Proceeding either with the purchase or sale of an Immovable Property it can be a stressful procedure. In the below we will explain in brief the procedure of a purchase of an Immovable Property alongside with the procedure of a sale of an Immovable Property in order to know your rights and obligations.
Purchase of an Immovable Property in Cyprus
STEP 1
Upon the decision making of the Immovable Property; a due diligence procedure must be followed in order to avoid any surprises in the future. During the due diligence procedure, we need to examine whether the Seller has separate title deeds for the Immovable Property in question and whether the Immovable Property is burden with any mortgage and/or any encumbrance. In the event that the Immovable Property is under construction we will also need to examine whether the planning and building permits have been issued.
In both scenarios, in the event that the Immovable Property is burden with a mortgage and/or encumbrance we will request for a bank confirmation (waiver) which will secure the Purchaser’s rights that either upon the full payment of the purchase price or upon the transfer of the Immovable Property upon the Purchaser’s name, the mortgage and/or encumbrance will be released from the Immovable Property.
STEP 2
Once the due diligence procedure will be completed and the Purchaser decide to proceed with the purchase of the Immovable Property, either a Contract of Sale or an Assignment Agreement (depends on the status of the Immovable Property) shall be negotiated, drafted and executed between the parties. In the event that the separate title deed of the Immovable Property has not been issued yet, the Parties can proceed with a Cancellation Agreement and a Contract of Sale instead of an Assignment Agreement.
STEP 3
Upon the signing of the Contract of Sale or Assignment Agreement, the Purchaser has to proceed with the stamping of the agreement within thirty (30) days from the date of the signing. The stamps duties are calculated as follows:
- 0% up to €500,00;
- 5% up to €170.000,00; and
- 2% for €170.000,00 and above.
In the event that the Purchaser will proceed with an Assignment Agreement, the Tax Office will calculate the Stamp Duties according to the highest price, i.e if the purchase price of the contract of sale is more than the assignment’s agreement purchase price, then the stamp duties will be calculated as per the purchase price of the Contract of Sale and not as per the Assignment’s Agreement.
STEP 4
In order to secure the Purchaser’s rights and become the beneficiary owner of the Immovable Property, the Contract of Sale or the Assignment Agreement shall be deposited at the District Land Registry Office for Specific Performance Purposes. The Contract of Sale shall be deposited within six (6) months from the date of signing and the Assignment Agreement within two (2) months from the date of signing.
STEP 5
The latest step of the above-mentioned procedure is to proceed with the transfer of the title deed. The transfer fees are being calculated by the District Land Registry Office as follows:
- 3% on the €0 – €85.000,00 of the value of the Immovable Property;
- 5% on the €85.000,00 – €170.000,00 of the value of the Immovable Property; and
- 8% from €170.000,00 and above of the value of the Immovable Property.
The transfer fees at the moment are reduced by 50%.
In the event that the Purchaser will buy an Immovable Property which is subject to V.A.T and pay at the time of the payment of the purchase price the applicable V.A.T (the Purchaser has the right to apply for a reduced V.A.T rate of 5% instead of the current one 19% for one (1) Immovable Property), then he/she will not need to pay any transfer fees at the Land Registry Office. Also, in the event that the Purchaser is a third country national (not member of the European Union), before proceeding with the transfer of the Immovable Property upon his/her name, he/she will need to obtain a Council of Ministers approval.
Sale of an Immovable Property in Cyprus
STEP 1
The Seller has to provide to the prospective Purchaser with any necessary information that the latter will require. The Seller has to provide to the prospective Purchaser the following documents:
- when the separate title deed has been issued:
- Copy of the title deed;
- Search from the Land Registry Office; and
- Copy of the Corporate Documents (if the Seller is a company) or copy of the passport/identity card (if the Seller is an individual).
- when the Immovable Property is under construction:
- Copy of the title deed of the land;
- Search from the Land Registry Office;
- Copy of the Corporate Documents (if the Seller is a company) or copy of the passport/identity card (if the Seller is an individual);
- Copy of the planning permit;
- Copy of the building permit;
- Architectural Plans; and
- Technical Specifications.
STEP 2
Once the due diligence procedure will be completed and the Purchaser decide to proceed with the purchase of the Immovable Property, either a Contract of Sale or an Assignment Agreement (depends on the status of the Immovable Property) shall be negotiated, drafted and executed between the parties. In the event that the separate title deed of the Immovable Property has not been issued yet, the Parties can proceed with a Cancellation Agreement and a Contract of Sale instead of an Assignment Agreement.
STEP 3
Upon the signing of either the Contract of Sale or the Assignment Agreement, the Purchaser will stamp the relevant agreement at the Tax Office. After the Seller will receive a stamped Contract of Sale or a stamped Assignment Agreement, the latter has to visit the Tax Office in order to obtain Tax Clearance including paying any Capital Gains Tax which is at the moment at the rate of 20% on gains from the disposal of the Immovable Property. Please note that if the Seller has bought the Immovable Property between 16/07/2015 and 31/12/2016, the Capital Gains Tax will not apply. Please also note that if the Immovable Property is the first one that the Seller will sell, there is a deduction of €17.086,00, i.e if the Capital Gains Tax will be calculated at the amount of €20.000,00 and it is the Seller’s first sale, then the Seller will pay at the Tax Office the amount of €2.914,00 instead of €20.000,00.
STEP 4
Alongside with the Tax Clearance, the Seller must provide the Purchaser with certificates from the local municipality/community council and sewerage board (if applicable) that there is no any outstanding amount towards them.
STEP 5
Transfer of the Immovable Property upon the Purchaser. The Seller at the time must provide the Purchaser the above mentioned in steps 3 and 4.
Our law firm is specialised in the above-mentioned procedures more than twenty (20) years and for further inquiries and explanation of the full procedures of the purchase and sale of an Immovable Property, please contact our Senior Associate in Property Department, Panagiota Christodoulou panagiota.c@aretilaw.com