Acquisition of Immovable Property   Yiannis Papazacharia LLC, through a dedicated team of lawyers and comprehensive secretarial, taxation and accounting support, handles all matters and transactions relating to both commercial and residential freehold and leasehold property. Our expert team will be delighted to answer any enquires and take care of all matters arising from your transaction.     NOTES ON THE ACQUISITION OF IMMOVABLE PROPERTY BY ALIENS UNDER THE LAW OF CYPRUS   The procedure under Cypriot law on the acquisition of immovable property is clear, easy and straightforward.   1.         Alien   Under the law of Cyprus, the term “alien” means:   An individual who is not a citizen of the Republic of Cyprus, but not including an ”alien Cypriot” or an alien wife of a citizen who is not separated from her husband by virtue of an order of a competent court;   A  citizen of the European Union who is not a permanent resident of Cyprus.   A citizen of the EU who is not a permanent resident of Cyprus in case of acquisition of  a “secondary house”   An alien-controlled company registered in the EU and incorporated outside of Cyprus, in case of acquisition of  a “secondary house”.   A company incorporated abroad, whether controlled by aliens or not;   A trust in which any alien is a beneficiary or otherwise has an interest.   2.         Acquisition   Under the Immovable Property Acquisition (Aliens) Law Cap. 109, no alien may acquire immovable property in Cyprus, other than by reason of death, without the prior permission of the Council of Ministers, after written application has been made on a specified form.  Such permission is required both for the purchase of freehold property and for leases exceeding 33 years.  Normally such permission is granted to bona fide alien individuals to acquire a flat, house or a piece of land for the erection of a house not exceeding three donums (4000 sq.m.).  This restriction will be abolished for EU Citizens from 2009 as a consequence of Cyprus’ accession to the EU.   The above-mentioned legal exception “otherwise than by reason of death” means that an alien may acquire immovable property in Cyprus without permission from the Council of Ministers, if he has inherited it as a legal heir or if it has been bequeathed to him as a legatee in a will.   The same individual cannot obtain permission for more than one property. Once permission is granted and the property is registered in the name of the alien, there is no restriction on the alien selling the property or disposing of it by will.   3.         Business Investment Purposes   Permission from the Council of Ministers may be granted for industrial or tourist investment purposes, but is normally not granted for investments in agricultural or estate development.   4.         Company uses   Permission will be granted to a company for the acquisition of property for its own uses, such as office space, stores, residences for its directors or employees.  Cypriot local companies or offshore legal entities could thus acquire property within the above restrictions.   5.         Exchange Control   Under the new regulation which has come into operation, approval from the Central Bank of Cyprus is no longer required on the transfer of immovable property to aliens.  Furthermore, on the sale of property by aliens, immediate exportation of the whole amount of the purchase price value is now allowed.    6.         Contract of Sale and Leases   Under Cypriot Law, contracts of sale and leases must be in writing.  It is also advisable that contracts of sale be deposited with the relevant District Land Registry Office within two months after the signing of the contract, so that the purchasers’ right to pursue the remedy of specific performance in the event of breach can be protected.  Leases exceeding 15 years can be registered and registration should be affected within 3 months of the signing of the lease.  Ownership in Cyprus is denoted by title deeds, issued by the District Land Registry Office.  All contracts must therefore provide for the transfer and registration of the property in the purchaser’s  name and for obtaining a title deed.   7.         Transfer of the Title Deed   Transfer of ownership can be effected once permission to acquire a property has been granted by the Council of Ministers.  Transfer fees are payable by the purchaser to the District Land Registry Office based on the market value of the property at the time of purchase as follows:-     VALUE OF PROPERTY       € RATE % Up to Over 85.431  to Over   85,430 170,860 170,860 3% 5% 8%           8.         Capital Gains Tax   As from 1 August 1980 Capital Gains Tax is levied at the rate of 20% on gains arising from the disposal of immovable property by individuals.  Gains arising on the disposal of immovable property by individuals are exempt as follows:                           €17.086 on the disposal of any property;                         € 25.629 on the disposal of agricultural land;                         € 85.430 on the disposal of a residence.   The allowance granted is a once-in-a-lifetime benefit, unless it has not been exhausted in the first sale, in which case the balance in the individual’s  favour is carried forward to the next sale.   9.         Immovable Property Tax   Immovable Property Tax is imposed annually at the following rates on the current market value as at 1.1.1980 of immovable property situated in Cyprus and owned as at 1st January each year.   VALUE OF PROPERTY      € RATE % 0 – 170.861 – 427.151 – OVER – 170.860 427.150 854.300 854.300 NIL 2.5‰ 3.5‰ 4.0‰         The above rates apply to both legal and natural persons.         A SPECIAL NOTE ON VALUE ADDED TAX   V.A.T. on a new property that is the principle place of residence is chargeable as of 1st May 2004 at the rate of 5% and at the rate of 15% for secondary properties.     If a house up to 250 square metres in size is purchased as a principle place of residence then there is the possibility of a VAT refund of up to 10% based on the government’s  official  formula for valuating the property.     