The Cyprus Tax Department has clarified the income tax and capital gains tax (CGT) treatment of commissions and fees paid relating to transactions involving immovable properties located in Cyprus:

• Commissions paid for licensed real estate agency services,
• Commissions for agency services performed entirely outside Cyprus,
• Fees for consultancy services that do not relate to real estate agency, and
• Other low-value procedural services,

All the supporting documentation required to sustain a deduction must accompany the above.

This  is relevant to any client buying, selling, exchanging or leasing Cyprus real estate (directly or via a share deal), and to real estate agents, developers and advisers who invoice such transactions.

 

Part I — Commissions for Real Estate Agency Conducted in Cyprus

Real estate agency in Cyprus is regulated by the Real Estate Agents Law N.71(I)/2010. No person may act, or receive commission, as a real estate agent unless they are:

registered under Article 11 of the Real Estate Agents Law and hold a valid annual practicing license under Article 17; or

covered by the temporary/occasional-services regime of Article 15 (EU/EEA/Swiss-established persons) and not subject to a prohibition under Article 16.

The definition of a “real estate transaction” is broad and it is not limited to a direct sale, purchase, exchange or lease of property, but also captures transactions effected through the transfer of company shares whose value is substantially derived from immovable property.

 

Deductibility

Commissions paid to persons who meet the above criteria are deductible for income tax and/or CGT purposes, as applicable.

Commissions paid to persons who do NOT meet the above criteria are not deductible for either income tax or CGT purposes.

Commission paid to an individual under the Article 15 route may be subject to 10% withholding tax under Article 23 of the Income Tax Law, subject to relief under an applicable double tax treaty.

 

Payments to employees and “associates” of the agent

Commission paid by a real estate agent to his/her own employee, or to an “associate” (a person who does not meet the Article 3 criteria but provides supporting services of a similar nature to those of an employee, e.g. property viewings) for a specific transaction, remains deductible for the agent provided the total of such payments does not exceed 50% of the total commission the agent earns on that transaction. Where the 50% threshold is exceeded, the entire amount becomes non-deductible for the agent.

 

Part II — Commissions for Real Estate Agency Conducted Entirely Outside Cyprus

Commissions paid to a person who carries out the real estate agency entirely outside Cyprus (i.e. without any physical presence or travel to Cyprus by that person or a connected party) remain deductible for income tax/CGT purposes, provided the person legally carries out real estate agency activities in their country of establishment, in accordance with the law of that country.

 

Part III — Consultancy Fees on Transactions Involving an Operating Business That Owns Property

Fees paid by an interested buyer or seller for consultancy-type services (e.g. financial due diligence, business planning) relating to the acquisition or disposal of an operating business, or of the shares of a company operating such a business (e.g. a hotel, factory, shopping centre, hospital, clinic, educational institution or student hostel) that itself owns immovable property, are treated as follows, regardless of whether the service provider meets the Part I criteria:

 

Acquisition or disposal of the operating business itself

Deductible for income tax purposes for the buyer or seller under Article 9(1), to the extent the business produces taxable income, and provided the transaction genuinely constitutes an acquisition/disposal of the business.

Not deductible for CGT purposes, since the fee relates to the business and not to the immovable property held by it (Article 6, CGT Law).

 

Acquisition or disposal of shares in the company operating the business

Not deductible for income tax purposes for the buyer (on a future disposal of the shares) or the seller, under Articles 8(22) and 11(5) of the Income Tax Law.

Not deductible for CGT purposes for either party, as the fee relates to the shares and not the underlying property.

Note: on disposal of an operating business, any amount received for goodwill/clientele is taxable income under Article 5(1)(στ) and 5(2)(ε) of the Income Tax Law.

 

Documentation required

These fees must be supported by an engagement letter between the professional and the buyer/seller identifying the nature of the consultancy services and the agreed fee (with any success fee shown separately), together with a formal invoice from the provider giving an analytical description of the services rendered and the corresponding fee.

 

Part IV — Other Low Added-Value Procedural Services

Procedural services of low added value carried out to complete a property transaction — for example, drafting of sale agreements, or completing and filing forms/declarations with government departments — fall outside Parts I to III.

Expenditure incurred by the buyer or seller on such services is deductible for income tax (Article 9(1)) or CGT (Article 6) purposes provided it is incurred wholly and exclusively for the production of income, irrespective of whether the provider meets the Part I criteria.

Where such expenditure instead relates to the acquisition/disposal of an operating business, or of shares in the company operating it, the same split treatment described in Part III (a) and (b) above applies.

 

Part V — Supporting Documentation for Real Estate Agency Deductions

A deduction for real estate agency commission is granted only where supported by a lawful invoice, together with:

Evidence that the agreed commission equals the statutory 3% of the transaction value under Article 20(2) of the Real Estate Agents Law, or, where a different rate was agreed, the relevant written (and duly stamped, where applicable) agreement; and, depending on the agent’s status:

For agents registered under Article 11 — a copy of the annual practicing license for the relevant year;

For agents operating under Article 15 temporary regime — a certificate from the Council for Registration of Estate Agents

For agents operating entirely outside Cyprus — an original governmental or professional certificate from the country of establishment (with an official Greek translation) confirming the agent held a valid local license, or otherwise legally carried on real estate agency activities, during the relevant period, together with evidence of the bank transfer of the commission to the beneficiary’s overseas account. Where a real estate agency is unregulated in that country, a governmental certificate confirming legal establishment or tax residence there may be submitted instead.

 

Action Points for Clients

Property buyers and sellers should confirm the licensing status of any real estate agent before agreeing commission terms, to protect the deductibility of the fee.

Ensure engagement letters are in place for consultancy-type services on business/share acquisitions involving real estate, distinguishing consultancy fees from any success fee.

Real estate agents making payments to employees or associates should monitor the 50% threshold on a per-transaction basis.

Overseas agents and their Cyprus counterparties should prepare the certification and translation requirements in Part V ahead of the 1 September 2026 effective date.

Review pending and upcoming transaction structures now, as the new documentary requirements apply to transactions carried out from 1 September 2026.