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One of the tax benefits of living in Cyprus is the fact that capital gains tax is so limited.Only gains arising on the disposal of real estate located in Cyprus are chargeable.Gains made on the sale of shares, overseas property or any other assets are not taxed in Cyprus.

The tax rate is 20%, and it applies to both residents and non-residents.

Note that you are also liable on gains made on unlisted shares of companies owning Cypriot real estate and on shares that directly own such immoveable property.Since December 2015, where a company indirectly owns immoveable property in Cyprus and at least 50% of the market value of the shares is derived from real estate located in Cyprus, gains on disposal of such shares are subject to capital gains tax. There is an exemption for property acquired between 16th July 2015 and 31st December 2016.

There is no charge for assets passed on death, or transfer between spouses or members of the family up to the third degree.So you can pass property within the immediate family, or even to a sibling/aunt/uncle etc, without any liability arising.

If you sell one property to buy another, if the whole gain is rolled over into the new house you do not need to pay any tax.If the whole gain is not rolled over, payment of the tax is deferred until sale of the new property.

There can also be exemptions where land and buildings are transferred into or out of family companies, although there are restrictions as to length of ownership etc.

Calculating chargeable gains

When calculating capital gains on real estate, the purchase costs, improvement costs, legal and transfer fees may be deducted.An ‘indexation’ allowance is given for inflation, based on the Cyprus Consumer Price Index.

Only gains arising from January 1980 are chargeable.You have a choice of using the actual purchase cost upon which to base your capital gains tax calculation, or the value of the property as at January 1980.

Exemptions

A single lifetime allowance of €85,430 is available on disposal of a resident’s main residence once they have lived there for at least five years.This is a one-off allowance, and once fully utilised, no further exemptions or allowances are available.If this exemption is not fully utilised, the balance cannot be carried forward to use against the disposal of a future main residence.

Since this exemption is for main residences, it does not apply to non-residents.However they do receive a lower lifetime allowance of €17,086. Sales of agricultural land attract an allowance of €25,629.

Only one type of allowance can apply to a particular disposal, and the maximum capital gains tax exemption (where more than one allowance applies) is €85,430.

Contact us if you would like any further information about taxation in Cyprus.

Tax rates, scope and reliefs may change.Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change.Tax information has been summarised; an individual is advised to seek personalised advice.