BUYING IN CYPRUS

When buying real estate in Cyprus, an investor will need to consider various factors before and after purchasing the property.

Despite Real Estate Agencies and Property Developers advising Buyers not to seek the consultation of lawyers, it is highly recommended to seek professional legal advice when purchasing real estate in Cyprus as the repercussions of a one-sided agreement favouring the Seller can result in unrecoverable losses for the Buyer.

Our specialized team of lawyers are legally obliged as professionals to undertake the appropriate due diligence on the prospective property and all the appropriate checks to ensure the property is ‘clean’ with no possible dangers, in order for you to enjoy the full and unequivocal rights of your future property.

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Our specialized team of lawyers shall:

• verify the Seller’s ownership of the property.
• carry out an official search at the Land Registry to confirm if there are any encumbrances or charges registered over the property.
• ensure the availability of all necessary permits, where required.
• verify the financial standing and viability of the Seller.
• provide an evaluation of the Seller’s reputation in the Cyprus real estate market.
• assist in appointing qualified engineers or surveyors to carry out structural or other surveys, where required.
• draft and execute the contract of sale between both parties with the contract’s provisions negotiated in a fair and balanced way with all formalities complying to all law and regulations applicable in Cyprus.
• handle all matters related with the Cyprus Tax Authorities, where required.
• execute an application for permission made to District Office in accordance to the Acquisition of Immovable Property (Aliens) Law Cap. 109 for purchase by non-EU nationals. Note: It takes about 15-30 days for the permission to be issued.
• submit and register the contract of sale with the Land Registry Office preventing the Seller from transferring the property elsewhere or registering an encumbrance before finalizing the transfer. Note: This is valid as long as the contract is valid and legally effective.
• assist in handling the payment of stamp duty and transfer fees related to the property.
• authorised representative of the Buyer through Power of Attorney, from start to finish until the Property is transferred to the Buyer.

Title Deed

A title deed is a formal document issued by the Land Registry Office which legally confirms the ownership of a property.  Once transfer is made at the Land Registry, the title deed will be registered on the Buyer’s name.

When no title deeds are issued yet, this means, most likely immovable property purchased is off-plan or still under development.

There are situations where Buyers purchase a property without a title deed, however, appropriate due diligence must be undertaken to assess the reasons why the title deed has not been issued.

Stamp Duty

Sale Agreements must be fully stamped by governmental authorities within 30 days of its signing.

Rates are as follows:

€0 – €5,000: 0%

€5,001 – €170,860: 0.15%

€170,861 – €8,543,000: 0.20%

Over €8.543.000: €17.086

Transfer fees

Transfer fees are payable to the Land Registry Office and are calculated on the market value of the property on the date of the transfer.  Once the transfer fees are paid, the transfer to the Buyer is finalised.

It’s good to point out that a sole Buyer will pay more transfer fees, so it is custom for Buyers to add family members to the title deed.

Note:

• A minor named on a title deed requires a Court Order to sell it before reaching 18 years old.
• No Transfer fees are payable, if the property is subject to VAT (19%)
• Transfer fees are reduced by 50% if the property was not subject to VAT.
• 0% Transfer fees are payable if property is transferred from company to company

Transfer fee rates:

Up to €85 000 of the property value – 3%

From €85 001 to €170 000 of the property value – 5%

From €170 001 of the property value – 8%.

Examples

One Buyer buys a house for €400 000:

Transfer fees will be:

€85 000 x 3% + €85 000 x 5% + €230 000 x 8% = €25 200*

Transfer fees for Buyer: €12 600* (where 50% reduction applies)

Three Buyers buy a house for €400 000:

Transfer fees will be:

€85 000 x 3% x 3 persons + €145.000 x 5% = €14,900*

Transfer fees for Buyer: €7,450* (where 50% reduction applies)

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OTHER FEES TO CONSIDER

VAT Payable on Property

A VAT rate of 19% is required to be paid when buying a new property.

A reduced VAT rate starting from 5%, is applicable for the acquisition of new residential properties when certain terms and conditions are met:

1. The property must be used as the primary and permanent residence of the applicant for the next 10 years.
2. The applicant has not acquired any other residence in Cyprus with a reduced VAT rate.
3. The applicant must be an individual, over 18 years old, thus legal entities are excluded.

Note: The reduced VAT rate of 5% is applied on the first 200 square meters of the property as per the architectural plans submitted to the Authorities. On the remaining square meters, the standard rate of 19% is imposed.

Municipality Tax

The registered owner of the property is required to pay an annual Municipality Tax, calculated on the market value of the property as at 1st of January 2018. The rates vary from 1% –  2% Municipality tax is payable to the local municipal authority, where the property is located.

Other Fees (Local Authorities)

Depending on the size of the property, local authorities charge between €85 – €500 yearly for garbage collection, sewerage and other community services.

