Residency

Preparation is key. It is highly advisable to obtain independent and reliable legal advice from the very beginning in order to prepare in advance and be well informed and avoid any potential pitfalls. The content of this article is valid as at of the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice.

Just as prior to Brexit, UK Nationals are able to purchase property in Cyprus whether for relocation, investment or as a holiday home. 

The only difference is that now, UK Nationals are required to apply for and obtain the Council of Ministers’ approval to purchase Property in Cyprus. It is a straightforward process handled by the Purchaser’s legal representative. 

UK Nationals, just as any other Non-EU Nationals, are now entitled to purchase up to two properties in Cyprus per family.  However, if they wish to purchase more than two Properties, they can always set up a Cypriot Company and purchase these Properties through a Cypriot Company. 

Non-EU nationals are granted the Council of Ministers’ Permit to acquire an apartment, house or a plot of land not exceeding three donums (approximately 4,014 square meters) for the erection of only one house. As of May 2013, the Ministry of Interior allows ownership of up to two Properties which can be two residences or one residence and one commercial premises with a floor area of up to 100 sq. metres. 

It is safe if you take certain precautions to avoid pitfalls when buying a Property in Cyprus. It is important to obtain legal advice and most importantly to ensure that a thorough Due Diligence is undertaken on the property to be purchased. 

It is highly recommended to engage an independent, reputable legal representative experienced in dealing with all the complexities of the process, and, most importantly, to undertake the due diligence investigation and searches on the Property. Having a legal representative throughout the process will secure your rights and ensure your needs are being met. With reliable legal representation you can ensure a hassle-free process from start to finish and furthermore, avoid any potential pit falls. nswer to this item.

Legal services would typically include but would not be limited to conducting due diligence on the property, Contract of Sale (CoS) review and/or preparation/drafting, contract negotiation, contract exchange/completion, registration of the CoS at the Land Registry Office (LRO), representation at the LRO for the title transfer, application to the Tax Authorities for reduced VAT, and application for permission to buy immovable property in Cyprus. Add an answer to this item.

For due diligence and conveyancing services (from contract review to contract execution and transfer of title deeds) legal fees typically amount to approximately 1% of the Purchase Price plus VAT, with a minimum fee applicable.  answer to this item.

PROPERTY RESERVATION 

The Purchaser makes an offer to purchase a Property at a specific price through My Tranquillity. Once the offer is accepted, the Purchaser pays a non-refundable reservation fee and the Vendor takes the Property off the market for an agreed period of time. The reservation fee fixes the sale price. If the sale proceeds, the reservation fee is applied towards the Purchase Price. It is important that the reservation fee is paid subject to legal searches and a clear title deed. In the event that the Purchaser wishes to conduct a survey on the Property, the reservation fee must be paid subject to a survey. 

DUE DILIGENCE 

Ensuring Due Diligence is undertaken on the Property to be purchased Due diligence on the Property to be purchased is of the utmost importance and is absolutely necessary. The Purchaser’s legal representative will perform the necessary checks to confirm ownership of the reserved Property and verify the existence of a freely transferable title. It is highly recommended that due diligence is completed prior to the signing of the contract. The appointed legal representative will conduct a search at the LRO to establish that the Vendor is the rightful owner of the Property and whether the title has any legal encumbrances that could potentially inhibit a sale. If the Property is a plot of land, the legal representative could search and verify the applicable zone, building capacity and allowable building density. For properties that do not yet have separate title deeds, the legal representative can check with the relevant authorities to verify that the necessary planning and building Permits exist. Moreover, as part of due diligence, the Purchaser’s legal representative needs to ensure that the Property being purchased is as described on the title deeds and that no amendments or alterations have been made to the Property that would require the issuing of any additional Permits. 

CONTRACT NEGOTIATION AND EXECUTION - including all agreed terms in the Contract 

All terms negotiated between the Parties need to be expressly included in the Contract of Sale which will be drafted by the Parties’ legal representatives. This includes the agreed Contents List, if applicable. 

SIGNING OF CONTRACTS AND PAYING STAMP DUTY 

As soon as the Contracts are signed by the Parties or by their legal representatives by virtue of a Power of Attorney, then the Contracts must be stamped and the Purchaser’s legal representative pays the stamp duty at the tax office. 

REGISTRATION OF THE CONTRACT OF SALE (CoS) AT THE LAND REGISTRY OFFICE 

Once the Contracts are fully executed and duly stamped, and provided the Purchaser pays the first instalment (normally 30% of the Purchase Price), the Contract of Sale can be lodged at the LRO for ‘specific performance’ (within six months of signing). Registration provides the Purchaser with maximum protection under the law. The ‘Sale of Immovable Property (Specific Performance) Law’ protects the Purchaser by preventing the Vendor from reselling, mortgaging or transferring the Property elsewhere and from otherwise encumbering the Property, for as long as the Contract of Sale is valid and legally effective. 

