Transfer Fee – tax on the transfer of ownership
Currently, the state of Cyprus is one of the most attractive for buying real estate. Thinking about buying property in Cyprus, you should study in detail all points related to the withholding tax, namely the transfer fee, also known as Transfer Fee.To start with the fact that to determine the exact amount of payments for a particular property can be on the official site of Cyprus Land Department. There you can get detailed information about the calculation of the value and the necessary payments related to the purchase of real estate.
So: the amount of tax depends directly on the total value of the acquired property. Currently, the Transfer Fee in Cyprus is calculated as follows:
- The first part of €85,000 of the value of the property is taxed at 3%.
- The second part of €85,000 (from €85,001 to €170,000) of the value of the property is taxed at 5%.
- The remainder (from €170,001) of the value of the property is taxed at 8%.
€85 000 х 3% + €85 000 х 5% + €130 000 х 8% = €17200
This would be the formula if your purchase of real estate in Cyprus is worth 300 thousand euros. The amount of tax for the transfer of the Title will be 17200 €
It must be remembered that if VAT was paid on the sale of the property, no fee is charged for the transfer of ownership rights. In all other cases, a discount of 50% of the specified fee is provided.
Transfer Fee in Cyprus you do not have to pay in the following cases:
- reorganization
- restructuring
- bankruptcy proceedings, liquidation, sale of the collateral by the lender, where the income from the sale is not more than €350,000 per owner
- transfer of property, which is subject to European value added tax at both the standard and reduced rate.
Transfer Fee on real estate transferred on a gratuitous basis is calculated based on the value of the property at the following rates :
- From parents to children 0%
- Between spouses 0.1%
- Between persons of the third degree of kinship 0.1%.
If you intend to underestimate the value of the property in the contract to save on transfer fees, it will be difficult, as the amount of tax is calculated based on the inspection and evaluation of the property by the Land Committee. When the final tax amount is generated, a thorough analysis is done, comparing similar properties in the same area and their characteristics. Thus, hidden payments to the seller are not possible.
However, you can save money if the property is purchased by two people, not one. In this case, the general formula for calculating the tax remains the same, but the final amount will be much lower, since the tax burden will be divided among several persons.
For example, consider a house worth €300,000, but this time the two buyers are spouses. They each contribute 150,000 euros, and they don’t even reach the Stage 3 tax calculation, where the 8% rate applies. The final savings would be €5,600. Consequently, the more people involved in the transaction, the lower the tax..