Understanding Cyprus Property Taxes
Comprehensive guide to property taxes in Cyprus. Learn about VAT, transfer fees, municipal taxes, rental income tax, and resident vs. non-resident obligations. Cyprus has a transparent and relatively simple taxation system for property owners. Most property-related taxes have been streamlined in recent years to encourage investment and home ownership.
Cyprus Value Added Tax (VAT)
• New residential properties are subject to 19% VAT.
• A reduced 5% VAT applies to the first 200 m² of a primary residence if conditions are met.
• Renovations of older properties may be eligible for reduced VAT rates.
• VAT exemptions apply to resale properties purchased from individuals.
Cyprus Transfer Fees
• Payable to the Department of Lands and Surveys when property ownership is transferred.
• Rates range from 3% to 8% depending on property value.
• Exemptions: No transfer fees if VAT has already been paid on the purchase.
• Discounts: Transfer fees reduced by 50% in certain cases.
Cyprus Municipal and Local Taxes
• Local authorities charge annual taxes based on property value.
• Refuse collection, sewage, and street lighting are typically included.
• Annual charges range from €100 to €400 depending on property size and location.
Cyprus Rental Income Tax
• Rental income is taxable for both residents and non-residents.
• Progressive tax rates: 20%–35% depending on income level.
• Non-residents taxed only on income generated in Cyprus.
• Special Defence Contribution (SDC) applies to resident landlords at 3% on gross rental income.
Abolition of Immovable Property Tax (IPT)
• IPT was abolished in 2017 to reduce property ownership costs.
• Previously based on 1980 property values, the tax was seen as outdated and unfair.
• The abolition has encouraged more foreign investment.
Case Study: Resident Landlord in Nicosia
A Cypriot retiree rents out an apartment for €800 per month (€9,600 annually). They pay income tax on progressive rates and 3% SDC, resulting in an effective tax liability of around €2,000.
Case Study: Non-Resident Investor in Paphos
A British investor rents a villa for €1,200 per month (€14,400 annually). They are taxed only on Cyprus-generated income, paying progressive tax but no SDC as a non-resident.
Checklist for Property Tax Compliance
1. Determine if VAT applies to your purchase.
2. Budget for transfer fees unless VAT is already paid.
3. Pay annual municipal and local property taxes.
4. Declare rental income for tax purposes.
5. Consult a tax advisor to optimise liability under double taxation treaties.
FAQs on Cyprus Property Taxes
Q: Are property taxes high in Cyprus?
A: No, they are lower than in many EU countries, especially since IPT was abolished.
Q: Do non-residents pay the same taxes?
A: Yes, but they are taxed only on income from Cyprus.
Q: What is the reduced VAT rate for?
A: For first homes, 5% applies to the first 200 m².
Q: Are municipal taxes negotiable?
A: No, but rates vary by municipality.
Q: Do I need a local accountant?
A: Recommended, especially for rental income reporting.
Final Recommendations
Property taxes in Cyprus are straightforward and investor-friendly. Understanding VAT, transfer fees, municipal charges, and rental income tax is crucial for ensuring compliance and effective financial planning.