Capital Gains Regulations
CYPRUS CAPITAL GAINS REGULATIONS FOR THE DISPOSAL OF IMMOVABLE PROPERTY IN CYPRUS
The Cyprus Capital Gains Tax Regulations provide that for every sale of property in Cyprus Capital Gains Tax, must be paid. From this tax imposition, Cyprus Economy benefits about 250 million Euros, every year.
This Capital Gains Tax is paid of course by the Vendor. It is paid at the time of transfer of the property. No transfer of immovable property is allowed in Cyprus unless this Cyprus Tax, has first been paid!
Any Cyprus Capital Gains, is liable to be taxed at the rate of 20%. Subject to certain conditions, individuals may claim the following deductions:
• Up to €85,430 if the disposal relates to a private residence.
• Up to €25,629 if the disposal is made by a farmer and it relates to agricultural land.
• Up to €17,086 on any other disposal.
These deductions are granted once in the lifetime of the individual, until fully exhausted and if an individual claims a combination of them, the maximum deduction granted cannot exceed €85,430.
CYPRUS CAPITAL GAINS TAX - EXEMPTIONS
UNDER THE LAW, CERTAIN DISPOSALS ARE NOT SUBJECT TO CAPITAL GAINS TAX:
Transfers arising on death, Gifts made by a parent to his children, Gifts to a company if the shareholders are members of the family, Gifts by a company to its members of property which was originally donated to the company, Gifts to charity, Gifts to the Cyprus Government.
CYPRUS CAPITAL GAINS TAX - ALLOWANCES
Under the law, the chargeable gain as adjusted for inflation, but certain lifetime exemptions apply to individuals for the disposal of their main residence:
The €17,086 deduction rises to €85,430 if the property has been the main residence of the tax payer for a minimum period of five years. To take advantage of the full allowance, the land on which the house is built must not exceed 1,500m2. If it exceeds this size, you will pay tax on the percentage over 1,500m2.
THE FOLLOWING EXPENSES ARE ALLOWABLE TO BE DEDUCTED FROM YOUR CYPRUS CAPITAL GAINS:
•Property transfer fees.
• Stamp duty paid to the Cyprus Government
• Estate agent’s commission to a lawful estate agent especially for the deal.
• Legal expenses paid especially for the deal.
• Accepted capital additions and improvements
• Additional allowable expenses are also granted for:
• Immovable Property Tax.
• Interest on loans used to buy the Property, assuming that the interest payments have not been used to offset other tax liabilities; e.g. Income Tax.
Cyprus Capital Gains Tax does not apply to profits resulting from the sale of overseas property by residents who were not resident in Cyprus when they purchased the property. So an apartment in Cyprus and become Cyprus Tax resident here, you will not be liable for Cyprus Capital Gains Tax should you subsequently sell your property in France for example.
REDUCING YOUR CYPRUS CAPITAL GAINS TAX LIABILITY
‘Under the table’ payments are, of course, illegal. However, there are perfectly legal ways of reducing your Capital Gains Tax liability:
• Capital losses may be used to offset the gain.
If you are selling your property partly or fully furnished, come to an arrangement with your buyer whereby they purchase any furniture, etc. using a separate agreement. This will reduce your Cyprus Capital Gains Tax liability as the items included in the agreement should not be liable for Capital Gains Tax.