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OUR FIRM

Panayiotis Z. Toulouras LLC provides clients legal advice on commercial and residential property.

Our areas of work include:

• Negotiation and drafting of contracts
• Sales and Purchase of property
• Authorised Representation
• Constructions
• Market Evaluation
• Long term and short-term leases
• Property management for non-residents.
• Licensing and Permits
• Due diligence reports
• Real estate transaction and tax issues

Our dedicated team provides strategic, cost-effective commercial advice spanning all types
of Intellectual Property such as patent, trademark, design, copyright, patents, and the licensing of technology. Our client-centric approach aims to provide value for all our clients, which tailored to the needs and objectives that each client may have.

We deal directly with the Cyprus Intellectual and Industrial Property Department, the European Union Intellectual Property Office (EUIPO), and the World Intellectual Property Organization (WIPO).

A client’s Intellectual Property rights need to be identified, protected, and exploited at all stages of the innovation lifecycle and our team provides strategic advice on all key matters of IP law ranging from local and global IP protection, tax planning, to the commercialization of the IP assets in a portfolio.

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Cyprus IP Box Regime

The Cyprus IP box regime provides a favourable tax benefit of up to 80% for the Intellectual Property profit that qualifies. As corporation tax in Cyprus is 12.5%, this will result in a tax rate of up to 2.5%.

The Cyprus IP box regime has been reviewed by the EU Code of Conduct and is fully compatible with EU standards.

Qualifying assets under the Cyprus IP Box regime:

• Patents
• Software programs with a copyright
• Other intangible assets that are not obvious but are useful and novel.
  The new IP regime is compliant with the provisions of the revised ‘Nexus approach.’

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Our areas of work include:

• Advice on the acquisition, registration, and protection of all types of Intellectual Property
• Franchising and Licensing
• Competition and Agency law
• Advice on all related tax aspects and the Cyprus IP Box Regime
• Trademark and registered design filings, both in Cyprus, EU, and globally
• IP litigation including patent, copyright, design right, and trademark litigation
• Intellectual property licenses

Our Trusts specialist team consults private individuals, families and international institutions on the creation of Cyprus International Trusts (CIT) and offshore trusts. We advise clients on the appropriate jurisdiction that best caters their needs, focusing on meeting their asset protection and tax demands.

Our team provides expert consultation regarding all ongoing trust issues affecting settlors, trustees and beneficiaries, appearing before courts and government authorities when necessary.

We act as trustees, protectors and represent international institutions, HNW families and individuals in the acquisition and disposal of property, globally, and advise our clients on all the associated legal and tax issues.

”CITs are used to benefit from the Cyprus advantageous tax system and allows entities acting as investment vehicles to maintain a level of privacy and confidentiality”

TRUST PURPOSES

• Tax Planning
• Protection of Assets
• Preservation of Family Assets
• Administration of Estate/Avoidance of Forced Heirship
• Confidentiality Investment
• Pension Schemes – Employees or Dependents
• Charitable Initiatives
• Reward Schemes – Employees or Dependents
• Continuation of a Family Business

Divesting of personal assets – An individual who wishes to divest himself of personal assets can achieve this by transferring them to a CIT.

Investing in business overseas – An individual can invest in business overseas to ensure profits and dividends received are not remitted to the country of his residence, by setting up a CIT to invest in overseas business

Investment Holding company – A trust can be used in one country to own an underlying investment holding company in another. This can provide maximum protection for both settlor and beneficially alike.

Flexibility – The Cyprus law allows the removal of a trust from its jurisdiction and vice versa. This gives the necessary flexibility where transfer becomes advantageous because the change of circumstances.

TRUST BENEFITS

Income

• If Beneficiary is not a Cyprus tax resident, the income CIT receives from outside of Cyprus will not be subject to tax. Income received from Cyprus is subject to tax.
• If Beneficiary is a Cyprus tax resident, the income CIT receives from outside/inside of Cyprus will be subject to tax.
• CIT does not pay tax on income received from outside of Cyprus.
• CIT does not pay tax on interest received, provided beneficiary is not a Cyprus tax resident.

Double Taxation – International Trusts come under the scope of double taxation treaties with more than 60 countries.

Dividends – Dividends, interest and other income received by a trust from a Cyprus company are not subject to tax.

Payments to Beneficiaries – No withholding tax on payments to beneficiaries provided that they are not resident in Cyprus.

Capital Gains – Any gains from asset disposal, other than immovable property situated in Cyprus, made by the CIT are not subject to capital gains tax in Cyprus.

Estate Duty – No estate duty is payable by a CIT that was formed for the purposes of estate duty planning.

Confidentiality – Confidentiality is of supreme importance as the law prohibits disclosure of any information or documents regarding the Trust by the Trustees or any other person. Only the Court may order and result in disclosure of such information e.g. in cases of fraud.

