Capital Gains Tax
Capital gains tax is charged at the rate of 20% on gains arising from the disposal of immovable property located in Cyprus or the disposal of shares of companies which own immovable property in Cyprus. Gains from the sale of shares listed on a recognised stock exchange are excluded from capital gains tax.
Determination of capital gain
The taxable gain is the result of the difference between sale proceeds and the original cost of property plus improvements cost. The total cost of property should be adjusted to include inflation from the date of acquisition (earlier date 01/01/1980) to the date of disposal. Inflation can be estimated through the Cyprus consumer price index.
| Example |
€ |
| Selling price 31/12/2004 |
90.000 |
| Cost of acquisition 01/01/1988 |
(40.000) |
| Inflation (01/01/1998 - 31/12/2004) (C£40.000 x 83.88%) |
(33.552) |
| Taxable profit |
16.448 |
Exempt Disposals
- Transfer by reason of death
- Gifts between relatives (up to 3rd degree of relation)
- Gifts to approved charitable institutions and the Government
- Transfer by reason of reorganisation
- Expropriations
- Exchange of sale of land according with Agricultural law
- Exchange of properties. The gain made on this exchange is used to acquire another property. That gain which is non-taxable is deducted from the cost of the new property.
- Gift to family companies. This is exempt only if the shareholders of the company are and continue to be members of the donor's family for at least five years.
- Gifts from family companies to their shareholders. This is exempt provided the company originally acquired the property by way of gift. If the shareholder disposes the property gifted by the company during the next three years from the gift date the exemption will not be available.
Exemptions available to individuals
| € |
| Gains from the disposal of any property |
17.086,01 |
| Gains from the disposal of agricultural land by a farmer |
25.629,02 |
| Gains from the disposal of primary residence |
85.430,07 |
Note
The exemption of €17.086,01 applies even if the property was purchased during the same year or any other year.
The €85.430,07 exemption applies only if the residence was owned and used by the owner as his primary residence for a period of at least five years. The five-year period does not need to be continuous, but the total use of the primary residence less any length of time that was absent from the primary residence should amount to five years.
These exemptions are only entitled once.
If an individual is entitled of more than one of these exemptions the amount is limited to €85.430,07.
