Selling property costs etc

Selling immovable property in Cyprus offers a unique opportunity to engage with a very active real estate market. Whether you are selling a holiday home, a family residence, or an investment property, it is crucial to understand the local processes, legal requirements and the costs involved for a smooth and stress-free transaction.

Many sellers fall into common traps by not fully understanding the costs involved, which often leads to unnecessary stress, lengthy delays, unexpected expenses, and reduced profits.

This article highlights the main costs involved in a sale transaction, aiming to help navigate the complexities of selling property in Cyprus, and ensuring the sellers are informed about potential costs.

Why sellers need to be informed of costs

Maximize Profit: Understanding the processes and procedures and all costs involved helps to better plan and to accurately calculate the net proceeds, allowing the opportunity to maximize the seller’s profit.

Protection of Interests: Engaging experienced and professional lawyers and knowing what to expect gives to the sellers the opportunity and the power to protect their interests throughout the whole transaction.

Risk Mitigation: Understanding the processes protects the sellers from wrong, improper, and costly advice.

Avoid Surprises: Being aware of potential expenses ensures that there are no unexpected surprises that could cause delays or even jeopardise the sale.

Main costs associated with sale transactions

Estate agent fees

The estate agent commissions in Cyprus usually range from 3% to 5% of the sale price. This fee usually includes the marketing and advertising of the property, arranging viewings with potential buyers, and negotiating offers. Following the offer acceptance, the case is usually being passed to the seller’s lawyer to handle the transaction.

Legal fees

Engaging expert legal representation prior to the initiation of the conveyancing process gives the sellers protection from improper and costly advice, ensures full compliance with all regulatory and legal requirements, and allows them to prepare better for the sale process.

Legal fees range from 1% to 1.5% of the value of the property, and these usually cover all the works associated with the sale transaction, such us drafting of contracts, liaising and submitting applications with the authorities (i.e. Land Registry and Inland Revenue), preparing for and completing the sale transaction at the Land Registry.

Government fees and taxes

Capital Gains Tax (CGT)

CGT is charged at a rate of 20% on the profit the sellers make from the sale of their property in Cyprus.  The purchase price that the seller paid for the property is being deducted from the sale price in order to calculate the profit.

There is also an indexation allowance which the Inland Revenue takes into account when they calculate the CGT liability of the sellers.

(Original price + indexation) – sale price = profit

Personal CGT allowances

There are also personal tax-free allowances of:

€17,086 if the seller has not sold immovable property in Cyprus before.

€85,000 if the seller has not sold property in Cyprus before, and he/she can prove that the property has been their permanent residence a minimum of 5 years.

Other CGT Deductions

Certain costs can be deducted from the profit of the seller before calculating the CGT liability.

Transfer fees – The amount paid at the Land Registry for the transfer fees to get the title deed transferred into the purchaser’s name.

Estate Agent’s Fees – Commission paid to a registered estate agent in Cyprus for the sale of the property. If the agent involved in the sale is a non-registered estate agent, then the marketing fees are not CGT deductible.

Legal Fees – Legal fees payable to the legal representatives of the seller for the sale of the property.

Interest paid to a Bank – If the seller obtained a loan to purchase the property, the interest paid to the Bank is CGT deductible as well, provided that the seller can obtain the bank statements showing the total interest paid.

Extra works – Any extra works or structural changes of permanent nature done to the property, such as building of a fence, garage, swimming pool etc., may be taken into consideration by the Inland Revenue, provided that the seller has all the relevant invoices and payment receipts.

0.4% Levy – New Tax

As of November 2022, a new tax of 0.4% on the sale price has been imposed and must be paid by all sellers of immovable property in Cyprus.

The introduction of the 0.4% levy is aiming to compensate the Greek-Cypriot refugees who are unable to possess, access, or rightfully use their properties after the Turkish invasion in 1974.

Immovable Property Tax

Immovable Property Tax (IPT) was an annual tax on real estate ownership levied on the total market value of the immovable property registered in the name of an owner. The IPT was abolished in 2017.

The seller may be liable to pay IPT for the years 2014, 2015 and 2016, if this has not already been paid.

GESY and Defence Tax

Sellers of immovable property who have been earning income since 2019 from renting out the property that they are selling, and have not declared this to the authorities, will be required to file tax assessments for income tax and make payments for the General Healthcare System (GESY) and the Special Defence Contribution.

The Inland Revenue will issue a statement with the exact amounts to be paid.

Other expenses

Other expenses include:

Costs associated with providing the buyer with documents relating to the property, such as a Land Registry search, copies of stamped architectural plans and permits, and energy performance certificates.

Debts relating to a mortgage, or any amounts owed to the developer of the property.

Outstanding amounts due to the management committees for the communal fees, water and electricity bills, property tax payable to the Municipality, refuse collection fees, sewerage fees etc.

Understanding the processes and costs involved in a sale transaction of immovable property in Cyprus is essential for avoiding common mistakes.

Engaging experienced professionals at the outset ensures an efficient and smooth process, as well as protection of the financial interests of the seller.

This proactive approach empowers the seller to address potential issues in advance, tailor the process to each case, and facilitate a seamless and profitable sale.

Prior to initiating a sale process, it is advisable to seek legal advice and consider the specific circumstances of each transaction, as some points mentioned in this article may not be applicable to all cases.

With thanks to Cyprus Property News

and

Maria Kokoridi

Lawyer at Polycarpos Philippou & Associates LLC

Source

https://www.news.cyprus-property-buyers … p;sfnsn=mo