Financial and Tax Issues

 

1. What other taxes, apart from the stamp duty, transfer fees and annual property tax, are to be paid in connection with the property purchase?

Taxes payable in connection with the purchase of immovable property in Cyprus are:

• stamp duty and transfer fees ( payable on the value of the property according to the contract of sale)
• annual immovable property tax
• capital galns tax ( applied at the rate of 20% on gains arising from the disposal of the property)
• mortgage fees ( calculated at 1% of the ammount secured plus the relevant stamps)
• immovable property (towns)  tax (calculated to ammount between 0.008% - 0.015% of the value of the property)
• communal expenses (these cover the cost of cleaning and maintaining the common areas, gardens, communal swimming pool expenses, electricity in common areas, management fees and repairs).

 

2. How is annual property tax being calculated? Where and when is it being paid?

Annual immovable property tax

Annual immovable property tax is payable on the market value of the immovable property in Cyprus (and not on the purchase price) as of 1/1/1980 as follows:

• property valued up to CYP 100,000:0%
• property valued from CYP 100,001 - CYP 250,000:0.25%
• property valued from CYP 250,001 - CYP 500,000:0.35%
• property valued CYP 500,001 and above:0.4%

Annual immovable property tax is payable on the 30th of September of each year at the Inland Revenue Department.

 

3. What is the process and cost of registering a company in Cyprus, if one wants to buy a property and register it on this company's name?

(a) Registering a company in Cyprus

Initially, the name of the company must be approved by the Registar of Companies and on approval the relevant documents and forms for the company's registration must be submitted to the Registar. A local lawyer will be required at this stage.

Cost for registering a company in Cyprus

The goverment and court fees (in revenue stamps & Bar Association stamps) regarding the registration of a company total around CYP 300, depending on the share capital of the company (this ammount includes the official translation of the memorandum and articles of association and the fees to accelerate the application). Legal fees are usually CYP 300 or more, again depending on the share capital and on the circumstances of the case.

NOTE: please seek legal advice for a full analysis of the fees and other costs.

 

(b) Purchasing immovable property in the name of a company (local or foreign)

Purchasing by a local company controlled by non-EU citizens OR by a company not registered in Cyprus.

The company shall require a permit from the Council of Ministers.

 

Purchasing by a company that has its registered office in Cyprus.

In order to acquire property without the need for a permit the company must either:

• be controlled by EU citizens, or
• in the case that the company has non-EU citizen shareholders, the share capital must be controlled by Cypriot citizens.

Any restrictions applied for EU citizens not residing in Cyprus will cease after 2009.

 

4. How to register a local business in Cyprus (e.g restaurant, shop etc) and what is required for this? Does one of the owners necessarily have to be Cypriot?

(a) In the event of EU citizens, then the business can be registered in their name.

(b) In the event of non-EU citizens the registration of the business is subject to certain restrictions, depending on the nature of the business, and they will require a permit from the relevant goverment department.

(c) As of 1/10/2004 foreign investors can register a company directly with the Registrar of Companies and obtain any license, if needed, from the appropriate authority according to the nature of the investment, subject to certain limitations in the areas of education, health, mass media and construction.

In the case that the company is controlled only by foreign investors, the directors will need to obtain a work permit and a residence permit from the Ministry of Labour and Social Insurance in order to operate a local business.

A permit is required from the Cyprus Tourism Organisation for Hotels, Hotel Apartments and all types of businesses offering food that have seating arrangements on their premises, exept for take-aways and traditional Cypriot coffee houses.

5. The taxation system for:

• An individual
• A local company
• An international company

 

(a) The taxation system for an individual in cyprus is as follows:

Cyprus tax residents (those who aggregate 183 days stay in Cyprus) are subject to tax on their worldwide income.

Non-Cypriots tax residents are subject to tax only on their Cyprus-sourced income.

The income tax rates for the years 2005-2006, subject to certain exemptions and allowable deductions, are as follows:

• taxable income up to CYP 10,000 is not subject to tax
• taxable income of CYP 5,000 over the initial CYP 10,000:20%
• taxable income of CYP 5,000 over the initial CYP 15,000:25%
• taxable income over CYP 20,000:30%

(b) The taxation system for a company in Cyprus is as follows:

Corporation tax rate for limited liability companies registered in Cyprus or any company not registered in Cyprus that carries on business in Cyprus (i.e a branch) is 10% on the company's taxable income.

