The implementation of the Lands and Surveys Department (Fees and Rights) (Amendment) (No 2) Law on the 14th July 2016 has made the reduction of the Property Transfer Fees by 50% permanent. The decision was taken following the pack of measures launched by the government in an effort to attract investors in Cyprus while focusing at the same time on the regeneration strategy of the construction industry. As such, the amended legislation will enable investors and/or other purchasers to purchase properties without having to pay transfer fees or having to pay well-reduced transfer fees while at the same time avoid having to pay capital gains tax for properties purchased until the 31.12.2016 with purpose to resale it at a later stage.
Who can benefit from the new amendments?
a. Purchasers who have deposited the property contract of sale to the Land Registry Office of the district where the property is located until the 31.12.2014;
b. Purchasers who have failed to deposit their contract of sale with the relevant Land Registry Office by the specified date but have obtain a court order allowing them to do so;
c. Purchasers who hold a valid title deed to their name, have fully paid the purchase price and have duly conformed to all their obligations arising from the contract of sale and irrespectively of the existence of any mortgage or other charge on the property;
d. Purchasers who do not hold a title deed to their name albeit the fact that they have fully paid the purchase price and have fully conformed to all their obligations arising from the contract of sale and irrespectively of the existence of any mortgage or other charge on the property.
Transfer fees and capital gain tax reduction
Those purchasers who have bought property and have paid VAT will not incur any transfer fees provided that the transfer of the property is effectuated prior to the 31.12.2016. Also, buyers who have purchased property for which the transfer of title deeds will effectuate prior and until the 31st December 2016 will benefit from the provisions of the 50% reduction of transfer fees.
Furthermore, the provision of 50% reduction of transfer fees will benefit those buyers who:
a. Pay the transfer fees within 60 days of a notice to transfer the property. An additional 10% reduction applies provided that the fees are paid by the 31.12.2016.
b. Pay the transfer fees with 12 monthly installments by 31.12.2016.
Those who are willing to sell properties will also benefit from the new amendments as any sale of immovable properties sold between the 16.07.2015 until 31.12.2016 will incur 0% capital gains tax.
Transfer fees calculation system
The amendments make it easier for purchaser to calculate the transfer fees he will be called to pay. The fees are paid at the time of the transfer to the name of the purchaser and are calculated on the basis of the market price of the property at the date of the transfer.
Properties purchased between the 2nd of December 2011 and 31st December 2016, which are subject to VAT will be exempt from the above transfer fees. Properties not subject to VAT will be eligible for a 50% exemption from the above transfer fee.
The new amendments to the legislation are promising and are welcome by all. Reduction in transfer fees will benefit potential investors and other individuals while investors who purchased properties between the 14th July 2016 until the 31st of December 2016 will have the incentive to sell as no capital gain tax will be imposed. However, it remains to be seen whether the new tax incentives will attract new investors in Cyprus as other legislative frameworks regulating investments in Cyprus must undergo similar improvements to encourage.