CORPORATE, COMMERCIAL AND INTERNATIONAL COMMERCIAL DEPARTMENT   Yiannis Papazacharia LLC has considerable experience and provides comprehensive support to foreigners wishing to take advantage of the business-friendly Cypriot tax régime with its numerous double-taxation treaties (see list below), which has created an ideal base for non-European Union companies seeking to enter the internal market, as well as for EU companies looking for new opportunities. Our main area of work is in company formation including ready-made (”shelf”) companies, partnership formation and dissolution, trusts, virtual offices, secretarial services (i.e., arranging for the notarizing, legalising and apostilling of documentation, increase/decrease of share capital, change of company name or objects of the company), transfer of shares, preparation of minutes and resolutions, preparation and filing of returns, preparation of Powers of Attorney, acting as bank account signatory, appointment of company secretary, nominee shareholders and nominee directors..   Yiannis Papazacharia LLC in association with tax accountants and auditors can provide to legal persons tax schemes suitable for their tax planning purposes.        ADVANTAGES OFFERED TO CYPRIOT COMPANIES   Cypriot companies enjoy a great degree of respectability among companies registered in tax incentive or tax haven countries. Cyprus is not black-listed in any country in the world.   Advantages offered to Cypriot companies include the following:   Taxation of company profits at the flat rate of 10%, which is the lowest in the E.U.    100% tax exemption for Cypriot companies whose management and control are  exercised abroad and are deemed non-residents.    50% exemption on receivable interest.   No withholding tax on dividends, royalties distribution and interest payments.   No capital gains tax on profits derived from the sale of property abroad, (including land, shares, etc.,  except on the sale of immovable property situated in Cyprus).   No V.A.T. on sales or services rendered abroad.   Freely transferable accounts of any currency may be kept either in Cyprus or anywhere abroad without any exchange control restrictions.   No exchange control restrictions.   No tax on dividends received from an overseas company by a resident company of Cyprus, or a company that is not a resident of Cyprus but has a permanent establishment in Cyprus, holding directly at least 1% of the share capital of the overseas company.   Cypriot group finance companies can fulfill intra-company and inter-company financial management functions, such as granting of loans for project financing or working capital requirements. These structures are particularly attractive for investment in high-tax countries where, local rules permitting, high debt structures are widely used.     CYPRUS TAX REFORM 2003   International Perspective   The new tax legislation in effect since 1st January 2003 aims to conform to European Union law and EU Code of Conduct and abide by its commitment to the EU to eliminate harmful tax practices.  With this new legislation, Cyprus maintains and enhances its competitiveness as an international financial centre and remains a suitable location for investments in and from Russia, the CIS and Eastern Europe.  At the same time, having the lowest tax regime in the EU, Cyprus has become a stepping-stone for investments in and from the European Union.  Cypriot companies will no longer be taxable by virtue of their registration in Cyprus but instead they will be considered tax residents if they are managed and controlled in Cyprus.  The 10% corporate tax rate gives Cyprus the lowest rate in the EU.    Set out below is a brief summary of the main provisions of the legislation affecting individuals and international investors and in particular Cypriot Companies.   Significant changes in the taxation system include the adoption of the residency basis rather than the source basis as the criterion of taxation, and the unification of the taxation system and rate of corporate tax for international and local business enterprises.   Taxation of Individuals   Resident persons will be taxed on their income accrued or arising from sources both within and outside Cyprus.  “Resident person” means an individual who stays in the Cyprus Republic for a period or periods exceeding in aggregate 183 days in the year of assessment.   Non-resident persons will be taxed on their income accrued or arising from sources in Cyprus. The taxation of pensions of any individual for services rendered outside Cyprus continues as under the present Law, that is any sum exceeding €3,417 will be, in any year of assessment, taxed at the flat rate of 5%, or the individual may elect to be taxed under the normal rules of the Law.     Taxation of Cypriot Companies   A company is a tax resident if its management and control is in Cyprus.   The following tax advantages apply to Cypriot companies:   Taxation at the 10% corporate tax rate and entitlement to the benefits of the new tax provisions.   Income is allowed to be derived also from within Cyprus.   The provisions of the Social Cohesion Fund Law apply, requiring a company contribution at the rate of two per cent (2%) on the gross earnings of its tax resident employees working in Cyprus.   Profits earned from a permanent establishment abroad are fully exempt from corporate tax.   Interest income from deposits with banking institutions in Cyprus will remain fully exempt from tax.   50% of interest income is exempt from corporate tax but the whole amount of interest received or credited is subject to the Special Contribution for the Defence of Cyprus at the rate of 10%.  However, interest from ordinary trading activities such as banking and financing activities will be considered as trading income and taxed only at the normal, prevailing corporate rates..   Cyprus intends to maintain its company and trust management regime, although the identity of the beneficiaries will have to be disclosed to the tax authorities when a company is registered or when a change of ownership takes place.    Tax Rates for Individuals For the 2008 Tax Year, the tax rates for individuals are as follows: Tax Rate Chargeable income (Euros)     0% 0 – 19. 500 20% 19.501 – 28.000 25% 28.001 – 36.300 30% 36.301 and over