Amid all the excitement of buying a property in Cyprus, there will come a time when you need to consider all the ongoing taxes you will have to pay.
Cyprus Immovable Property Tax (IPT)
Cyprus Immovable Property Tax (IPT) is a tax imposed on all property owners in Cyprus, regardless of whether they are resident or not. Property owners are liable to pay an annual tax based on the total value of all the property registered in their name, based on its 1980 value. A new law on IPT received much criticism in 2014; however, it did contain some good points for all people with holiday homes in Cyprus.
The Interior Minister, Socratis Hasikos, said: “People will be asked to pay less than last year and the reason is very simple: many more properties have been included.” Under the new law, if you are buying an off-plan property and you are still waiting to receive your title deeds, you need not pay your developers the IPT. This means a lower rate than the 1.9 per cent previously paid and you avoid the chance of being overcharged by unscrupulous developers.
What’s more, property developers now need to provide the authorities with full details of which properties they have sold and which are awaiting final transfer to purchasers, making them accountable for dates of sale and details of who the purchasers are. If you own property in Cyprus, you will also be glad to know that a rebate of 15 per cent is applied to all those who have paid their IPT before 30 October 2014.
- Make sure your developer has your current address and contact details so that the IPT office can send you your tax notice to the correct address.
- Do not pay 2014 IPT direct to your developer. Your developer must let the Inland Revenue know the details of your property, so they can send you a demand.
- If you believe the 1980 value of your property has been incorrectly assessed, you are free to challenge the valuation by contacting the IPT authorities.
Other ongoing taxes for owners of property in Cyprus
If you are a non-resident, your rental earnings in Cyprus are liable to the country’s income tax, with the following allowances:
- For tax residents of Cyprus, rent from Cypriot sources or outside the country, after being reduced by 25%, is subject to a special defence contribution of 3%. This is payable in two instalments on the 30th June and the 31st December each year.
- Cypriot Corporate Income Tax is payable if your property is purchased through a company. This is calculated at 10% of your company’s profits, after costs.
- Capital Gains Tax (CGT) is payable at 20% and is subject to the following deductions (the maximum deduction granted cannot exceed €85,430 for a private residence, which can be used over a lifetime):
- A reduction of 20% on the gross rent
- A deduction for the total interest paid for the acquisition of the property rented
- 3% capital allowances calculated on the cost of your rented property (33 years from your date of purchase)
Factored in your tax requirements abroad? How about your home insurance for your holiday property?