TRANSFER OF TITLE DEEDS 

In cases of resale properties where the title deed has already been issued, and the Property is ready and available for transfer, the transfer and registration of the title deed into the Purchaser’s name takes place simultaneously with the full payment of the Purchase Price at the Land Registry approximately 90 days from signing of the Contracts. A title deed transfer is effected at the Land Registry Office provided that the Purchaser has paid all the outstanding balances to the Vendor, paid any applicable transfer fees and taxes to the government and has obtained the necessary Permit from the Council of Ministers, if applicable. It is a simple procedure and legal representatives can act on the Purchaser’s behalf, pursuant to a Power of Attorney. 

In cases of off plan/new builds, once separate title deeds are ready which will be at a later date, the Purchaser and the Vendor present themselves at the Land Registry Office to complete the transfer. The process to issue separate title deeds for each unit in a new development typically takes a few years after the development is completed. his item.

From the time the Contracts are signed until completion, the process takes approximately 90 working days

It is not necessary for the Purchasers to be physically present in Cyprus during the process. They can grant to their legal representative a Power of Attorney to represent them during their absence. This is commonly the case.wer to this item.

It is important when making a decision to purchase Property that one should consider all relevant costs. During the Purchasers’ first meeting with their legal representative, the Purchasers should request a breakdown of all costs surrounding their purchase in order to be able to budget accordingly. The relevant transfer fees or VAT rate (where applicable), stamp duty, legal fees and other disbursements should be calculated, depending on the value of the Property to be purchased, to enable the Purchasers to include these expenses into their budget. Also, costs will differ on what type of property one purchases, i.e. whether it is a resale or an off-plan property.

The relevant expenses are as follows: 

Stamp duty 

Stamp duty is payable on both new builds and resale properties and is 0.15% on the first €170,000 and 0.20% on any amount above that. 

VAT, if Applicable. 

If a Property is a new build or off plan, then the potential Purchaser has to pay VAT. The standard VAT rate of 19% applies to new build properties and development land. (Second hand properties are exempt of VAT). However, a Purchaser may be eligible to apply for a reduced VAT rate of 5% for a primary residence, subject to terms and conditions. 

Transfer fees, if Applicable 

When purchasing resale properties, Purchasers have to pay transfer fees. Transfer fees are payable by the Purchaser to the Land Registry Department on the date of the transfer of the title deed into their name. Although the transfer fees are usually calculated on the Purchase Price, the Land Registry Office may impose higher transfer fees if the Valuation Department decides the market value of the Property at the time of purchase exceeds the Purchase Price. 

The applicable rates are 3% on the first €85,000, 5% on the next €85,000 and 8% on any excess above €170,000. Transfer fees apply to the property value per Purchaser, hence the total transfer fees on a transaction can be reduced if a Property is bought in joint names. Currently, a reduction of 50% applies to the above rates, and Properties subject to VAT are completely exempt from transfer fees. 

Not necessarily because Law firms are regulated entities and they tend to have a trust/escrow account in the same way as a UK solicitor. Therefore, the transaction could take place as it does in the UK where funds are hosted into the lawyer’s escrow account and all the payments would be made by the lawyer on behalf of the clients. 

Provided the clients have the necessary documentation requested by the bank, it is not difficult to open a bank account in Cyprus. The law firm representing the Purchasers would be able to introduce their clients to the bank and assist their clients with the opening of a personal bank account, thus simplifying the process for them. 

In Cyprus, it is the Vendors who pays the estate agents fee and therefore the Purchasers do not have to worry about this cost when arranging their budget. As this fee is sometimes hidden, My Tranquillity are clear that their fixed fee is 1.9% of the purchase price for undertaking preliminary due diligence.  We actively encourage and recommend Purchasers enquire with an estate agent as to their commission rate.

Usually, a reservation deposit will keep the property off the market for a period of approximately 30 days. 

If the prospective Purchasers change their mind after payment of the reservation deposit, the reservation deposit will usually be forfeited, except under certain circumstances. to this item.

Usually, a deposit will be refundable if there are issues with the title deed or the property is not free from mortgages and/or other encumbrances. It is very important that this be stipulated in any reservation agreement signed with the Estate Agent when payment of the deposit is made..

When both the Purchasers and the Vendors have Bank accounts in the United Kingdom in British Pounds Sterling, then it is possible for the purchase price to be paid in British Pounds Sterling provided, of course, the legal representatives of both Parties ensure there are sufficient safeguards in place. Furthermore, it is important to agree on the exchange rate to be applied at the outset to avoid any disputes. 

Yes, it is possible and a legal representative will be able to help with the process. 

