Capital Gains Tax


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 such immovable property excluding shares listed in any recognized stock exchange.

Exemptions

The following disposals of immovable property are not subject to Capital Gains Tax:

  • Transfers arising on death.
  • Gifts to charities and the Government.
  • Transfers as a result of reorganizations.
  • Gifts made from parent to child or between husband and wife or between up to third degree relatives.
  • Gifts 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 after the day of the transfer.
  • Exchange of properties, provided that the whole of the gain made on the exchange has been used to acquire the other property. The gain that is not taxable is deducted from the cost of the new property, i.e. the payment of tax is deferred until the disposal of the new property.
  • Gifts from a family company to its shareholders provided such property was originally acquired by the company through a donation. The property must be kept by the donee for at least three years. Gifts that were made from the company to its shareholders and took place before 28 May 1999, the exemption applies irrespective of how the immovable property was originally acquired by the company.
  • Exchange or disposal of immovable property under the Agricultural Land Consolidation) Laws.
  • Expropriations

Determination of capital gain

Liability is confined to gains accruing since January 1, 1980. The costs that are deducted from gross proceeds on the disposal of immovable property are its market value at January 1, 1980, or the costs of acquisition and improvements of the property, if made after January 1, 1980, as adjusted for inflation up to the date of disposal on the basis of the consumer price index in Cyprus.

EXAMPLE

Sale price at 31 December 2002 80.000
Cost of acquisition at 1 January 1988 (40.000)
Indexation allowance 1 January 1988 to 31 December 2002 Cí40.000 @ 72,19% (28.876)
Capital Gain 11.124

 

 

 

 

Exemptions

Individuals can deduct from the capital gain the following:

  • Disposal of private residence (subject to certain conditions) 50.000
  • Disposal of agricultural land by a farmer 15.000
  • Any other disposal 10.000

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 £50.000.

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