Capital Gains tax

 

Capital Gains are not included in the ordinary trading profits of a business but instead are taxed separately under the Capital Gains Tax Law (CGT). Capital Gains Tax is imposed at the rate of 20% on gains from the disposal of immovable property situated in Cyprus including gains from the disposal of shares in companies which own immovable property in Cyprus and not listed in any recognised Stock Exchange.
 
Capital Gains that arise from the disposal of immovable property held outside Cyprus or shares in companies which may have as an underlying asset immovable property held outside Cyprus, are completely exempt from capital gains tax.
 
The capital gain tax is calculated after deducting from the selling price the initial acquisition cost or the market value as at 1 January 1980 whichever is the higher, inflated by the retail price index in Cyprus.
 
Exemptions to Capital Gains Tax
 
The following disposals of immovable property are not subject to CGT:
 
·     Transfers arising on death
·     Gifts made from parent to child or between husband and wife or between up to third degree relatives
·     A gift 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
·     Gifts by a family company to its shareholders
·     Gifts to charities and the government
·     Transfers resulting from reorganisations
·     Expropriations
·    Exchange of property where the market value of the property exchanged is equal
 
Deductions
 
The following deductions exist for individuals:
 

Disposal of own residences (under certain conditions)
€ 85.450
Disposal of agricultural land by a farmer
€ 25.650
Other disposal
€ 17.090

 
The above exemptions are given only once and not for every disposal. An individual claiming a combination of the above is only allowed a maximum exemption of €85.430.
 
Immovable Property Tax
 
Under the Cyprus 'Immovable Property Tax' laws 1980-2004 all property owners, regardless of whether they're resident in Cyprus or not, are liable to pay an annual tax based on the total value of all the immovable property registered in their name.
 
Cyprus' property tax is calculated on the market value of the property as at 1st January 1980 and is paid annually the Inland Revenue Department.
 
Individual owners are exempt from this tax if the 1980 value of their property is less than € 170,860.
Calculating your Immovable Property Tax liability
Every registered owner whose immovable property exceeds € 170,860 is required to submit a Declaration of Immovable Property (IR301 and IR302). The immovable property tax is payable before 30 September of each year. The tax rates are as follows:
Immovable Property Tax Table

Property value
 
Rate
Accumulated tax
Up to € 170.860
0%
Nil
From € 170.861 - € 427.150
0.25%
€ 641
From € 427.151 - € 854.300
0.35%
€ 2.136
From Over € 854.300
0.40%
 

 
From the Immovable Property Tax the following are not subject to:
 
-       Schools, churches, other religious buildings, public hospitals, public cemeteries
-       Foreign embassies and consulates
-       Buildings of charitable organizations and buildings under a preservation order
-       Immovable property owned by the Republic of Cyprus
-       Common use and public places
-       Property under Turkish occupation
-       Agricultural land used in farming or stock breeding, by farmer or stock breeder residing in the area
 
Estate duty
 
The estate duty was abolished in 2000.
 
Transfer fees
 
Transfer fees are levied by the Department of Land and Surveys for transfers of immovable property.
 
Rates applying from 19 March 1999:
 

Property value
 
Rate
Accumulated tax
Up to € 85.430
3%
€ 2.563
€ 85.431 - € 170.860
5%
€ 6.835
Over € 170.861
8%
 

 
In the case of property transferred to a family company, transfer fees are refundable after five years if the property remains with the company and the shareholders remain the same.
In the case of company reorganization transfers of immovable property are not subject to transfer fees.
In case of property transferred from a family company to one of the two spouses or their children or to a relative up to third degree relation, the transfer fees are calculated on the value of the property on the title deed, as follows:
            - if the transfer is to a spouse                -8%
            - if the transfer is to a child                    -4%
            - if the transfer is to a relative                 -8%
Also the following rates are applicable in the case of free transfers:
 

From parents to children
4%
Between spouses         
8%
Between third degree relatives   
8%
To trustees
€ 8,54