Convenience

• CIT laws does not require Settlor or Beneficiary to be resident of Cyprus and requires one trustee to be Cyprus resident
• CIT can last for an indefinite period of time

”The Cypriot international Trust regime is designed to make Cyprus more attractive to clients living outside Cyprus.”

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TRUST REQUIREMENTS

For a valid trust to be created, the following three certainties must be present:

a) Certainty of intention – evidence of the express intention of the Settlor to create the trust

b) Certainty of subject matter – the assets part of the trust property must be easily identifiable

c) Certainty of objects – the identity of the trust beneficiaries must be ascertained or ascertainable at the time of setting up the trust

TRUST CONDITIONS

The restrictions imposed by the Law mainly focus on the residency status:

• The Settlor – Can be either a natural or legal person but must not be resident of the Republic of Cyprus during the calendar year immediately preceding the creation of the trust
• The Trustee – At least one of the Trustees must be resident of the Republic of Cyprus* for the whole duration of the Cyprus International Trust
• The Beneficiary – Must not be resident/s of the Republic of Cyprus during the calendar year immediately preceding the creation of the trust and that applies equally whether the beneficiary is a natural or legal person

POWER OF SETTLOR

New amendments of the Law provide more protection and flexibility for the CIT as the Settlor is able to reserve certain powers for himself, rights over or in the trust property either in his capacity as a Settlor, as Protector or Enforcer of the Trust without it affecting the validity nor the execution of the Trust:

a) The revocation, amendment of the terms of the trust or any trusts or powers arising wholly or partly from the trust

b) The allocation, distribution, payment or other disposition of income or capital from the trust property or issuance of directions to conduct any of these actions

c) The exercise of powers of a director or officer or the issuance of binding directions regarding the appointment or removal of any Board member or officer of any company, which is owned by the trust, either wholly or partially conferred on such property

d) The issuance of binding directions to the trustee in connection with the purchase, retention, sale, management, loan, pledge or charge over property of the trust or the exercise of any powers or rights

e) The appointment or termination of any investment manager or investment adviser

f) Changing the applicable law governing the trust or place of management of the trust

g) The restriction of the exercise of any power or the discretionary power of the trustee (e.g. requesting that these be exercised only with the approval of the settlor or any other person expressly mentioned in the terms of the trust)

POWER OF TRUSTEES

Trustees are appointed by the Settlor. There are no rules as to how many trustees should be appointed.

Main Duties:

a) To administer the trust property prudently, and

b) To comply strictly with the terms of the trust

Trustees do not have the power to vary the terms of the trust under any circumstances. However, all beneficiaries of full age and capacity can authorise all together to alter the trust. Trustees in their private lives may not act in any way that brings them in conflict with their duties as trustees.

Under the Law, the Trustees can have extensive investment powers, e.g. to make capital distribution, to borrow, to guarantee, to mortgage, to employ, to invest/lend money. They may also hold, maintain or invest in movable and immovable property in Cyprus and abroad, including shares in companies incorporated in Cyprus.

Unless the trust instrument expressly provides otherwise, trustees are not entitled to any payment for their services but can be reimbursed from the trust property for any expenses they incur in performing their duties. Action taken by the trustee that is in excess of their powers or contravenes the terms of the trust instrument is a “breach of trust”.

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Our areas of work include

• Trust creation
• Trust management
• Trust termination
• Trust disputes
• Trustee and Protector services
• Preparation of Trust accounts and annual tax returns
• Family asset protection and inheritance advice
• Tailor-made wealth management structures
• Opening, administrating and monitoring all bank accounts
• Distributions to beneficiaries

For more information on Cyprus International Trusts click here (PDF)

Mediation is a alternative dispute resolution, handled by our qualified Mediator, in which the parties discuss their disputes with the assistance of a trained impartial third person, i.e. mediator, who assists them in reaching a settlement at a minimum time and cost-effective manner, thus avoiding high court fees.

The disputes are can either be pending court proceedings or could potentially be a dispute  filed in court, with mediation suitable for disputes that do not involve or require complex procedural and evidential matters.

Mediation is a faster and cost-effective method of dispute resolution and all the information presented during a mediation process is kept confidential and cannot be used in the court proceedings neither by the parties to the mediation or the mediator.

Mediation is becoming very popular in Cyprus due to the long delays expected from court proceedings , with our qualified Mediator, tasked with facilitating the communication between the parties in dispute with a view to helping them reach a voluntary resolution.

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Our areas of work include

• Commercial Disputes
• Employee/Employer Disputes
• Tenant/Landlord Disputes
• Dissolution Matters
• Compensation Matters
• Construction Disputes
• Banking Matters: Loan Restructuring & Mortgage Settlements

 

The inheritance Laws of Cyprus has a set complicated system of forced heirship, whereby a portion of the deceased’s estate is effectively administered to the surviving family members. This is done in order to protect the rights of close relatives of the deceased i.e., the testator.

