Cyprus: Overview

RENTAL YIELDS

Gross yields are poor in Cyprus

Yields on rental property in Cyprus are on average at 4.7%, according to Global Property Guide estimates.

Yields on properties in the district of Limassol range from 4.3% to 5.5%.

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TAXES AND COSTS

Effective rental income tax is low to moderate in Cyprus

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	nil	6.70%	19.5%
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Source: Disclaimer

Rental Income: Rental income exceeding CYP10,000 (€17,153) is taxed at progressive rates. Standard deductions for income-generating expenses are deductible from the gross income.

Capital Gains: Capital Gains Tax is charged at 20%, with a lifetime exemption of CYP50,000 (€85,764) if the property was owner-occupied for at least 5 years.

Inheritance: There are no inheritance taxes or estate duties in Cyprus.

Residents: Residents are taxed on their worldwide income.

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BUYING GUIDE

Total transaction costs are moderate

Total roundtrip transaction costs range from 8% to 14% of the purchase price. The buyer pays around of 3% to 9%, whereas the seller pays the remaining 5% for the agent’s commission. The transfer tax rate ranges from 3% to 8%, depending on the purchase price of the property. If the property is in joint names, the property value is halved, leading to lower transfer fees.

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LANDLORD AND TENANT

Cypriot laws are pro-tenant

Rent Control: The rental market can be divided into two broad categories: Houses controlled by the Rent Control Law (1983), and the free market.

Foreigners are not covered by the provisions of the Rent Control Law, except the non-Citizen wife of a citizen of the Republic, and legal entities controlled by non-residents.

Tenant Eviction: Eviction of tenants is relatively difficult, especially in the case of ‘statutory tenants’ protected by the Rent Control Law. It takes an average of 360 days to evict a tenant.

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ECONOMIC GROWTH

An island divided

This Mediterranean island is known as the birthplace of Aphrodite, the goddess of love. Despite a history of ethnic clashes between the Cypriot Greeks and the Cypriot Turks, Cyprus is one of the most popular vacation spots and retirement locations in the region; drawing people in with its charming vineyard and orchards, crusaders castles, frescoed monasteries and glorious beaches.

The island in itself is effectively partitioned by the "Green Line" - dividing the two parts from Morphou through Nicosia to Famagusta - with the northern third inhabited by Turkish-Cypriots and the southern two-thirds by Greek Cypriots. The border is patrolled by United Nations troops.

The Cypriot economy is expected to see modest growth in 2006. The IMF forecasts 4% GDP growth this year, up from 3.7% last year, and this is expected to continue next year. The country has shown impressive growth during 2004, recording a 3.9% rise from 2003’s 1.9% growth, owing mainly to increased domestic demand.

Inflation was 2.6% last year. As oil prices ease this year, inflation is expected to fall to 2%, and to remain at that level in 2007.

Cyprus acceded to the EU in 2004 and in July 2007, the currency was locked into the Euro. From 1st January 2008, the Cyprus Pound was replaced by the Euro, one Euro worth 0.585274 Cyprus Pounds.

Since its accession to the EU, Cyprus has tightened its fiscal policy, following a slippage in 2003 which saw a general government deficit of 6.3% of GDP. The deficit was reduced to 4.2% in 2004, and only 2.7% in 2005, well within the EU prescribed 3% of GDP ceiling.