GUIDE TO PURCHASING A PROPERTY IN CYPRUS

Situated at the eastern end of the Mediterranean, the island of Cyprus has in recent times expertly combined business with pleasure by carving out a niche as a popular location for offshore business whilst takin advantage of its natural beauty and climate to become a busy tourist hotspot. Its long history has seen the country absorb an eclectic mix of influences from Ancient Greece through to the modern era.

Cyprus has become home to a large expat community (estimated at around 60,000), while British tourist trade accounts for the overwhelming majority of the country's tourism income. A look at the Cypriot climate and its easy to see the attraction: average temperatures only dip below 70F (21C) between November and April and the country can boast on average 300 days of sunshine per year. English is also widely spoken by the local population, and the legal and land registry systems are largely based on British practices. What's more, luckily for the Brits, they also drive on the left side of the road!

Tthe country has been rapidly growing in popularity for property investors and this has been borne out by steadily rising prices. So what do you get for your money? About 130,000 Cyprus Pounds (EUR224,000, USD278,000, GBP154,000) will buy you a detached three bedroom dwelling, although expect to pay more to get near the beach.

Obtaining finance for a property purchased in Cyprus is relatively straightforward, and thanks to the country's British connections, most bank staff speak reasonably fluent English. Typically, Cypriot banks will lend between 60% and 80% of the value of the property with the term usually fixed at 7 to 25 years, although longer repayment periods can be negotiated. As things stand, it would be very difficult to obtain a Cyprus mortgage from a non-Cyprus bank. The country's accession to the EU means in theory that any restrictions on capital transfers or interest rates should no longer apply. In practice however, it is taking longer than expected for the domestic banking industry to fully adjust to the new environment.

There are a number of taxes that are associated with the purchase of property in Cyprus. First, there is a Real Estate Transfer Tax. This is necessary to transfer the freehold into the name of the buyer and is levied on a progressive scale starting at 5% up to CYP10,000 increasing in five steps up to a maximum of 8% above CYP75,000.

For residents there is an Immovable Property Tax based on the value of the property at a rate of 0.2% between CYP100,000 and CYP250,000; 0.3% up to CYP500,000; and 0.35% over CYP500,000. The first CYP100,000 is exempt.

The buyer is also liable for stamp duty. This is charged at a rate of 0.15% on the first CYP100,000, and 0.2% above this threshold. Depending on the size of the property, local authority taxes range from 0.1% to 0.5% per annum to cover refuse collection, sewerage, street lighting etc.

Since Cyprus joined the EU, residency and work permits are no longer required of EU citizens. However, for non-EU citizens, employees of entities in Cyprus require 'Temporary Work and Residence (TRE) Permits', which are issued by the Central Bank. For this purpose, employees are categorized either as Executives or Non-Executives.

Of course not everybody investing in Cypriot property is doing so with the intention of living there, and many investors (mainly British) will rent out homes whilst staying put in their home jurisdiction. Rentals in Cyprus will generally yield around 8% gross.

This also brings up the thorny issue of tax. Few countries tax their citizens purely on a territorial basis (that is, only on income obtained from within the country of residence), and rental income from a property let in Cyprus will almost certainly attract income tax in your home state should you choose to remain there, not to mention capital gains tax when the property is sold on. In Cyprus itself, income tax is levied on a progressive scale up to 30% on income above CYP20,000. The first CYP10,000 is exempt. Meanwhile, pensions are taxed at 5%.

Finally, we must address the issue of investing in the North. With the process of rapprochement between the two communities underway, many brave (again mainly British), souls have chanced their arm with an investment in the northern property market. A note of caution : the risk of losing your entire investment is a very real threat unless you have a cast iron guarantee to the title. This is because the Turkish Republic of Northern Cyprus is not legally recognised by other EU countries, and therefore the legal position of title deeds issued in the TNRC over the last three decades is precarious to say the least.

IMPORTANT WARNING: The contents of this report have been compiled in good faith by ClubMayfair.com to provide assistance to investors, but do not constitute investment advice or recommendations. Investors should not rely upon the information given in order to choose types or routes of investment but should make their own independent enquiries before making choices. ClubMayfair.com has taken reasonable care in researching and presenting the information herein but makes no representations as to its accuracy and accepts no liability for actions taken or not taken as a result.