Things You Should Know About the Immovable Property Tax in Cyprus

You may have heard of the Immovable Property Tax in Cyprus before. The country has a unique system that requires homeowners to pay an annual fee for their property. We’ll tell you everything about this tax. In addition, we can also explain what that means for you’re the purchase of your dream home. 

The real estate market in Cyprus is becoming more competitive. Property taxes and other financial factors play a big role. Nevertheless, taxes are low. That means that the country can offer some excellent taxation policies.

Cyprus has abolished an important tax that affects real estate transactions. It is called the Immovable Property Tax. The history and abolishment of the Immovable Property Tax will also be explained in this article.

Facts on the Immovable Property Tax

When it comes to property tax, Cyprus has been following the international standard for many years. There are two types of property: movable and immovable. The idea of movable and immovable property is a fundamental component of every legal system. It sets clear boundaries for legal status as well as taxation policies.

Movable assets are defined as anything that can be moved. Immovable property, such as real estate can be difficult to move. Most often, it refers to land. It also includes buildings or other pieces of geographical infrastructure. The government doesn’t require you to register your movable property. 

On the other hand, immovable property requires the appropriate registration. It also has implications for inheritance. These assets cannot easily be portioned between parties because they are registered with local authorities. The first property tax was established in ancient times. The earliest known tax records date back to around 6,000 B.C. They were found in Iraq. 

The discovery of these early payment systems has helped experts understand how civilizations thrived across different regions. In ancient times, taxes were collected in the form of crop yields or land size, not from annual value.

Property taxes reflect the growing complexity in society. The evolution of property tax reflected the rising value of properties for each year.

What you need to know about the Immovable Property Tax in Cyprus

The Immovable Property Tax is a complicated tax. It has been in effect for over thirty-five years. 

The rate was determined by the total market value of the owned property. It didn’t matter if one was a Cypriot citizen or not. The Cyprus legislators have eliminated the Immovable Property Tax. The tax was progressive and ranged up to 1.9%. The Council approved a series of amendments. A new law was passed on July 1st in 2016. It resulted in the decrease of immovable property tax by up to 75%.

2016 tax year amendments

The changes to the 2016 tax year included several stipulations for taxes. 

The deadline to settle Property Tax liability for the 2016 tax year was October 31st. Those who settled their balance on time only needed to pay 25% of what they owed. The taxpayers that settled their Property Tax liability for the 2016 tax year until December 31, received a bill with 27.5% of what they owed. Not settling your taxes by the end of December in 2016, resulted in an additional 10% charge on top of the 27.5% tax due. The last year that this tax was imposed was 2016.

What Cyprus property owners should know about taxes

The abolishment of Immovable Property Tax means that owners must be aware of other taxes. The local taxes on immovable property in Cyprus are very low. Unlike Cyprus, many European countries continue to impose a tax on immovable property.

The lowest rate is 0.05%. The highest tax rates in Europe can be found in France at 1.70%. It is followed by the UK who has a rate of 2.53%. Property taxes are an important factor to consider when choosing a property location. The annual property taxes you pay are just the beginning of what it really costs to own a home.

Tax rates imposed by federal and local governments add up to the true cost of owning a property. Cyprus is an ideal destination for those looking to own a home. Its abolishment of the Immovable Property Tax alongside other policies makes it a one-of-a-kind among European countries.

Municipality taxes applied on immovable property

The tax on property is often decided by the municipality. There are different rates from 0.1% to 0.2%. The property tax is paid directly to the local municipality. It’s charged annually, from October to the end of the year.

Local authority fees depend on the property size. The authorities charge an annual fee of €85- 256 per year. The fees you pay every month go towards maintaining trash collection, sewerage and street lighting. Your local authority also provides other community services like police protection.

Sewerage charges

The sewerage tax is calculated based on the property value. The tax rate can vary depending on the area.  In general, the average rate is around 0.3%. The annual tax is paid to the local Sewerage Board from October until December.

Transferring immovable property

Property taxes are one of the biggest expenses for most homeowners. In fact, it’s often their largest expense other than housing costs. When an individual or company wants to transfer property, financial calculations have to be done. Taxes like Capital Gains Tax and Stamp Duty must be considered.

Taxes and fees property owners should be aware off

When considering the true cost of a property, you need to be aware that these taxes and fees may apply.

1. When you sell your property, the buyer will need to transfer the title deed. The transfer of ownership can be registered in their own name. There is an initial fee for this service which ranges from 3% – 8%.

2. The real estate agent’s fee is typically a percentage of the sale price. This can be anywhere from 3% to 8%. If you are considering listing your property with an expert in this industry, do some research on their commission rates.

3. The property sales tax is 0.4% of the sale price. It applies to all real estate transactions including purchases, exchanges, assignments, or any other alienation activity on your behalf.

4. VAT is included in the purchase price of new property, but there’s a 19% tax on it.

5. The capital gains tax is a hefty 20%. 

6. Stamp duty is a small fee that you pay when buying or selling property. It’s often between 0.1% and 0.2%.

7. The municipality tax is a percentage that varies by city. It is a flat rate that varies from 0.1-0.2%.

8. The fee for local authorities is around 85-256 euros.

9. Sewerage taxes are a tax on waste material that flows through the sewers. The amount varies depending on where you live. It can range from 0.3-0.4%.

Conclusion: A country in where property owners enjoy financial advantages and reduced taxes

There is an added responsibility and maintenance associated with owning a home. The property tax is a reflection on how society has changed over time. The complexity increases each year, and so does the value of properties. The cost of owning property is high in many countries, but not in Cyprus. Property owners enjoy the financial advantages of owning a home without additional costs for Immovable Property Tax.