Capital Gains Tax on Property Sales in Cyprus
Learn how the Cyprus Capital Gains Tax applies to property sales in Cyprus. Discover rates, exemptions, reliefs, case studies, and compliance tips for residents and non-residents. Cyprus Capital Gains Tax (CGT) applies to profits made from the sale of immovable property in Cyprus. Understanding how CGT is calculated and what exemptions apply is crucial for property investors and homeowners.
Cyprus CGT Rate and Calculation
• The standard CGT rate in Cyprus is 20% on net profit.
• Profit is calculated as the difference between the sale price and acquisition cost, adjusted for inflation.
• Costs such as legal fees, transfer fees, and property improvements can be deducted.
Exemptions and Reliefs
• Primary Residence: Lifetime exemption up to €85,430 on the sale of a main residence (if owned for at least 5 years).
• Other Exemptions: €17,086 per person per lifetime for any property sale.
• Agricultural Land: €25,629 exemption for qualifying disposals.
• Inheritance: Property acquired through inheritance is exempt from CGT.
• Gifts: Transfers between relatives up to 3rd degree are exempt.
Residents vs. Non-Residents
• Both residents and non-residents are subject to CGT on Cyprus property sales.
• Non-residents are taxed only on property located in Cyprus.
• Double taxation treaties may reduce liability depending on the investor’s country of residence.
Case Study: Sale of Primary Residence in Nicosia
A Cypriot couple sold their main residence for €300,000, originally purchased for €200,000. After applying the €85,430 exemption, the taxable profit was reduced, resulting in significantly lower CGT liability.
Case Study: Non-Resident Selling Holiday Home in Paphos
A British investor sold a villa for €400,000, purchased at €250,000. After deducting renovation expenses and applying the €17,086 exemption, the taxable gain was reduced, but CGT of around €25,000 still applied.
Checklist for Calculating and Paying CGT
1. Determine acquisition cost (including documented improvements).
2. Adjust for inflation as per Cyprus tax rules.
3. Subtract exemptions and reliefs.
4. Apply the 20% CGT rate.
5. Pay CGT to the Cyprus Tax Department within the required timeframe.
FAQs on Capital Gains Tax in Cyprus
Q: What is the CGT rate?
A: 20% on net profit from property sales.
Q: Do I pay CGT if I gift property to my children?
A: No, gifts to close relatives are exempt.
Q: Is CGT payable on inherited property?
A: No, inheritance transfers are exempt.
Q: How can I reduce my CGT liability?
A: By documenting improvements, claiming exemptions, and applying lifetime allowances.
Q: Do non-residents pay CGT?
A: Yes, but only on property located in Cyprus.
Final Recommendations
Capital Gains Tax is a key consideration for anyone selling property in Cyprus. Proper planning, accurate record-keeping, and use of exemptions can significantly reduce liability. Consulting a tax advisor is strongly recommended to optimise outcomes.