In this article we outline the key steps and important considerations every individual should be aware of before proceeding with a property transaction.
Reservation Agreement
A reservation agreement marks the initial stage of a property transaction, where the buyer agrees to pay a fee to the seller to take the property off the market, for a set period, allowing time for legal due diligence and checks on the property and negotiating the terms of the contract of sale. Reservation agreement usually contains also provisions dealing with the treatment of the reservation fee in the event the transaction does not proceed.
Due Diligence
Purchasing a property is undoubtedly a significant investment which requires thorough research including inspection by a trustworthy professional to rule out major defects and legal due diligence by an independent lawyer to uncover any hidden issues and safeguard your interests.
It is often the case that properties have various complications such as unresolved mortgages,title deeds issues, issues with building and planning permits, statutory tenants, or issues with common area maintenance fees. These problems might not be immediately obvious but can seriously affect your ownership experience.
An essential part of the due diligence process, inter alia, is to always request a land registry search/search certificate in relation to the property to ascertain whether the property is free from any mortgages, charges, encumbrances, or any other legal burdens.
In addition, due diligence checks should be also made in relation to the source of income and origin of funds of the buyer. In this respect, it is suggested that the seller introduces the buyer to his/her bank prior the signing of the contract of sale to confirm that the seller’s bank will accept the buyer’s funds in terms of Anti Money Laundering proceedings.
Contract of Sale
A key element in any real estate transaction in Cyprus is the drafting and preparation of a solid contract of sale. A well-structured contract of sale significantly increases the likelihood of successful completion, as it not only outlines basic terms such as the sale price and payment schedule but also addresses potential breaches by either party. This allows disputes to be resolved efficiently without resorting to court proceedings, reducing legal costs and delays.
One of the most important terms in the contract of sale is the payment structure. Careful attention must be given to how and when payments will be made, as well as to the transfer of title and possession, ensuring the property is transferred free of any encumbrances. At this
stage, i.e. execution of the contract of sale, it is a common practice that the buyer pays 20% – 30% of the purchase price to the seller.
Stamping and Lodging the Contract of Sale
Following the execution of the contract of sale, the buyer’s legal advisor must ensure the contract is duly stamped at the Tax Department. Stamp duty grants legal validity to a document, ensuring it is enforceable and recognised by the relevant authorities (calculation of stamp duty
is explained below).
This step is necessary for lodging the contract with the Land Registry under the Sale of Immovable Property (Specific Performance) Law, which provides legal safeguards to the purchaser. Although not lodging the contract does not affect its validity, registration creates a legal encumbrance in the purchaser’s interest. This prevents the seller from transferring or selling the property to a third party and significantly enhances the purchaser’s legal protection and available remedies should the seller fail to complete the deal.
Tax Clearance Certificate & Bills
Before the official conveyance of the property to the buyer—effected through registration at the Land Registry—certain confirmations and clearances must be obtained to enable the Land Registry to proceed with the transfer of title. Specifically, the seller is required to complete and submit the necessary forms and documentation to the Tax Department and pay all applicable taxes (as further detailed below) in order to secure a tax clearance certificate for the transaction. In addition, the seller must ensure that all outstanding utility bills and communal charges in relation to the property are fully settled with the relevant authorities.
Transfer of Title
The final stage in completing a property sale is the formal transfer of the title deed at the Land Registry, where the seller and purchaser (or their duly appointed attorneys) attend in person. All required documentation is typically submitted to the Land Registry approximately one week prior to the scheduled meeting. Once the file is reviewed and approved, the Land Registry arranges the official transfer appointment. During this meeting, the purchaser settles the remaining balance of the purchase price, and upon completion, the title deed is registered in their name.
It should be noted that, in certain cases (usually when the transaction is a resale and not subject to VAT), the purchaser is also required to pay transfer fees to the Land Registry on the day of the transfer. Further details regarding applicable transfer fees are outlined below.
Taxes & Other Costs
The purchase or sale of a property in Cyprus, involves various costs and taxes, in addition to the selling price, that those interested in the transaction need to consider and understand.
- Value Added Tax (VAT)
Establishing whether VAT applies to a property transaction is essential, especially for the buyer, who is liable for the payment if applicable. The general rule is that VAT is imposed on newly constructed properties/first-time sales, and most land acquisitions. Land transactions may be subject to certain exceptions, often dependent on the seller’s activity (e.g. whether they have previously sold land) and other factors as well. Therefore, given the complexity and case-specific nature of these rules, it is important that VAT obligation is assessed on a case-by-case basis.
V.A.T. rate is currently at 19%. However, a purchaser acquiring their first residence may be eligible to apply for a reduced VAT rate of 5%, subject to specific restrictions relating to the property’s value and size.
- Stamp Duty
Legal documents relating to property transactions are subject to stamp duty which is necessary to be paid before proceeding with the next steps of the transaction.
Stamp duty is calculated based on the value of the contract, as follows:
| Contract Value | Stamp Duty Rate |
| €0 – €5,000 | 0% |
| €5,001 – €170,000 | 0.15% |
| Over €170,000 | 0.20% – With a maximum payable of €20,000 |
- Transfer Fees
Transfer fees are paid by the buyer to the Land Registry for the registration of the purchased property in his/her name. The Transfer Fees are only payable when we have resale properties, and the transaction is not subject to VAT. In all other cases, where VAT is not applied to the transaction, the transfer fees are calculated as based on the market value of the property as at the date of purchase, as follows:
| Purchase price | Transfer fees |
| Up to €85 000 | 3% |
| From €85 001 to €170 000 | 5% |
| Amount exceeding €170.000 | 8% |
It is also noted that the transfer fees (as calculated above) are reduced by 50% in case the transaction is not subject to VAT.
- Capital Gains Tax
A 20% Capital Gains Tax (CGT) applies to the profits gained by the seller from the sale of property in Cyprus. The gain is calculated by deducting the property’s original cost (inflation-adjusted), certain expenses (legal expenses, agent fees, transfer fees paid at the time of purchase by the seller, costs of renovation) and eligible lifetime exemptions from the sale price.
Lifetime Exemptions Include:
€17,086 for any property sale
€85,430 for a primary residence (owned and lived in for 5+ years)
€25,629 for agricultural land sold by a farmer
The amount which corresponds to the CGT is paid to the Tax Department by the seller, and a tax clearance certificate is issued to this end, which is a prerequisite for the Land Registry to proceed with transferring the property at the Land Registry.
- Refugee Tax
In the case of transferring real estate through a sale, the seller must pay to the Tax Department
along with the CGT, an amount equal to 0.4% on the gross selling price.
Conclusion
Investing in real estate is often considered a safe way to secure one’s financial future, and Cyprus, remains a prime location for property investment offering favourable legal, tax, and lifestyle benefits.
To safeguard your investment, independent legal advice is always recommended to avoid any pitfalls, therefore it should be considered the first step in the whole process of buying or selling property.
11 June 2025
Disclaimer: The information provided in this note is for general informational purposes only and should not be
used as professional or formal legal advice.
If you need any legal advice on a specific case/transaction please contact MARILENA SHAMBARTA, Advocate & Legal Consultant, Licensed Insolvency Practitioner, Mediator at 00357 99446150 or send an email to msh@marilenashambarta.com