The Complete Guide for Investors: Purchasing Real Estate in Cyprus

Paphos

In recent years, Cyprus has become a sought-after destination for Israeli investors seeking real estate opportunities abroad. With its close geographic proximity (only a 40-minute flight from Israel), Mediterranean climate, EU membership, and strong diplomatic relations with Israel, the island offers a compelling combination of convenience and opportunity. Property prices—though rising—remain attractive compared to Israeli prices, with apartments typically ranging between €140,000 and €250,000.

However, behind the appealing headlines lie legal complexities and nuances that can turn a promising deal into a costly mistake. This guide is designed for Israeli individuals and companies interested in acquiring property in Cyprus—whether for investment, vacation, or permanent residence—and outlines the key legal, regulatory, and tax issues you must consider.

Our firm provides end-to-end support throughout the Cyprus real estate journey, from initial planning and due diligence to ownership structuring and ongoing tax compliance.

Legal Framework and Foreign Ownership

Legal System in Cyprus

Cyprus operates under a mixed legal system, with a strong foundation in British Common Law due to its history as a former British colony, complemented by EU regulations since joining the European Union in 2004. For Israeli investors, this means some procedures will feel familiar, while others require adjustment.

Can Foreigners Buy Property in Cyprus?

Yes—but with conditions:

• Non-EU citizens, including Israelis, are permitted to buy one residential property (house or apartment) and the plot must not exceed 1 donum (approximately 1,338 square meters).

• Purchasing larger properties or multiple units may require special government approval.

• Properties in strategic or agricultural zones may carry additional restrictions.

Tip: Forming a Cyprus-based company can sometimes bypass these limitations and offer tax benefits. Our office assists clients in setting up these structures where appropriate.

The Property Purchase Process in Cyprus

Step-by-Step Overview:

1. Preliminary Search – Identifying the right property with local agents, developers, or independently.

2. Contract of Sale – Negotiated with the seller and drafted by a local lawyer. It outlines the purchase terms, payment schedule, and other conditions.

3. Filing with Land Registry – Within 60 days, the sale contract must be lodged with the District Land Registry Office. This protects the buyer's rights (Specific Performance Law).

4. Transfer Tax & Title Deed – Before the buyer is officially registered as the owner, all relevant taxes and fees must be paid. Transfer of ownership is done through issuance of the Title Deed.

Beware: Properties Without Title Deeds

A significant number of properties—especially new developments—are sold without a finalized Title Deed. In such cases, buyers are at risk of delayed ownership, legal disputes, or existing liens on the property.

Our legal due diligence includes:

• Verifying registration status and liens

• Confirming construction permits

• Reviewing developer compliance

• Drafting protective clauses

• Using escrow arrangements

Taxation: What You Need to Know

Purchase-Related Taxes and Costs

• Transfer Fees:

  • Up to €85,000: 3%

  • €85,001 – €170,000: 5%

  • Over €170,000: 8%

• Stamp Duty:

  • First €5,000: exempt

  • €5,001 – €170,000: 0.15%

  • Over €170,000: 0.2%

• Contract Filing Fee: €100

• VAT: New properties are subject to 19% VAT (unless exempt or reduced to 5% under specific conditions)

Example:

For a €150,000 new apartment:

• Transfer Fee: €5,500

• Stamp Duty: €225

• Contract Fee: €100

• VAT (19%): €28,500

• Total Cost: €184,325

Ongoing Ownership: Income Tax and Rental Strategy

Long-Term Rentals

• Income Tax: Progressive rates from 0%-35% with 20% exemption on rental income.

• Alternative Regime: A flat 2.25% tax on gross rental income—ideal for foreign investors with minimal deductions.

• Municipal Taxes: €100–€300/year.

Short-Term Rentals (Airbnb, Booking.com)

Cyprus mandates licensing for short-term rentals:

• Must register with the Deputy Ministry of Tourism.

• Requires a license for “Self-Catering Accommodation” (Category E).

• Safety, hygiene, and insurance compliance is mandatory.

• VAT registration is required—9% VAT applies to rental income.

• Treated as business income, not passive.

Example – Short-Term Rental

• Monthly Revenue: €2,500 x 12 = €30,000

• VAT: €2,700

• Income Tax (25%): €6,825

• Total Tax Burden: €9,525 (31.75%)

Our office handles full registration, licensing, and tax structuring for short-term rentals.

Double Taxation: Cyprus and Israel

Despite close relations, Cyprus and Israel have no double taxation treaty. This creates two key challenges:

1. Double Tax Exposure – Income may be taxed both in Cyprus and Israel.

2. Credit Limitations – Informal credits may be applied in Israel only with strict documentation.

Example:

• Rental Income: €10,800/year

• Cyprus Tax (2.25%): €243 (₪972)

• Israeli Tax (30%): ₪12,960

• Informal Credit: ₪972

• Final Tax in Israel: ₪11,988

We assist clients with tax filings in both jurisdictions to avoid overpayment.

Holding Structures and Exit Planning

• Cyprus Company Ownership: Offers flexibility, reduced tax, and multi-property access.

• Trust/POA: Legal tools for remote ownership.

• Exit Strategy: Timing sales to minimize capital gains or transfer fees.

Managing the Property Remotely

• Property Management: Typically 15%-20% of rental income. Handles guests, repairs, cleaning.

• Power of Attorney (POA): Required for legal actions in Cyprus on your behalf.

• Banking & Transfers:

  • In-person visit required for account setup

  • KYC and source-of-funds documentation needed

  • Transfers subject to Israeli AML laws

We provide banking, POA, and management support.

Risk Areas: Common Legal Pitfalls

• Properties sold without clear title

• Unapproved extensions or changes

• Delayed registrations due to developer defaults

We uncover these issues through comprehensive due diligence.

Practical Tips for Israeli Buyers

✔ Prioritize Larnaca, Limassol, Paphos – stable rental demand.✔ Check for clear title and permits.✔ Structure via Cyprus company if investing >1 unit.✔ Use escrow services for staged payments.✔ Don’t skip the tourism license if renting short-term.✔ Plan cross-border taxation in advance.

Final Word: Legal Support Makes the Difference

Cyprus offers attractive opportunities, but only with the right legal and tax infrastructure. Our firm has guided dozens of Israeli clients through successful acquisitions, rentals, and exits in Cyprus.

We partner with leading lawyers, tax experts, and banks in Cyprus to provide an integrated solution—from search to signature to sale.

Contact us today for a free consultation about your Cyprus real estate investment.