Capital Gains Tax (CGT) in Cyprus is imposed on profits from the disposal of immovable property situated in Cyprus and specific shares in companies. This tax applies when the disposal is not subject to income tax, making it crucial for property owners and investors to understand how it affects them. In this article, we will explore the key aspects of capital gains tax in Cyprus, including the tax rate, exemptions, and practical examples of calculating CGT on immovable property.

What is Capital Gains Tax in Cyprus?

Capital Gains Tax in Cyprus is levied on profits from the sale of immovable property located within the country. The scope of the tax also extends to the disposal of shares in private companies that hold immovable property in Cyprus. However, shares of listed companies on recognized stock exchanges are exempt from this tax.

Taxable Disposals Under Cyprus Capital Gains Tax

The following types of disposals are subject to Capital Gains Tax:

 1. Immovable property situated in Cyprus.

 2. Shares of private companies that own immovable property in Cyprus.

 3. Shares of companies that participate directly or indirectly in companies owning immovable property in  Cyprus, provided that at least 50% of the market value of those shares is derived from such property.

 4. Sale agreements for immovable property situated in Cyprus.

Capital Gains Tax Rate in Cyprus

In Cyprus, the capital gains tax rate is 20%. Taxable gains from property disposals are calculated as the difference between the disposal proceeds and the original cost, including improvements, adjusted for inflation based on the consumer price index. For properties acquired before January 1, 1980, the original cost is considered the property’s value as of that date, determined by the general valuation conducted by the Land Registry Office under the Immovable Property Law.

Exemptions from Capital Gains Tax in Cyprus

Several exemptions reduce or eliminate the CGT burden for specific transactions. These exemptions include:

          – Gifts to relatives within the third degree of kindred.

          – Transfers due to death.

          – Gifts to companies where shareholders are family  members, provided they retain ownership for at least five years.

          – Donations to charities, educational institutions, the government, or local authorities.

          – Expropriations and reorganizations.

          – Exchange of property, where the immovable properties being exchanged have equal values.

          – Gifts by family companies to shareholders, under certain conditions.

Example: Calculation of Capital Gains Tax in Cyprus

Let’s illustrate how Capital Gains Tax is calculated on the sale of immovable property in Cyprus using a practical example.

Scenario:

     – Sale Price: €500,000 (sale takes place in February 2024).

     – Original Purchase Price: €280,000 (acquisition took place in March 2008).

Step 1: Adjust the Purchase Price for Inflation

The purchase price is adjusted for inflation using the Cyprus Consumer Price Index (CPI) :

     – CPI for March 2008: 207.80

     – CPI for February 2024: 253.44

Adjusted Purchase Price = €280,000 × (253.44 / 207.80) = €341,488

Step 2: Calculate the Taxable Gain

The taxable gain is the difference between the sale price and the adjusted cost:

Taxable Gain = €500,000 − €341,488 = €158,512

Step 3: Apply Exemptions and Calculate CGT

     1. General Property Disposal Exemption: €17,086

          – Taxable Gain after Exemption = €158,512 − €17,086 = €141,426

          – CGT = €141,426 × 20% = €28,285

     2. Primary Residence Exemption: If the property was used as the primary residence for at least five years, an exemption of €85,430 applies:

          – Taxable Gain after Primary Residence Exemption = €158,512 − €85,430 = €73,082

          – CGT = €73,082 × 20% = €14,616

Additional Exemptions and Special Cases

     – Agricultural Land Exemption: If the property is agricultural land used by a farmer, an additional exemption of €25,629 may apply.

     – Immovable property acquired between 16 July 2015 and 31 December 2016 at market value from unrelated parties may be exempt from CGT upon future disposal.

The exemptions mentioned above are lifetime exemptions, subject to an overall lifetime maximum of €85,430.

Immovable Property Transfer Fees in Cyprus

When acquiring immovable property in Cyprus, transfer fees are payable to the Department of Land and Surveys. The rates are as follows:

          – 3% on the first €85,000.

          – 5% on amounts from €85,001 to €170,000.

          – 8% on amounts over €170,000.

Important Notes on Transfer Fees:

          – No transfer fees are payable if VAT is applicable on the property purchase.

          – Transfer fees are reduced by 50% if the property purchase is not subject to VAT.

For free property transfers, the transfer fees are determined based on the property’s value as of 1 January 2013. The rates are:

          – From parents to children: No fees (Nil).

          – Between spouses: 0.1% of the property’s assessed value.

          – Between third-degree relatives: 0.1% of the property’s assessed value.

          – To trustees: A flat fee of €50.

Mortgage registration fees are set at 1% of the property’s current market value.

Conclusion

Understanding the Capital Gains Tax in Cyprus is essential for anyone involved in property transactions. With a tax rate of 20% and several available exemptions, property owners and investors can plan their disposals to minimize tax liabilities. Proper calculation, including adjustments for inflation and applying the relevant exemptions, is crucial to ensure accurate CGT reporting and payment.

Contact Us

Have questions about Capital Gains Tax in Cyprus or need assistance with property transactions? Contact us at info@nikitapartners.com.cy. Our team is here to provide expert advice and help you navigate the Cyprus tax system.