Cyprus Capital Gains Tax and Exemptions
Guide to capital gains tax in Cyprus. Explains 20% CGT, exemptions, deductions, inheritance rules, case studies, checklists, and FAQs. Capital Gains Tax (CGT) applies to profits made on the sale of immovable property in Cyprus. The standard CGT rate is 20%, but several exemptions and deductions significantly reduce liabilities.
Standard CGT Rate
• 20% on net profit from property sale.
• Profit calculated as sale price minus purchase price, adjusted for inflation.
• Deductible expenses include legal fees, transfer fees, and improvements.
Exemptions and Deductions
• Lifetime Exemptions:
– €85,430 for the sale of a private residence (if lived in for 5+ years).
– €25,629 for other properties.
– €42,258 for agricultural land by a farmer.
• Indexation: Inflation adjustment reduces taxable gain.
• Inheritance: No CGT on inherited properties.
• Gifts: Exempt between family members.
Application to Different Buyer Categories
• Cypriot Citizens: Full access to exemptions and deductions.
• EU Nationals: Same treatment as Cypriots.
• Non-EU Buyers: Same CGT rules, no discrimination.
Case Study: Seller Benefiting from Exemption
A Cypriot owner sold their primary residence in Nicosia:
• Profit €100,000.
• Exemption of €85,430 applied.
• CGT paid only on €14,570.
• Outcome: Tax liability reduced to €2,914.
Case Study: Seller Paying Full CGT
A Russian investor sold a villa in Limassol:
• Profit €200,000 on resale.
• No exemptions applicable.
• CGT liability €40,000.
• Outcome: Significant reduction in profit margin.
Checklist for Managing CGT Obligations
1. Determine taxable gain (sale price – purchase price).
2. Deduct eligible expenses (legal, transfer, improvements).
3. Apply for lifetime exemptions if applicable.
4. Verify indexation adjustments.
5. Submit CGT declaration to Tax Department.
6. Pay CGT within 30 days of sale.
FAQs on Capital Gains Tax in Cyprus
Q: What is the CGT rate?
A: 20% on net profit.
Q: Are exemptions automatic?
A: No, must be claimed.
Q: Does CGT apply to inherited property?
A: No, exempt.
Q: Are foreigners subject to CGT?
A: Yes, same as Cypriots.
Q: Can renovation costs reduce CGT?
A: Yes, if documented with receipts.
Final Recommendations
Capital Gains Tax is an important consideration when selling property in Cyprus. Buyers and investors should plan early, keep documentation of expenses, and utilize exemptions to minimize liability.