Have you heard of the immovable property tax in Cyprus before? If not, we’ll tell you everything you need to know. If yes, we’ll explain this topic in more detail and what it means for your dream home purchase!
Signing the deal on a new property is one step and real estate owners face many new financial factors that affect their purchase, such as immovable property tax for a Cyprus home. Luckily Cyprus is a jurisdiction known for its excellent taxation policies. One of the biggest is that the country has abolished the Immovable Property Tax.
Property Experts Cyprus gives you the low-down on the history and abolishment of Immovable Property Tax in Cyprus and a few other tax rates property owners should be aware of.
The Establishment of Immovable Property Tax
Immovable Property Tax in Cyprus was based on the international standard of property tax that has been in development since ancient civilizations.
Common English law uses the idea of movable and immovable property to set clear boundaries for legal status and taxation policies. Movable property is defined as assets that can be moved, such as electronics and jewelry.
On the other hand, immovable property refers most often to real estate as these assets cannot easily be moved. This does not only apply to homes, but also workplaces, warehouses, manufacturing units, and factories. Landscaping that is attached to the ground is also considered immovable property under the defined criteria.
Movable property usually is not required to be registered whereas immovable property in Cyprus requires the appropriate registration and has implications for inheritance and transferring as these assets cannot easily be portioned between parties.
Property tax has been around since the first establishment of governance. Some of the first tax records ever found date back in what is now Iraq to around 6,000 B.C. From Ancient Middle Eastern and African cultures to Medieval England, most taxes were in the form of crop yields or the size of the land, instead of the annual value of the land.
As more complex governmental and societal systems formed, property tax became adjusted to reflect the yearly value of a property and the improved local services that contribute to a property’s assets.
What is Immovable Property Tax in Cyprus?
The Immovable Property Tax in Cyprus, which was progressively up to 1.9%, was abolished in July 2016 by the House of Representatives. The approved amendments stipulated that immovable property tax in the tax year of 2016 would decrease by up to 75% and then be completely abolished starting from the year 2017.
The recent Immovable Property Tax in Cyprus had been imposed from January 1, 1980, until 2017. The rate was based on total market value owned by an individual or a company, regardless of the status of tax resident in Cyprus, if the property was situated in Cyprus.
The breakdown of rates was as followed (based in Euros):
- Less than 12,500: Exempt
- 12,500 – 40,000: 0.6%
- 40,001 – 120,000: 0.8%
- 120,001 – 170,000: 0.9%
- 170,001 – 300,000: 1.1%
- 300,001 – 500,000: 1.3%
- 500,001 – 800,000: 1.5%
- 800,001 – 3,000,000: 1.7%
- Over 300,000,001: 1.9 %
The amendments for the 2016 tax year included the following stipulations for tax paid:
- Those taxpayers that settled Property Tax liability for the 2016 tax year by October 31, 2016 only needed to pay 25% of their owed balance.
- Those taxpayers that settled Property Tax liability for the 2016 tax year from November 1- December 31, 2016 needed to pay 27.5% of their owed balance.
- Not settling by December 31, 2016 results in an additional 10% charge on top of the 27.5% rate of tax due.
- Should the liability be less than 10 Euros, tax was not collectable.
- 2016 was the last tax year that the Immovable Property Tax in Cyprus was imposed.
So, which taxes are there in Cyprus for homeowners?
Taxes Associated with Cyprus Property That Owners Should Be Aware Of
Although the Immovable Property Tax in Cyprus has been abolished, there are several other taxes owners of immovable property should know about.
While Cyprus does impose local taxes on immovable property assets, these are generally very low. Further, other European jurisdictions continue to impose Immovable Property Tax unlike Cyprus, and also have their own set of local property taxes. The rates of Immovable Property Tax range with the lowest being 0.05% in Luxembourg and the highest being 1.70% in France and 2.53% in the United Kingdom.
When considering the right location for property ownership, annual Property Taxes cannot be ignored and the tax rates imposed federally and locally add up to the true cost of owning a property. Regular maintenance and registration of ownership with title deeds of the immovable property also contribute to the overall expense beyond the initial purchase price.
Compared with other European jurisdictions, abolishing the Immovable Property Tax in Cyprus alongside its other lower tax policies makes the jurisdiction ideal for property ownership at a reduced annual cost.
Municipality Tax
Local municipalities apply tax to the immovable property based on the market value of the property and rates range from 0.1% to 0.2%. These are paid to the local municipality where the property is located and are payable to the direct authorities annually from the October to December tax period.
Local Authority Fees
Calculating fees using the property size, local authorities determine the amount of the fee to be within the range of 85 Euros to 256 Euros per year. These fees go towards maintaining trash collection, sewerage, street lighting, and other community services provided by local authorities. These fees are also paid directly to local municipal authorities for the regular October to December tax year.
Sewerage Tax
Sewerage tax is calculated based on the property value and ranges from 0.3% to 0.35%, depending on if the area charges this tax. Taxes due are paid to the local Sewerage Board for the annual tax year from October to December.
Transferring Property
The above taxes are based on property ownership. If an individual or company wants to transfer immovable property to another owner, Capital Gains Tax (20%), Property Transfer Fees (3-8%), Stamp Duty (0.15-0.2%), and VAT (only applicable on new developments, 19%, and not resales) should be included in the financial calculations of property ownership.
In cases of sales, the House of Representatives has signed a bill in 2021 that would levy a 0.4% tax on the seller of the immovable property with proceeds going towards Greek Cypriot refugees.
Applicable Property Fees
In summary, potential property owners should be aware of these taxes and fees when considering the true cost of a property:
During Purchase
- Transferring Title Deed, in case of sales: 3-8%
- Real Estate Agent Fee, if applicable
- Property Sales Tax: 0.4%
- Capital Gains Tax: 20%
- VAT, new property only: 19%
- Stamp Duty: (0.15-0.2%)
Annual Property Taxes and Fees
- Municipality Tax: 0.1-0.2%
- Local Authority Fees: 85-256 Euros
- Sewerage Tax: 0.3-0.35% (if applicable)
Find the Right Property and Financial Commitment
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