Capital Gains Tax is imposed at the rate of 20% on gains generated from the disposal of immovable property situated in Cyprus (when the disposal is not subject to income tax) and on gains from the disposal of shares in companies which own such immovable property, excluding shares listed on any recognised stock exchange.
Realization of gain or loss
The gain is made on the date of the disposal and is chargeable on such date. Capital gains are not chargeable on a yearly basis such as income tax. A disposal includes the sale, exchange, leasing of an asset for over 15 years, and the gifting of an asset.
The following disposals of immovable property are not subject to Capital Gains Tax:
- Transfers arising on death
- Gifts made from parent to child or between husband and wife or between up to third degree relatives
- Gifts to a company where the company’s shareholders are members of the donor’s family and the shareholders continue to be members of the family for five years after the day of the transfer
- Gifts by a family company to its shareholders, provided such property was originally acquired by the company by way of donation. The property must be kept by the donee for at least three years
- Gifts to charities and the Government
- Transfers as a result of reorganisations
- Exchange or disposal of immovable property under the Agricultural Land (Consolidation) Laws
- Exchange of properties, provided that the whole of the gain made on the exchange has been used to acquire the other property. The gain that is not taxable is deducted from the cost of the new property, i.e. the payment of tax is deferred until the disposal of the new property
Calculation of capital gain
For the determination of the capital gain, the costs of acquisition and improvements of the property, if made after 1 January 1980 (otherwise its market value at 1 January 1980), is adjusted for inflation up to the date of disposal on the basis of the consumer price index in Cyprus and deducted from the gross proceeds. Expenses that are related to the acquisition and disposal of immovable property are also deducted, subject to certain conditions
Individuals can deduct from the capital gain the following:
- Disposal of private residence (subject to certain conditions) €85.430
- Disposal of agricultural land by a farmer €25.629
- Any other disposal €17.086
The above exemptions are lifetime subject to an overall lifetime maximum of €85.430.