Cyprus Capital Gains Tax (Immovable & Movable Property Transactions & Exemptions)
Introduction:
" In consideration of the many exemptions on capital gains, Cyprus has favorable capital gains tax rules, especially for corporate, overseas and family immovable property transfers."
Capital gains from sale of Securities and Shares
Under the Capital Gains Tax (Amendment) Law, No. N119(I) of 2002, effective 1st January 2003, gains accruing from disposal of shares listed on any recognised Stock Exchange will be exempted from tax. There is no requirement for minimum holding period or minimum investment.
The tax exemption applies to both resident and nonresident entities and individuals
Capital Gains tax on profits from sale of Ovearseas Immovable Property
Capital gains tax does not apply to profits from the sale of overseas real estate by non-residents, by offshore entities, or by residents who were not resident when they purchased the asset. Gains accruing from disposal of such immovable property or shares in companies owning property held outside Cyprus, will be tax exempt.
Capital Gains Tax from disposal of Cyprus Immovable Property
Gains arising from the sale of shares listed on the stock exchange are excluded from capital gains tax. Capital gains arising from the disposal of immovable properties and/or companies owning immovable property are charged at a 20% capital gains tax rate.
The taxable gain is the difference between earnings realized and the original purchase cost minus a series of allowable expences which must be submitted with invoices and receipts of the costs incurred.
these Capital gains tax deductable expences are:
(Validity is subject to nterpretation by inland revenue officers).
1) Cost of „renovation/improvement costs”.
2) Inflation from the date of acquisition.
3) Property transfer fees
4) Licenced estate agent commissions
5) Legal fees
6) Immovable property tax
7) Interests on loans used to buy the property unless used to offset other tax liabilities
The first 17.086EUR (at the time of writing) of a gain made by an individual on disposal of a personal property is capital gains tax exempt. This exemption limit rises to a maximum of 85.430EUR if the seller has lived in the property continuously for the previous five years even in consideration of the above allowances. This exemption and the use of the above mentioned allowances is available only once.
Note:
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Capital Gains tax arising from Transfer/Purchase of Immovable Property
Real estate transfer tax is payable on the actual consideration or on market value, whichever is the higher, by the transferee.
Real Estate Transfer fees are imposed by the Lands Registry in order to transfer FREEHOLD ownership to the name of the purchaser. The transfer fees are due for payment when the transfer of the title deed in the name of the purchaser takes place. The Purchaser is solely responsible for the payment of the transfer fees. The rates are on a graduated scale.
Value of property (€)
Transfer fee rate (%)
up to 85.430,07
3
from 85.430,08 to 170.860,14
5
from 170.860,15 and over
8
If the property is in joint names e.g. of a couple (husband and wife) or two individuals, then the purchase value is divided into two parts which results in reduced transfer fees (view example at the endo of the page).
Exemptions from Cyprus Capital Gains Tax arising from Tranfer
Some other disposals types of immovable property in cyprus are exempt from taxation, these include:
1) Transfer by reason of death
2) Gifts between relatives up to third degree
3) Gifts to a company where the company shareholders are members of the donor’s family and the shareholders continue to be members of the family for five years after transfer.
4) Gifts by a family company to its shareholders provided such property was originally donated to the company. The property must be kept by the recipient for at least three years. Gifts made by a company to shareholders before the 28th if May 1999 are exempt irrespective of how the immovable property was originally acquired.
5) Gifts to charities and the Government.
6) Transfers as a result of reorganisations.
7) Exchange or disposal of immovable property under the Agricultural Land (Consolidation) Laws.
8) Expropriations.
9) Rollover relief in some circumstances is available if a gain is used for the purchase of a further property.
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Capital Gains arising fromTransfer EXAMPLE:
EXAMPLE:
Assume a house is purchased by you for 200.000EUR and this amount is accepted by the Land Registry Office to be the market value as well.
Calculation of transfer fees:
Value of 85.430,07EUR at 3% = 2562,90EUR
Value between 85.430,08EUR & 170.860,14 (total of 85.430,06EUR) at 5% = 4.271,49EUR
Value above 170.860,14EUR at 8% (total of 28.139,86EUR)= 2.331.18EUR
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Total Transfer Tax
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9.165,57EUR
The same computation applies if the purchaser is a limited liability company.
The transfer fees can be reduced if you purchase the house jointly with a company or family member.
In this case the computation is made as follows:
Value of house 200.000EUR: broken down into 100.000 (1/2 share) and 100.000EUR (1/2 share)
Partner 1 - share
Value of 85.430,07EUR at 3% = 2.562,90EUR Value between 85.430,08EUR & 100.000,00 (total of 14.570,93 EUR) at 5%= 728,55EUR
Partner 2 - share
Value of 85.430,07EUR at 3% = 2.562,90EUR
Value between 85.430,08EUR & 100.000,00 (total of 14.570,93 EUR) at 5%= 728,55EUR
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Total Capital Gains tax for Transfer =
______
6.579,90EUR
This approach provides a saving of 2.585,67EUR in transfer taxes for a 200.000,00EUR property
