Capital Gains Tax Overview

Capital Gains Tax (CGT) is imposed  at the rate of 20% on gains from the disposal of immovable property situated in Cyprus or the disposal of share in companies that own Cyprus-situated immovable property when the disposal is not subject to income tax. CGT includes the sale, exchange, lease, gifting, abandoning use of right, granting of right to purchase, and any sums received upon cancellation of disposals.

CGT is also imposed on disposals of shares in companies that indirectly own immovable property situated in Cyprus where at least 50% of the market value of the said shares derives from Cyprus-situated immovable property. Shares listed on any recognised stock exchange are excluded from CGT. In the case of share disposals only that part of the gain relating to the immovable property situated in Cyprus is subject to CGT. The value of the immovable property will be its market value at the time the shares were disposed of.

Shares listed on any recognised stock exchange are excluded from these provisions.

CGT is payable within one month after the date of disposal.

Immovable Property includes

  • Land
  • Buildings
  • Trees, vines etc.
  • Springs, wells, bores and water rights
  • Privileges, liberties and any other rights
  • Any undivided share in any property of above
  • Property situated in “Turkish occupied area”, taxable since 11/10/2013

Badges of Trade

To determine whether an immovable property disposal is subject to CGT or Income tax the badges of trade should be considered:

  • Subject matter
  • Frequency of transactions
  • Length of ownership
  • Profit motive
  • Supplementary work and marketing
  • Reason of acquisition
  • What happens with the sale proceeds
  • Knowledge of the owner

Exemptions

CGT is not imposed on the following disposals of immovable property:

  • Subject to conditions, land as well as land with buildings, acquired in the period 16 July 2015 up to 31 December 2016 will be exempt from CGT upon its future disposal subject to certain anti-avoidance provisions.
  • Transfers arising on death
  • Gifts made from parent to child or between husband and wife or between up to third degree relatives
  • Gifts to a company where the company’s shareholders are members of the donor’s family and the shareholders continue to be members of the family for five years after the day of the transfer
  • Gifts by a family company to its shareholders, provided such property was originally acquired by the company by way of gift. The property must be kept by the donee for at least three years
  • Gifts to charities and the Government
  • Transfers as a result of reorganisations
  • Exchange or disposal of immovable property under the Agricultural Land (Consolidation) Laws
  • Expropriations
  • Exchange of properties, to the extent that the gain made on the exchange has been used to acquire the new property. The gain that is not taxable is deducted from the cost of the new property, i.e. the payment of tax is deferred until the disposal of the new property

Eligible Expenses

Expenses Eligible for indexation allowance

  • Planning Permission fees
  • Water installation
  • Leveling of Land
  • Architect fees
  • Civil engineer fees
  • Enhancement expenditure such as swimming pool or installation of central heating
  • Acquisition costs

Expenses Eligible for deduction from CGT without indexation allowance

  • Transfer fees
  • Advertising fees
  • Valuation fees
  • Disposal fees
  • Interest
  • Legal fees
  • Commissions to licensed agent

Lifetime Exemptions

  • Disposal of private principal residence (subject to certain conditions) – €85.430
  • Disposal of agricultural land by a farmer – €25.629
  • Any other disposal – €17.086

The above exemptions are lifetime exemptions subject to an overall lifetime maximum of €85.430

Capital Losses

When the CGT computation results in a capital loss, the loss can be treated as follows:

  • Deducted from chargeable gains made on the same date
  • When no capital gains arise on the same day, it can be carried forward against any future chargeable gains until the loss is fully relieved
  • Losses cannot be carried back, under any circumstances

Immovable Property Transfer Fees

Department of Land and Surveys charges the bellow fees to the purchaser for transfers of Cyprus-situated immovable property:

Market value (EUR) Rate (%) Fee (EUR) Accumulated fee (EUR)
Up to 85,000 3 2,550 2,550
85,001 to 170,000 5 4,250 6,800
Over 170,000 8

Notes:

  • No transfer fees are payable if VAT is applicable upon purchasing the immovable property.
  • The above transfer fees are reduced by 50% in case the purchase of immovable property is not subject to VAT.

Mortgage registration fees are 1% of the current market value.

In the case of companies’ reorganisations, transfers of immovable property are not subject to transfer fees or mortgage registration fees.