Capital Gains Tax in Cyprus
Capital Gains Tax (CGT) in Cyprus is a tax levied on the profit from selling real estate — the gain (profit) that is taxed and not the whole received amount. Capital gain is calculated from the increase in value of the sale price as compared to the value of the property on 1 January 1980 or the cost as adjusted for inflation if the date of acquisition is later.
Additions and expenditures on the property may also be deducted. In Cyprus, CGT has to be paid at the time of the disposal of the property.
The difference between long- and short-term capital gains tax only applies in Cyprus if we take this to mean the original price of the property on 1 January 1980 or as adjusted for inflation (see above).
Property on which CGT is paid in Cyprus means:
- immovable property in the Republic,
- shares in companies that own immovable property in the Republic,
- shares in companies that participate in a company or companies that own immovable property in the Republic (upon conditions),
- agreements to sell property in the Republic.
How much is capital gains tax on property?
Capital gains tax in Cyprus is 20% unless your case falls within the exemptions or allowances.
Exceptions
Exceptions to the duty to pay CGT include, among others:
- transfer on death,
- gifts between spouses, parents, children and relatives up to the third degree of kindred,
- gifts from foster parent to foster child,
- gifts to a charitable organisation, the Republic, or a local authority.
Allowances
Allowances for CGT in Cyprus are made as follows:
- No CGT is imposed on a natural person whose profit does not exceed 10,000 Cyprus pounds (17,086 euros) or 15,000 Cyprus pounds (25,629 euros) for profit arising out of the sale of agricultural land for people whose profession is agriculture.
- No CGT is paid for profit from selling a primary residence not exceeding 50,000 euros on 1.5 hectares of land.
- No CGT is paid on the first 50,000 Cyprus pounds (85,430 euros) if the profit exceeds that sum.
- If the land exceeds 1.5 hectares, the CGT is paid on the price of the land exceeding 1.5 hectares.
Relevant legislation
The relevant legislation for CGT in Cyprus is the Capital Gains Tax Law 52/1980, latest amendment N. 197(I)/2022.
Importance
This tax is a crucial element of financial planning for property investors and can significantly impact net earnings from a sale. CGT is an important consideration when setting a sale price and estimating the net proceeds from a sale. It is also a factor that can affect the return on investment for real estate investors.
Capital Gains Tax also affects legal compliance. Accurate calculation is necessary to avoid penalties and legal implications. Aiding someone in avoiding CGT is a criminal offence.
It is advisable to consult with a professional tax advisor to ensure accurate calculation and compliance with relevant laws.
