Capital Gains Tax

Capital Gains Tax (CGT)

The CGT rate applicable is 20% on profits made on the sale of immovable property or shares (other than shares listed in a recognized stock exchange) in a company holding more than 50% of its assets in immovable property located in Cyprus.

Profits from the disposal of immovable property located outside Cyprus are not taxed under CGT in Cyprus.

Charge of CGT

The CGT is imposed on the net profit from disposal.

The net profit is calculated as the disposal proceeds less the greater of the cost or market value on 1 January 1980 plus additions and after adjusted for inflation. Inflation is calculated using the official Retail Price Index.

Lifetime exemptions for individuals

Any Individual will be entitled to any of the three exemptions from the CGT for a lifetime.

For sale of own private residence: An exemption of €85.430 applies for gain made from disposal of primary residence. This exemption is applicable on the condition that the individual used the property as a primary residence for a period of at least five years.

Agricultural land exemption relates to agricultural land sold by the farmers and can be €25.629.

The lifetime exemption of €17.086 for any other gains made from the disposal of a property.

Exemptions

The following transactions are considered as exempt transfer of properties:

• Gift to the Republic or to a local authority for educational or other charitable purposes or to approved charitable institutions.
•  Land exchanged or sold in accordance with the Agricultural Land (Consolidation) Laws.

–     Expropriations

–     Exchange of properties, provided that the whole of the gain made on the exchange has been used to acquire the other property (rollover relief).  The gain that is not taxable is deducted from the cost of the new property.

–    Gifts made by shareholders to family companies and applies in the cases where the shareholder(s) of the company remain members of the giver’s family for a minimum of five years.

–    Transfers of immovable property, because of approved reorganisation scheme.

–    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)

Transfer Fees

No transfer fees are required for properties which are subject to VAT. If there is no VAT paid on the purchase, transfer fees are reduced by 50%.