Businesses in Cyprus are also subject to VAT.

 

(c)The taxation system for international business companies is as follows:

IBCs are subject to tax at the rate of 10% as follows:

• Those that are Cyprus tax residents, on their worldwide income
• Those that are non-Cyprus tax residents, only on their Cyprus sourced income

6. For what maximum period can a housing loan be granted to a foreigner?

A housing loan granted either in Cyprus pounds or in a foreign currency may be for up to a maximum period of 30-40 years (on the condition that the creditor is to be under the age of 65 years old at the expiry of the loan period). 

7. Are there any limitations when transferring money from abroad to local accounts? Do local banks demand any proof of where this money came from?

There are no limitations when transfering money from abroad to local Bank accounts, as long as such transfers are effected through a bank.

8. With regards to personal taxation, how do I register with the Cyprus tax authorities and what do I need to do about the Inland Revenue in the UK?

In order to register with the Cyprus Tax Authorities one must complete Form I.R163A and deliver it to the Inland Revenue Department of Cyprus and will be registered as a tax resident. (they will need to present their Identification Card).

Regarding the Inland Revenue in the UK please visit their official webpage at http://www.hmrc.gov.uk/ for any information required.

 

9. What are the regulations of transferring pensions from other EU countries for people who wish to move to Cyprus permanently?

Pensioner residents of Cyprus holding a foreign pension should write to the relevant foreign authorities to send their payments to Cyprus, directly to them at their Cyprus address or Bank account, if this is acceptable by the foreign authorities.

Some countries (i.e England and Canada) have an agreement with Cyprus that allows state pensions to remain index-linked when pensioners are residents in Cyprus.

 

10. Under what circumstances can I register my car duty free in Cyprus? Whom do I apply to and how long does it take? What documentation is needed for this? What happens if I want to sell it after it is registered?

The following relief is granted by the Ministry of Finance, Department of Customs and Excise regarding motor vechicles:

• Aliens who settle permanently in Cyprus without exercising any profession may import, buy or acquire a vechicle under relief from excise duties (not VAT) under certain conditions.

The procedure followed is the following:

The applicant must submit an application in person at the Nicosia Custom House (Reliefs Section), supported by the following documents:

1. Passports held by the applicant and the members of his/her family
2. Evidence of applicants residence
3. Aliens Registration Certificate (of applicant and his/her family)
4. Residence permit issued by the Chief Immigration Officer
5. Evidence of applicant's financial condition (i.e satisfactory proof of sources and ammounts of income and bank statement)
6. Cypriot or EU driving licence

The applicant is allowed to use the vechicle for a period not exceeding 6 months, untill his/her application is processed.

Once relief has been granted the applicant must have the vechicle cleared from customs and registered at the Department of Road Transport. The vechicle may only be used by the applicant and his/her family.

The vechicle can not be sold, lent, hired, pledged, exchanged or otherwise disposed of in Cyprus without the prior permision of the Director of Customs.

• EU citizens transferring their normal residence from another EU member state, whithin 12 months from the date of transfer are granted exemption for one vechicle per person which that person must have possessed and used for a minumum of six months before the date of transfer of his normal residence to Cyprus.

The documents required are the following:

1. Motor vehicle registration document
2. Certificate of insurance
3. Sales invoice/receipt of purchase
4. Particulars of the vehicle's arrival

The vechicle can not be sold, lent, hired, pledged, exchanged or otherwise disposed of in Cyprus without the prior permision of the Director of Customs.

 

• Total or partial relief is also available for temporary importation of private motor vehicles from countries within and outside the EU.

 

11. If an old person leaves the property to a relative after his/her death and the relative does not live in Cyprus, is the relative liable to inheritance tax in the country of residence?

Estate dudy (inheritance tax) has been abolished in Cyprus for deaths on or after 1/1/2000.

If the beneficiary is a residence or tax residence of a country other than Cyprus then the laws of that country apply as to inheritance tax.