Capital Gains Tax
Subject to certain exemptions, capital gains tax is imposed in accordance with the Capital Gains Tax Laws 1980-2002, on gains from disposal of immovable property situated in the Republic including shares of companies not listed on a recognised Stock Exchange which own immovable property situated in Cyprus. Gains are not a component of the ordinary income of a business, but instead are taxed separately at a rate of 20%.
In computing the capital gain 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, are deducted from the sale proceeds.
The following expenses are not considered expenses wholly and exclusively for the production of the profit and therefore are not deductible:
a) Immovable Property Tax
b) Immovable Property Fees
c) Sewerage Council Fees
Exemptions
The following disposals of immovable property are exempt from capital gains tax:
- Transfer on death
- Gifts between spouses, parents and children and relatives up to third degree
- Gift to a company whose shareholders are members of the donor’s family and continue to be members of the family for a period of five years from the date of the gift
- Gift by a family company to its shareholders, if the company had also acquired the property in question via donation. However if the shareholder disposes the property within 3 years then the shareholder will not be entitled to the deductions listed below.
- Gifts to charitable organization or the Republic
- Exchange or disposal under the Agricultural Land (Consolidation) Laws
- Exchange provided the gain is used for the acquisition of new property. The gain derived from the exchange reduces the cost of the new property and the tax is paid when the latter is disposed
- Expropriations
- Transfer of ownership or share transfers in the event of company reorganizations
- Transfer of property of a missing person under administration
- Transfer of ownership between spouses that their marriage has been dissolved by a court order or in case of transfer of ownership between the same persons for the purpose of settling their property according to the Settlement of Property Relationships between Spouses Law.
Deductions
Individuals are entitled to deduct from the gains the following:
| Disposal of principal private residence (subject to conditions) | € 85.43 |
| Disposal of agricultural land by a farmer | € 85.43 |
| Other disposals | € 85.43 |
The above are lifetime deductions – A maximum overall limit of €85,430 can be exempted over the life of each individual.
