clearly showing what the extras were and that the amounts were settled in full. Acceptable extras are structural/permanent alterations (e.g. a swimming pool, garage / car port, central heating etc.) subject to these having the correct Permissions.
Things such as the purchase of white goods, furniture, painting and decorating are not considered as extras by the Inland Revenue. However, it is ultimately up to the Inland Revenue to decide as to what they may or may not accept towards the CGT calculations and their policies seem to change over the years.
C) Immovable Property Tax
Immovable Property Tax (IPT) was a collective tax which was paid to the Inland Revenue by owners of property. This was abolished in 2017.
The seller may be liable to pay IPT for the years 2014, 2015 and 2016, if this has not already been settled.
For the years up to and including 2013 owners of property (on building projects without separate title deeds) would have paid their IPT contribution to the developer.
D) Gesy and Defense Tax
The Inland Revenue, during their research for CGT, may find if a person is/was getting income from renting out their property (if this has not already been paid). In this case, the person needs to file tax assessments to the Cyprus government for income tax (if applicable) and payment of GESY and Defense Tax. The Inland Revenue will issue a statement with the GESY and Defense Tax which will need to be paid.
Preparation for Completion
Following the issuance of the tax clearance, the seller’s lawyer makes sure that the Property Tax* and all utility bills are paid up to date, so they can proceed with submitting the documents at the District Land Registry and requesting an appointment date for the completion of the transaction.
* Property Tax is an annual fee which is payable to the local community council or municipality where your property is situated.
****** If the buyer(s) is a non-European citizen, they must obtain the Council of Ministers’ Approval from the District Administration Office (this document is also required in order to be able to request an appointment for completion).
The District Land Registry give us an appointment date following a thorough review of the submitted documents.
The buyer’s lawyer must make sure that the buyer holds the balance of the purchase price and is ready for the final payment.
Completion and Handover
On the completion date:
- Payment of balance by the buyer / buyer’s lawyer to the seller / seller’s lawyer
- Seller’s lawyer gives the keys to the buyer’s lawyer
- Transfer of title deed in the name(s) of the buyer(s) OR in case of an assignment – lodgement of the agreement at the Land Registry.
Following the Completion of the transaction at the Land Registry, the seller’s lawyer must get confirmation from the buyer’s lawyer that the utility bills have been transferred in the buyer’s name.
Consultation and Instruction of Lawyers
It is recommended that you schedule a consultation with us prior to the initiation of the conveyancing process. This will give you the opportunity to understand the procedures, timelines, the potential risks and other important matters concerning the process.
BENEFITS OF INSTRUCTING US
- Risk Mitigation: Protect your property sale from improper and costly advice by Developers and Estate Agents.
- Professional advice: Receive expert guidance tailored to your unique circumstances.
- Time and cost saving: Benefit from our efficient management of the sale process, saving you both time and money.
- Peace of Mind: Experience a smooth and stress-free transaction from start to finish.
- Comprehensive Support: Get assistance with all necessary documentation and legal requirements.
- Negotiation Power: Leverage our expertise to negotiate favourable terms on your behalf.
- Regulatory Compliance: Ensure full compliance with all legal and regulatory requirements, avoiding potential pitfalls.
- Post-Sale Assistance: Receive support with any post-sale issues or queries, ensuring a seamless transition.