UK Nationals are still able to visit Cyprus post-Brexit. However, their passports will be stamped at entry/exit border checks with a 90-day limitation period, which is the period of time that they can legally remain in Cyprus. This means that UK Nationals can legally enter and stay in Cyprus with a 90 days’ maximum limit in any 180-day period. 

In the event that UK Nationals wish to extend their stay in Cyprus for more than 90 days, they can apply for a Temporary residence Permit - the so called “pink slip” - which allows non-EU passport holders to extend their stay in Cyprus for more than 90 days. It will also enable tourists and visitors to extend their stay. Applicants need to apply before their visas expire. Under this Permit a person is allowed to live in Cyprus for one year as a visitor, without the right to work. Spouses and children below the age of 18 can also get a Temporary residence Permit as dependents. 

 In order to be eligible for this type of Permit, the Applicant mainly needs to show: 

1. Sufficient income from abroad to cover living expenses while residing in Cyprus. 

2. Income includes salary, pension deposits in a bank account abroad, rents, dividends, interest on deposits, etc. - 

3. The Applicant needs to have a minimum deposit of €10,000 in a Cypriot financial institution (bank) during the first application and a minimum of €6,000 when reapplying. 

4. The Applicant must provide detailed bank statements of bank account transactions in a financial institution in Cyprus for the last 12 months in case of renewal or from the date of opening the bank account in case of a first application for a Temporary Residency Permit, showing foreign remittances in the name of the applicant which in total should not be less than €2,000 per month or €24,000 per year for one person. This amount increases by 20% for the spouse and by 15% for each dependent child below the age of 18. 

5. The Applicant must either be renting or have bought a house or apartment in Cyprus. 

6. The Applicant must obtain a clean criminal record from their country of origin or residence if the Applicant resides in a country other than their country of origin. 

7. The Applicant must undergo medical examinations and blood tests and X-rays during their first application. 

The Applicant must have valid private health insurance for medical care in Cyprus 

The Applicant under Regulation 6(2) need to proceed with the purchase of a house or an apartment of a minimum Purchase Price of €300.000 plus VAT from a development company. The Property must be bought from the primary market, i.e. not a resale Property, hence, the addition of VAT to the Selling Price. The Applicant could also invest €300.000 plus VAT in commercial real estate (excluding a house or apartment) in which case they could purchase property from the secondary market (re-sale). The Applicant needs to provide evidence of a secure and steady annual income emanating from abroad that should be a minimum of €50,000 which increases by €15,000 for the dependant spouse and €10,000 for each dependent child. In calculating the annual income, the income of the spouse is also taken into consideration. Such secured annual income of at least €50,000 (of the Applicant and/or his/her spouse) which must be remitted from abroad may emanate from: Salary, Dividend income, Pension, Deposits and/or Rental income, and needs to be proven by a tax declaration from the country in which the Applicant is a tax resident or can be proven by an official confirmation/declaration by an independent chartered accountant. Such funds can emanate not only from the personal bank account of the applicant/spouse but also from a corporate account of a company in which the Applicant/ spouse are sole shareholders. em.

UK Nationals post-Brexit can apply for Permanent Residency under either Category 5(F) or Regulation 6(2) which is commonly known as the ‘Fast Track’ procedure. 

Under Regulation 6(2) the spouse of the Applicant, their children up to the age of 18, as well as any single financially dependent children aged 18-25, who are in full time education as at the date of filing of their application, can qualify for a Residency Permit provided that the Applicant can show they have adequate income emanating from abroad to support them. It will not be possible for adults (financially dependent children aged 18-25) to add their future spouse/children to such a Permit. 

The only difference is that now, UK Nationals are required to apply for and obtain the Council of Ministers’ approval to purchase Property in Cyprus. It is a straightforward process handled by the Purchaser’s legal represen  

A Residency Permit obtained under regulation 6(2) is valid for life for the main Applicant and the spouse. With regards to unmarried children between the ages of 18 and 25, who are students in higher education institutes abroad on the date of submission of the application, and who are financially dependent on the Applicant, their Permit remains valid throughout their lifetime provided they visit Cyprus at least once every two years. Such a Permit, once issued, will continue to be valid even after they reach the age of 25, even if they marry and cease to be students and/or financially dependent on their parents. The Residency Permit issued for the minor children of the Applicant will end on reaching the age of 18. They can reapply if they fulfil the relevant criteria mentioned above. tative. 

The holder of a Category 6(2) Residency Permit cannot work in Cyprus as an employee or director of a Company receiving a salary. However, they can be the 100% shareholder of a Company doing business in Cyprus, and they are allowed to be the director of a Company if they are not receiving a salary.

