Capital gains tax is payable by both residents and non-residents at a rate of 20% on the gains made from the disposal / sale of immovable property in Cyprus in relation to the cost acquisition. If the property was acquired prior to 1.1.1980 the property’s value is adopted as at 1.1.1980 and this value is so recorded on the title deed. If after 1.1.1980 the actual cost of acquisition is adopted. In both cases the acquisition cost is upgraded/inflated, based on the cost of living index, so published on a monthly basis by the Cyprus Government. So, if a property is acquired at a cost of say  €170.000 2 years ago and the index is, say, now +7%, the indexed cost [the cost which will be taken into account by the tax authorities is €170.000 x 107%] = €182.000.

 There are several allowances to the tax which is worth mentioning.

1.  If the property is the sellers’ primary residence, with land extent up to 1.500 sq.mts., there is a lifetime [i.e. once only] exception of €85.430. If it is in the names of both spouses then again the sum of €85.430 [i.e. €42.715 each] is in total. This is so, provided that one lives in the residence for the past five years prior to sale and there are no other previous claims [for the €17.000 mentioned below in paragraph 3]. If a previous allowance has been made, this previous allowance is deducted from the €85.430 allowance. This allowance of €85.430 holds good provided one claims it, within 12 months after the house is sold or within 12 months from not living in the residence.

2.  If one has a house which was sold and has claimed the exception, which did not warrant the full allowance of €85.430 then the balance can be claimed from the new permanent residence, purchased.  He can claim the difference provided he lives in the new residence for a period of 10 years, prior to the sale. It is repeated here that the €85.430 is for life in total of any number of residences.

3.  For any other kind of property (e.g. a holiday home, plots, land), only €17.000 is exempt, and this exemption is for each registered owner, [once only] not per property, so if a gain is made by two co-owners each one is allowed the €17.000 exception. For agricultural land sold by a bona fide farmer, the exception increases to €25..630. [One cannot claim both [1] and [3] of these exceptions. The total amount that can be claimed for both allowances must amount to €85.430 maximum.

4.  Exchange of property. Capital gains tax is paid on the difference between the value of the property given and the value of the property obtained.

So, if for example, one exchanges a €500.000 property with another property of €300.000, then the capital gains tax is applied on the difference of €200.000. If the exchange is equal in value, then no Capital Gains Tax is paid. 

5. Part – exchange [antiparochi]. This refers to cases where a property is “given” to say, a developer, who undertakes development on the same property and part of the new development is given to the original registered property owner, in part exchange against the value of the plot of land.  If a property is given for the development, the sales price is calculated based on the land value in analogy. So if you “give” a part exchange, a  plot to the extent of say 70%, to a developer and the total land value under the exchange is say €300.000, then the tax authorities will assume a sale of the land at [€300.000 x 70%] = €210.000 [less the relevant allowances].

 All the calculations are made as follows:

 Sales price:                  70% of the value

Allowances:                70% of all allowances.

 6.1.1.  Exception from capital gains tax include the following:

• Transfers due to death and compulsory acquisition are not considered as disposal.

• Gifts to close relatives such as spouses or children;

• Gift to the Government or a charity;

• Exchanges or sale in accordance with Agricultural Land Laws [Land consolidation]

• Restructuring of Cos

6.1.2. Added allowances

If one undertakes any improvements or additions to the property, from the acquisition date/or from 1.1.80,   this will be added to the cost of the property [the indexation factor covers also the additions] and deducted from the assumed profit made from the sale, thereby reducing the liability. This is so provided when there is written proof of the improvements [including a planning permit] and in case where V.A.T. is applicable, V.A.T. must have been paid, indexed accordingly.

6.1.3.Also the following can be deducted: (Not indexed.)

• Land transfer fees

• Legal estate agents commission + Vat on sale (illegal estate agents commission is not deductible)

• Interest on loan made for acquisition purposes of the said property, provided it is  not for rent.

7. Caution.  Please note that the allowance of €85.430 or €17.000 is not deducted from the final tax amount calculated, but from the gains made from the sale. e.g. sale of a property:

Sale of a property                                  €100.000

Total indexed cost of the property          €60.000

Gain from the sale                                  €40.000

Less allowance                            say      €10.000

Taxable gain                                           €30.000

Capital gains tax, 20%  x €30.000           €6.000

Please refer to your accountant for further information and details of any particular transaction.

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