Capital Gains Tax (CGT) in Cyprus is a tax levied on the profit made from the sale or disposal of immovable property (real estate) located in Cyprus. This tax applies primarily to the gain realized from the sale of land and buildings situated within Cyprus, including the sale of shares in companies holding such property.
Rate of Capital Gains Tax
The standard rate of Capital Gains Tax in Cyprus is 20% on the profit made from the sale of the property.
Exemptions and Deductions
Certain exemptions and deductions can reduce the taxable amount of capital gains. These include:
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Lifetime Exemption:
- Individuals are entitled to a lifetime exemption on the sale of their primary residence, which amounts to €85,430. This exemption can only be claimed once, and the property must have been used as the main residence for at least five years prior to the sale.
- A general lifetime exemption of €17,086 is available on any sale of property. This exemption can be used once during the lifetime of an individual.
- An additional exemption of €34,172 is available for the sale of agricultural land by a farmer.
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Indexed Cost Adjustment:
- The original cost of the property can be adjusted for inflation using the Cyprus Consumer Price Index, effectively reducing the taxable gain.
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Transfer Between Spouses or Relatives:
- Transfers of property between spouses, or between parents and children, and gifts made for charitable purposes are exempt from CGT.
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Compulsory Acquisitions:
- Properties that are compulsorily acquired by the state (for example, for public infrastructure projects) may be exempt from CGT.
Calculating Capital Gains Tax
The taxable gain is calculated by subtracting the original acquisition cost of the property, as well as any related expenses (such as transfer fees, legal fees, and improvement costs), from the sale price. After applying any eligible exemptions and deductions, the remaining profit is subject to the 20% CGT rate.
Example Calculation:
- Sale Price: €300,000
- Original Purchase Price: €200,000
- Allowable Expenses (e.g., improvements, fees): €20,000
- Net Gain: €300,000 – (€200,000 + €20,000) = €80,000
- Taxable Gain: €80,000 – applicable exemptions (if any)
- CGT Due (assuming no exemptions): €80,000 * 20% = €16,000
Payment and Filing
Capital Gains Tax is payable within 30 days from the date of disposal of the property. Failure to pay within the stipulated time may result in penalties and interest. It is advisable to consult with a tax professional or the Cyprus Tax Department for specific filing procedures and deadlines.
Understanding and correctly calculating Capital Gains Tax is essential when selling property in Cyprus. By taking advantage of available exemptions and deductions, individuals can significantly reduce their CGT liability. If you are considering selling property in Cyprus, it is recommended to seek advice from a tax professional to ensure compliance and optimal tax planning.
