Stamp duty is an important aspect of various transactions in Cyprus, thus businesses and individuals must navigate its provisions to ensure compliance with the applicable law. This publication aims to provide an overview of the current stamp duty framework in Cyprus, focusing on its applicability, important exceptions, calculation, timeframes and penalties.

Applicability of Stamp Duty

Stamp duty is governed by the Stamp Duty Law (19/1963), as amended from time to time (hereinafter the “Law”). The Law imposes stamp duty on documents specifically mentioned in its first schedule, irrespective of the place of execution of such documents, provided these documents relate to:

• assets located in Cyprus, or
• matters or things to be performed or done in Cyprus.

Failure to pay Stamp Duty

Although failure to pay stamp duty does not affect the validity of an agreement, it prevents an agreement from being admissible as evidence in court proceedings (except for criminal proceedings).[1]

Important Exceptions

The Law includes several notable exceptions to the general rules on stamp duty, being among others, the following:

1. Agreements within the framework of debt restructuring : Agreements, mortgages, or other documents executed as part of debt restructuring.
2. Agreements for the sale of goods .
3. Ship sale agreements: Transactions involving the sale of ships or the purchase of part of a ship or an interest in a ship.
4. Transactions related to the transfer of shares traded on a recognized stock exchange .
5. Agreements relating to the hiring of employees.

Self-Stamping and the Stamp Duty Calculator

One of the most significant procedural changes in recent years has been the introduction of a self-stamping procedure. Effective from 27 July 2020, this process allows parties to independently stamp certain agreements with fixed stamp duty costs.[2]

For the needs of this new procedure a special calculation tool has been developed to calculate the stamp duty payable. This can be found on the Tax Department’s website.

It is important to note that this procedure applies exclusively to principal contracts and does not extend to Additional Agreements, Addendums, or Supplementary Agreements related to these contracts.

The types of agreements eligible for this self-stamping procedure include:

• Real Estate Lease Agreements;
• Employment Contracts;
• Contracts between two legal entities;
• Contracts with a fixed contract value , such as:
• Sale-Purchase Agreements
• Construction Agreements
• Loans
• Public Contracts

Calculating Stamp Duty

The stamp duty payable is determined by the value of the transaction and the nature of the agreement. The following general rules apply:

• Transactions up to €5,000: No stamp duty is payable.
• Transactions between €5,001 and €170,000 : Stamp duty is calculated at a rate of 0.15%.
• Transactions exceeding €170,000: Stamp duty is calculated at a rate of 0.20%, with a maximum cap of €20,000.

Additionally, ancillary documents are subject to a fixed stamp duty of €2 per document.

Timeframes for Stamping

Agreements must be stamped within 30 calendar days from their execution.[3] If the document is executed outside Cyprus but is subject to stamp duty, it will be considered signed when it is received in Cyprus. In this case, stamp duty becomes payable within 30 days of receipt in Cyprus.[4]

Penalties for Late Payment

Failure to pay stamp duty within the required timeframe results in penalties. The penalty structure is as follows:

1. Within 30 days : No penalty applies.
2. Within 6 months:
• If unpaid stamp duty is €2 or less: The unpaid stamp duty and a penalty of €2 will be due.
• If unpaid stamp duty exceeds €2 but does not exceed €35: The unpaid stamp duty and a penalty equal to the unpaid amount will be due.
• If unpaid stamp duty exceeds €35: The unpaid stamp duty, a penalty of €35, and an additional penalty of €0.10 for each €1.00 (or part thereof) exceeding €35 will apply.
3. After more than 6 months : The unpaid stamp duty, the above penalties, and double the respective penalties will be imposed.

Practical Considerations

The introduction of self-stamping and the stamp duty calculator offers a modernized and efficient process for managing stamp duty obligations. These tools are particularly beneficial for simpler transactions where the stamp duty is fixed. However, it is important to understand that not all agreements qualify for self-stamping, and specific legal advice is advisable for more complex transactions.

Additionally, businesses and individuals should be diligent in ensuring that all relevant documents are stamped within the required timeframes to avoid the imposition of penalties. While the penalties may seem manageable at first, they can accumulate quickly and create unnecessary administrative burdens.

Conclusion

Understanding the provisions of the Law, is essential for ensuring compliance and avoiding unnecessary penalties. Notably, the recent updates to the law, such as the self-stamping procedure and stamp duty calculator, have simplified the process for many transactions. However, paying careful attention to the specific requirements of each agreement remains crucial to avoid legal and financial complications.

Should you have any questions about how stamp duty applies to your transactions or need assistance with compliance, please do not hesitate to contact us.

Author

Yiolanda Rotsides

Principal

Legal Department

Legal@kinanis.com

December 2024