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Cyprus In Search Of Settlement

With ongoing talks in Geneva between Greece and Turkey about the divided island of Cyprus, how should property investors view this otherwise idyllic Mediterranean location?

The BBC reports that talks to resolve the disputed territory on Cyprus between the heads of the Greek and Turkish governments are ongoing. But at the time of writing no resolution has been reached

Hopes of reunification (or a proper division) of Cyprus have been raised after talks between Turkish and Greek Cypriots in Geneva. But a number of stumbling blocks remain, including whether any Turkish troops would stay in northern Cyprus after reunification. The island’s communities have been split since 1974.

However, the number of property sales contracts deposited at Land Registries across Cyprus in December was the highest recorded since September 2008 according to official figures from the Department of Lands & Surveys, as reported in Cyprus Property News.

There has been a 121 per cent rise in the number of property sales contracts deposited at Land Registry offices across Cyprus during December compared with December 2015. This 121% rise follows a 46% rise in November, a 37% increase in October and a 50% increase in September, bringing the annual increase to 43%; the largest year-on-year rise for the past decade.

Sales rose in all district compared with December 2015. In percentage terms Nicosia led the way with sales up 156%, followed by Limassol, where sales rose by 156%. Meanwhile, sales in Paphos, Famagusta and Larnaca rose by 137%, 107% and 18% respectively, reports Cyprus Property News.

Although based on English law, there are some differences to the process of buying property in Cyprus, says our correspondent Christopher Nye. You may be asked initially to pay a ‘reservation deposit’ of a couple of thousand euros or 1% of the property price, to take it off the market and prevent gazumping. Although the sum isn’t huge, you should still have an independent lawyer check it over first.

Your lawyer will then undertake some vital searches on the property, checking that the sale has been agreed by all the owners, that there are no outstanding debts on the land, and that all planning permissions are in place. The presence of historic monuments and certain trees on your land can all complicate matters, as will being close to the seashore.

Next, the lawyer will draw up a contract of sale, stipulating the conditions of the sale. When each party signs this, the buyers pays 10% of the sale price as a deposit. The buyer can assign power of attorney to sign the document if they don’t wish to be in Cyprus for it. For off-plan, new-build property the deposit is likely to be 30% followed by stage payments as the building continues.

When the sale is registered at the District Land Registry office, the balance of money, stamp duty and any other fees are paid.

For new-build property you will pay VAT of 19%. For resale property, real estate transfer fees are between 3% for property up to €85,430, 5% up to €170,860 and 8% for property above that. You can reduce that by buying in two names if you are a couple. Stamp Duty is 0.15% for properties up to €170,860 and 0.20% for properties above that. Legal fees are usually 1-2%. Agents’ fees of 3-5% are normally paid by the seller.

Cyprus is a popular retirement destination. It has relatively low income tax rates, capital gains tax is generally restricted to disposals of immovable Cyprus property, no gift or inheritance taxes, no withholding taxes on investment income (although a special defence contribution is levied on bank deposit interest and dividends) and an extensive Double Tax Treaty network.

A 50% exemption applies to the income of those who take up residence to work for an employer in Cyprus. The exemption applies for a period of five years, provided the annual income exceeds €100,000 and the employee has not previously worked in Cyprus.

Foreign pension income may be taxed separately at the rate of 5% above an annual exemption, or may be taxed at normal progressive rates where personal allowances and deductions would produce a more favourable result.