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CAPITAL GAINS TAX

Capital gains tax is charged on profits arising from the disposal of immovable property situated in Cyprus, including the profit arising from the disposal of shares in companies not listed on a recognized Stock Exchange which own immovable property situated in the Republic.

 

The capital gains tax rate is 20%.

 

Τhe capital gain arising on a disposal is calculated as the difference between the sale proceeds and the value of the immovable property as at 1 January 1980 (or cost if the date of acquisition is later), the cost of any additions after 1 January 1980 or the date of acquisition if later, any expenditure incurred for the production of the gain and the indexation allowance.

 

 

Expenses not considered as expenses incurred wholly and exclusively for the production of the profit are not deductible in the capital gain calculation. Such expenses are the following:

 

  1. Immovable Property Tax
  2. Immovable Property Fees
  3. Sewerage Council Fees

 

 

Exemptions

The following disposals of immovable property are exempted from capital gains tax:

  • transfers arising on death
  • gifts between parents and children, between spouses and between relatives up to third degree
  • gifts by a family company to its shareholders provided that the company had also acquired the property by way of gift and given that the property will remain in the shareholders’ ownership for at least 3 years
  • gifts to a company whose shareholders are members of the donor’s family and continue to be members for a period of 5 years from the date of the gift
  • gifts to any approved charitable organizations or to the Republic
  • exchange or disposal of immovable property under the Agricultural Land Laws
  • exchange of property, provided that the profit is used for the acquisition of the new property. In this case the profit that is not taxable is used to reduce the cost of the new property acquired and the tax is paid when the latter is disposed
  • expropriations
  • transfer of assets/shares of non-listed companies, which own immovable property, in the case of company’s reorganization
  • transfer of property of a missing person under administration
  • transfer of ownership as settlement by court decision i.e. between ex spouses, in accordance with the Settlement of Property Relationships Law

 

 

Deductions

Individuals are entitled to the following lifetime deductions in respect of capital gains tax:

                                                                                                                                                                   

  • Disposal of main residence (subject to conditions)    € 85.430
  • Disposal of agricultural land by a farmer    € 25.629
  • Other disposals   € 17.086

 

The above deductions are given only once to each individual. However, no individual can claim all three deductions but can only claim one of these deductions whichever is the higher.