Cyprus has consistently attracted foreign investors, retirees, and second-home buyers thanks to its Mediterranean lifestyle, strategic location within the European Union, and favorable tax environment. Its real estate market offers a wide range of opportunities, from beachfront villas to city apartments and countryside estates. However, for foreigners unfamiliar with Cyprus law, purchasing property involves specific legal procedures and considerations that must be carefully handled.

This guide explores the key aspects that foreign buyers must understand before investing in Cypriot real estate, offering practical insights into the legal framework, taxes, costs, and the strategic use of a Cyprus company to enhance investment efficiency.

1. Can Foreigners Buy Property in Cyprus?

Yes, foreigners can buy property in Cyprus.

However, the legal framework distinguishes between EU citizens and non-EU citizens:

• EU citizens are treated the same as Cypriot nationals. They may purchase an unlimited number of properties without restrictions.
• Non-EU citizens are allowed to purchase real estate but are typically limited to acquiring:
  • One apartment or house, or
  • A plot of land not exceeding 4,014 square meters.

Non-EU citizens must also obtain permission from the Council of Ministers after signing the Contract of Sale. Although this approval is usually a formality, it is a mandatory step before the property can be fully registered under the buyer’s name.

2. The Property Purchase Process: Step-by-Step Overview

The purchase process in Cyprus is designed to protect both buyers and sellers, but it requires methodical steps to ensure legal compliance.

Step 1: Engage an Independent Lawyer — A lawyer must act exclusively for the buyer, ensuring there are no conflicts of interest with the seller or the developer.

Step 2: Due Diligence on the Property — Before signing any binding documents, the lawyer should:

• Confirm that the seller has a clean and undisputed title.
• Verify there are no mortgages, liens, or encumbrances.
• Ensure that the relevant planning and building permits are in place (when the property concerns a house, apartment or an office).

Step 3: Reservation Agreement — Typically, a small deposit is paid to reserve the property, providing the buyer with exclusivity while final documents are prepared.

Step 4: Execution and Filing of the Contract of Sale — The Contract of Sale must be properly stamped at the Tax Department and lodged at the District Land Registry within six months of signing. This secures the buyer’s rights even before transfer of the title deed.

Step 5: Application to the Council of Ministers (for Non-EU Buyers) — If applicable, the buyer’s lawyer will submit the necessary application to obtain acquisition permission.

Step 6: Transfer of Title Deed — Once all conditions are met and payments completed, the title deed is transferred, and the buyer pays any applicable Transfer Fees at the land registry.

3. Taxes and Costs Associated with Buying Property

Foreign buyers must be aware of several taxes and costs that apply when purchasing real estate in Cyprus:

• Stamp Duty: Payable upon signing the Contract of Sale, calculated progressively based on the purchase price. Without stamp duties paid the land registry will not accept the Contract of Sale.
• VAT: A 19% VAT applies to newly constructed properties, although a reduced rate of 5% is available for eligible first-time owners under certain conditions.
• Land Registry Transfer Fees: These fees range from 3% to 8% of the property’s market value unless the purchase was subject to VAT (in which case no transfer fees apply).
• Legal Fees: Typically around 1% to 3% of the purchase price plus VAT, depending on the case.
• Municipal Taxes: Annual charges for refuse collection, sewerage services, and immovable property taxes (typically paid by the Seller).

It is essential to budget correctly for these expenses, as they significantly impact the overall cost of acquiring a property.

4. Buying Property Through a Cyprus Company: Strategic Advantages

An increasingly popular method for foreign investors is to acquire property through a Cyprus private limited company. This structure offers several key benefits:

A. Flexibility in Ownership — A Cyprus company is considered a domestic legal entity and is not subject to the limitations that apply to non-EU individuals. It can acquire multiple properties without seeking special permission.

B. Potential for Lower Transaction Costs on Sale — Perhaps the most significant advantage is that when the property owner eventually decides to sell, they have the option to sell the shares of the company that owns the property, rather than the property itself. The transfer of shares in a private company is not subject to Land Registry Transfer Fees, unlike the direct sale of real estate.

This results in notable savings, especially for high-value properties, where transfer fees could otherwise amount to tens of thousands of euros.

Example:

• Selling a €2 million property directly would normally incur substantial Land Registry Transfer Fees.
• Selling the shares of the company that owns the property results in zero Land Registry fees, making the transaction much more cost-efficient for the buyer and potentially more attractive to investors.

C. Discretion and Simplicity — A share sale transaction can be executed more discreetly and quickly than a property sale, as it does not involve the formalities of registering a change of ownership at the Land Registry.

5. Ongoing Obligations for Cyprus Companies

While purchasing through a Cyprus company offers considerable benefits, it also comes with certain ongoing responsibilities:

• Audited Financial Statements: Annual financial statements prepared and audited by a licensed Cyprus auditor.
• Annual Returns: Submission of Annual Returns and other corporate filings.
• Substance Requirements: While minimal for holding companies, maintaining a registered office address, a director and a statutory secretary is obligatory.

Most investors appoint professional administrators or law firms to manage these compliance obligations on their behalf.

Conclusion

Cyprus remains a highly attractive destination for property investment, offering a favorable legal, tax, and lifestyle environment.

Foreigners can acquire property securely, provided they follow their legal advisor’s recommendations correctly and comply with the applicable regulations.

Purchasing property through a Cyprus company provides enhanced flexibility, eliminates restrictions on ownership, and offers significant transaction cost savings upon resale through share transfers rather than property transfers.

When structured correctly, this approach can offer investors long-term benefits both in terms of tax efficiency and investment liquidity.

At AGPLAW, our team provides comprehensive advice on all aspects of property acquisition in Cyprus, including optimal ownership structuring. To discuss your plans and receive tailored guidance, contact us at agp@agplaw.com.