This category would be the most appropriate route for pensioners who receive a pension from abroad and have savings, wishing to retire in Cyprus or families with secure incomes from abroad who want to set up a home in Cyprus. Each application is examined on its merits and a high level of discretion is exercised by the Migration Department. Category 5(F) applies to persons who have a secured annual income coupled with some savings and a place to stay in Cyprus. Applicants must have fully and freely at their disposal a secure and regular annual income, which is high enough to provide a decent living in Cyprus without having to engage in any business, trade or profession in Cyprus. The law does not specify the amount of annual income the Applicant should earn, although typically it should be such that he can afford a decent standard of living for the whole family. Likewise, the regulation does not set out a specific amount of savings to be deposited in the local bank. Although the place of residence can be a rental property, owning a property in Cyprus weighs heavily and positively when the application is processed and is a considerable advantage.    

There is no minimum amount that must be spent on the Property that is being purchased and the property does not have to be from the primary market - it can be a resale Property or a new build of any value. However, the Cypriot Government is contemplating changing the criteria of eligibility for this category and to require a minimum amount. 

Main Applicants can add to their application their spouse and children, up to the age of 18, as dependents. However, children who are Permanent Residency holders, under category 5(F), will not be able to renew their Permanent Residency Permit once they become 18 years old, unless they can satisfy the requirements independently and are able to apply in their own right. 

The examination of the application currently takes over three years and there is a huge backlog, the main reason being that the government is contemplating changing the criteria of eligibility for this category. There have not been any approvals under this category for the last three years. 

Holders of Permanent Residency Permits under 5(F) are not allowed to work in Cyprus, or be appointed as officers in Cypriot companies or have income from such appointments. 

A Residency Permit obtained under category 5(F) is valid for life for the Applicant and their spouse but for the dependants, its validity ceases when the dependent children turn 18. Additionally, if a holder of a Permanent Residency Permit stays out of Cyprus for more than 2 years, it is automatically cancelled. The holders of Permanent Residency Permits must visit Cyprus at least once every two years. 

It is much easier for persons wishing to relocate to Cyprus, if they or their spouse have a European passport as the process of obtaining a Residency Permit is much simpler and straightforward. EU nationals can purchase property in Cyprus without any restriction, they can work and reside in Cyprus without any limitations. 

It is important to note that holders of Temporary Residency, Permanent Residence Permit s under category 5(F) and Regulation 6(2) are not allowed to work in Cyprus. 

It is possible, provided for UK Nationals to be employed by a Cypriot company and obtain a work permit, provided certain conditions are met. The application process involves submitting the application to the District Labour Office, which will investigate and confirm that the criteria for the employment of third country nationals are being met. It is also possible, subject to certain requirements, to obtain a work Permit and Residence Permit as an employee of an existing or new company of foreign interests.   

No, there is no inheritance tax in Cyprus which is a major benefit. The Probate procedure is very similar to that in the UK. 

What are the tax benefits of Cyprus? 

Cyprus offers numerous tax benefits, a few of them being as follows: 

(a) there is low personal income tax rates with the first €19,500 being exempt from income tax; 

(b) there is a 20% exemption of rental income; 

(c) dividends are exempt from income tax; 

(d) there is a 50% exemption from income tax, for remuneration from any employment exercised in Cyprus by an individual who was not a resident of Cyprus before the commencement of the employment. Exemption applies for a period of 17 years for employments commencing as from January 1st 2022 proved that the annual remuneration exceeds €50,000. 

(e) Tax free transfers of profit and capital from abroad to Cyprus; 

(f) There is no immovable property tax; 

(g) There is no wealth tax; 

(h) There is no inheritance tax; 

(i) There is no gift tax; 

(j) Foreign pension received in Cyprus is taxed either at 5% flat rate for amount exceeding €3,420 per annum or at normal personal income tax rates. 

(k)Cyprus has the lowest corporate tax rate which is 12.5% Not necessarily because Law firms are regulated entities and they tend to have a trust/escrow account in the same way as a UK solicitor. Therefore, the transaction could take place as it does in the UK where funds are hosted into the lawyer’s escrow account and all the payments would be made by the lawyer on behalf of the clients. 

Cyprus is a democratic country known for its political stability and commitment to the protection of human rights. The English language is spoken by the vast majority of the population, which makes it easier for British Nationals to live and prosper in the country. It enjoys a high standard of living and quality of life with a modern and highly developed infrastructure and excellent telecommunications, ranked as the fifth best place to relocate by Knight Frank Global Lifestyle Review. Cyprus also, provides a secure and safe environment for the whole family to enjoy a stress-free lifestyle. Cyprus has a very high standard of education across all sectors, including are excellent private schools for both junior and secondary level foreign pupils. Moreover, Cyprus also has a wide selection of English-speaking Universities which are directly linked to UK and USA Universities. o the bank and assist their clients with the opening of a personal bank account, thus simplifying the process for them. 

It boasts an enviable geographical position between Asia, Europe and Africa makes Cyprus the ideal place to invest, as it is a gateway for many emerging nations to expand their business throughout Cyprus. Additionally, Cyprus provides excellent health care at low cost.