Cyprus has traditionally been a popular destination to move to, combining a business-friendly environment and favourable tax regime with a safe, high-quality lifestyle to raise a family.
The real estate sector in Cyprus has experienced substantial growth with demand from both within and outside the EU.
Buying real estate doesn’t however come without its challenges and restrictions.
European Union Nationals
European Union (EU) nationals may relocate and/or purchase real estate in Cyprus without any restrictions.
This means that EU nationals looking to relocate or invest in real estate in Cyprus, have the liberty to purchase real estate without being restricted as to the number or kind of property (real estate assets) that they acquire.
Third Country Nationals
Interestingly, restrictions still persist for Third Country Nationals (non-EU nationals) wishing to buy property in Cyprus.
TCNs need to obtain a prior approval from the Council of Ministers before legal title to real estate in Cyprus may be registered in their name. For first time home buyers, this can be considered a mere formality. The process can be more complicated for TCNs looking to invest in commercial or multiple residential units.
This doesn’t restrict TCNs from signing a Sale and Purchase Agreement and depositing it with the Land Registry to secure their purchase until legal title is issued.
Following Brexit, UK nationals are treated as Third Country Nationals and therefore need to obtain an approval by the Council of Ministers prior to the transfer of legal title to their name.
Key Considerations when Buying Real Estate in Cyprus
Many properties may be encumbered with a mortgage, Sale and Purchase Agreements, court orders or a right of way, for example.
Encumbrances which burden such property will affect future owners and/or the enjoyment of the property, or may even prevent the transfer of legal title altogether. As such, the necessary due diligence will need to be performed prior to committing to a property.
Prospective purchasers should also consider the type, intended use of a property and the planning zone in which this is located, as these factors may restrict the ways in which the new owner may exploit the property. Buildings may have been constructed for residential, commercial, or mixed use. Respectively, land may be within a residential, industrial or agricultural planning zone, among others. It is important to ensure that the permitted use of a property matches your needs.
It is equally important to know that many properties offered for sale do not in fact have a title deed. Apartments under construction, do not usually have a title deed and purchasers will be obtaining rights under the Sale and Purchase Agreement until a separate title deed is issued in their name.
A separate title deed may take years to be issued after construction is completed, as formality procedures will need to be followed.
Applicable VAT
It is also very important to note that real estate transactions in Cyprus are often subject to VAT. The Value Added Tax (VAT) coefficient applicable on the purchase of newly constructed or off-plan real estate in Cyprus is 19%.
However, individuals and families looking to acquire real estate in Cyprus may benefit from the reduced VAT scheme currently in place for first-time home buyers. Cyprus law provides for a reduced VAT rate of 5% when constructing or purchasing a new house or apartment, which is intended for use as the main and permanent residence of the purchasers. Beneficiaries of this scheme should be aware that they will be restricted from leasing or disposing of the property for a period of 10 years after acquisition.
We pride ourselves on our depth of knowledge and expertise in Real Estate & Construction Law. We advise on the legal challenges of developing, acquiring, selling or leasing land in Cyprus.
Looking to buy real estate in Cyprus? Contact us at info@paraschou.com.cy.