The forced heirship regime, restricts the deceased person and means that certain relatives such as a spouse or children cannot be excluded from an inheritance and they have a right to a fixed minimum percentage of the estate.

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Two terms important to know are Disposable and Statutory Portion:

• Disposable portion is the part of the estate that the testator can dispose of as they wish through their Will.
• Statutory portion is the part reserved for the spouse, children and grandchildren and must be distributed according to the provisions of the Wills and Succession Law/Cap. 195.

Disposable portion allocation

1. Where a person passes away, leaving spouse and a child, or spouse and descendant of a child, or no spouse but a child or descendant of a child, the disposable portion must not exceed one-fourth of the net value of the estate. (1/4 of the NV of the estate)
2. When a person passes away, leaving spouse or father or mother but no child or descendant of a child, the disposable portion must not exceed one-half of the net value of the estate, (1/2 of the NV of the estate)
3. When a person passes away, leaving neither a spouse, nor a child, nor a descendant of a child, nor a father, nor a mother, they are free to dispose as they wish all of the estate.

In situations where the testator disposes more than the disposable portion, the disposition portion will be reduced according to the above scenarios.

Statutory portion allocation

The Statutory portion, that remains after the disposition, is disposed according to the rules of intestacy. The portion of the spouse is calculated first and then the rest of the estate will be distributed to the different classes of relatives of the deceased depending on the degree of kindred, as follows:

Spouse:

1. Where the deceased left a child or a descendant of a child, the spouse’s share is equal to the share of each child.
2. Where the deceased left no child or descendant of a child but has an ancestor or descendant of an ancestor within the third degree of kindred, the spouse is allowed 50% of the net estate.
3. Where the deceased has left a relative within the fourth degree of kindred, the spouse is entitled to 75% of the net estate.
4. Where the deceased left no relative within the four degrees of kindred the spouse is entitled to the entire net estate.

Family:

Distribution according to the rules of intestacy (absence of a Will when a person passes away):

The parties entitled to receive portions of the estate (movable and immovable property) are divided into the following categories:

First class – this includes:

• the deceased’s legitimate children; and
• the living descendants of legitimate children who died during the deceased’s lifetime.

Second class – this includes:

• the deceased’s living parents;
• in the absence of parents, brothers and sisters alive at the time of the deceased’s death; or
• in the absence of both of the above, the descendants of the deceased’s siblings who died during the deceased’s lifetime.

Third class – this includes:

• grandparents and distant relatives; and
• closest living descendants.

Fourth class – includes deceased’s closest relatives at the time of death up to the sixth degree (eg, uncles, aunts, cousins or siblings of grandparents).

Estate Administration

• When a deceased person dies intestate (without a will), the Cyprus courts can authorise an individual and/orindividuals to administrate the deceased’s
• A deceased can also appoint executors of their will to administrate their estate.

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Our areas of work include

• Will drafting and registration to the court
• Advising on issues relating to Wills and Succession law
• Safekeeping of Will
• Application and Documentation for the Grant of Probate
• Executors or administrators
• Grant of Probate procedures
• Trust Creation

 

Any sort of unpaid debt can have huge impact on a company’s cash flow, creating a domino effect that negatively influences a company’s overall economic viability resulting in unpaid employees, creditors and others. The global pandemic faced in the past year, has resulted in many unpaid debt due to payments either not being executed within stipulated schedules or not being paid at all. In many situations, debtors use COVID19 as a scapegoat to avoid payment.

Our team of advocates and associates provide a swift, efficient, and customer-centric approach for all debt collection needs of clients against individuals and entities. Our team has been able to achieve great triumphs in situations where clients believed that the collection of monies owed was impossible.

When faced with a debt-collection request, we review and investigate all the ‘ins & outs’ of the situation and advise clients on the most cost-effective, quickest and easiest procedure to pursue.

Our recent debt-collection activities include:

• Advising and handling the debt collection of mortgage payments and restructuring of debt on behalf of a financial institution
• Advising and handling the debt collection of unpaid invoices on behalf of a shipping company
• Advising and handling the debt collection of unpaid loan payments on behalf of a property management enterprise
• Advising and handling the debt collection of rent income owed to a global property investment firm
• Advising and handling the debt collection of mortgage payments and restructuring of debt on behalf of a financial institution

Our areas of work include:

• Issuance of Letters of Demand
• Structuring effective methods of debt collection specific to each industry
• Enforcing effective methods of securing and/or freezing assets
• Investigating and locating Debtors in Cyprus and abroad
• Negotiating on behalf of clients
• Acting as a mediator in commercial resolutions
• Filing and serving legal proceedings to recover debt
• Enforcing Court judgments against the debtors
• Court applications for Debtor’s liquidation or bankruptcy