Information

Capital Gains Tax

Capital Gains Tax (CGT)

The rate of CGT is 20% on profits acquired from the sale (or transferred) of immovable property located in Cyprus, resident or non-resident. Sellers who bought between the period of July 2015 and July 2016 are exempt. 

To calculate the CGT, you need to deduct from the sales proceeds the original cost and any additional expenditure, adjusted for inflation (amount of inflation when the property was purchased divided by the inflation of the sale), and any allowable expenses directly related to the disposal of the building such as interest on loan, real estate fees and advertising (also known as potential exemptions). 

Taxable Gains Explained

The taxable gain is a calculated difference between the sale price and the original cost of the immovable property plus refurbishment cost after purchase. The total price of the immovable property must be adjusted to include the increase from the date of purchase which took place not earlier than 01 January 1980, up to the date of disposal. This increase can be estimated via Cyprus consumer price index.

Capital Gain Exceptions

Individuals are entitled to exemptions from the CGT; however, the exemptions are only permitted once.

The first exemption of €17.086 occurs if the gains are obtained from disposal of any property. Using the above-mentioned example, the tax to be paid can be calculated as follows:

Taxable profit €137,394 – €17.086 = 120,308*20% = €24,062

Also one needs to deduct from the sales proceeds the original cost and any additional expenditure, adjusted for inflation, and any allowable expenses directly related to the disposal of the building such as interest on loan, real estate fees and advertising 

N.B. If owners of the immovable property are more than one i.e. a married couple, then the tax exemption will be €17.086 * 2 = €34.172.

Example:

Selling price of an immovable property (on 30/01/2009) – €450,000

Less the cost of acquisition (on 01/01/2000) – €250,000

Less inflation (01/01/2000-30/01/2009) – €250,000 x 206.97 / 165.52 = €312,605

Taxable profit – €450,000 – €312,606 = €137,394

The second exemption of €85.430 occurs if the gains are obtained from disposal of primary residence. The second exemption applies only if the property in question was owned and used as individual’(s) primary residence for a period of at least five years. Taking this into consideration, the calculation of CGT changes as follows:

Taxable profit €137,394 – €85.430 = €51,964 * 20% = €10,392.8

The third exemption relates to the agricultural land sold by the farmers and sums up to €25.629.

Exempt disposals

Gifts and/or donations between relatives. The relation between relatives must be up to third degree:

• Parents to children (no tax)
• Between spouses (0.1% on the fair market value (FMV))
• Between third degree relatives (0.1% on the FMV)
• To a trustee (€50)

– Donations made to support charitable organisations and the Government.

– Land sale exchange in compliance with Agricultural Law.

– Expropriations.

Property exchange. The gain produced through the exchange is used to purchase another property. The gain in question is then deducted from the cost of the new property and is non-taxable.

Gifts made to family companies. (N.B. The following exempt applies only if the shareholder(s) of the company is and persists to be a member of the giver’s family for a minimum of five years.

Gifts made by family companies to the companies’ shareholder(s), taking into consideration that the property was initially acquired by way of a gift. Moreover, if the shareholder(s) disposes of the company’s property in the following three years from the gift date, the exemption will not be valid.

Transfer for the purpose of organisation.