Capital Gains Tax
Capital Gains tax is levied at the rate of 20% on gains arising from the disposal of immovable property or the disposal of shares of companies the assets of which consist mainly on immovable property.
As a general rule, the gain is calculated as the difference between the sales proceeds and the original cost of the property. Interest on payments paid for the acquisition, additions to the property and inflation rate, as published yearly by the Government, are deducted form fees.
Capital gains tax as a whole has minimal effect, since the appreciation of values, coupled with the following allowances and inflation, tend to leave little excess.
Individuals are entitled to the following lifetime allowances on Capital Gains Tax:
- The first €17,086.00 of gains arising from the disposal of any property are exempted.
- The first €25,629.02 of gains arising from the disposal of agricultural land by the farmer are exempted (subject to certain conditions).
- The first €85,430.10 of gains arising from the disposal of a house used by the owner for his/her own habitation are exempted (subject to certain conditions).
The above allowances are not available separately and an individual claiming a combination of the above allowances is only allowed a maximum lifetime allowance of €85,430.10
Cyprus residents and companies registered in Cyprus are subject to Capital Gains Tax when disposing their property, wherever it is, in Cyprus or overseas. However, under certain conditions, Capital Gains Tax can be reduced significantly if the purchase of the immovable property is effected through a Cyprus registered company.
The following categories of immovable property disposals are exempted from the Capital Gains Tax:
- Transfers by reason of death
- Gifts between relatives up to third degree of kindred
- Gifts to limited liability companies when, at the time of transfer and for a period of five years following the transfer, all the shareholders of the company are members of the family of the donor
- Gifts by family companies to their members, but only in cases where the property transferred, was obtained by the company as a gift
- Exchanges of immovable properties
- Compulsory acquisitions
- Gifts to charitable institutions
- Gifts to charitable institutions or the Republic of Cyprus
Capital Gains Tax Exemption:
The Capital Gains Tax concession introduced in mid-2015 that exempted those who purchased property after it came into force and 31 December 2016 from paying Capital Gains Tax regardless of when the property was sold has not been extended.
As a consequence those who buy property in 2017 will be liable for Capital Gains Tax when they sell the property.
Communal expenses are usually payable monthly or quarterly, in advance, and vary from development to development depending on the area and type of the property. They cover an immovable property’s owner share of the cost of cleaning and maintaining common areas and gardens, communal swimming pool expenses, electricity in common areas, management fees and repairs.
Personal Income Tax
All Cyprus tax residents are taxed on all income accrued or derived from all sources in Cyprus and abroad. Individuals who are not tax residents of Cyprus are only taxed on income accrued or derived from sources in Cyprus. An individual is a tax resident in Cyprus if he/she spends in Cyprus more than 185 days in any one year. Days in and out of Cyprus of Cyprus are calculated as follows:
- The day of departure from Cyprus counts as a day of residence out of Cyprus.
- The day of arrival in Cyprus counts as a day of residence in Cyprus.
- Arrival and departure from Cyprus in the same day counts as one day of residence in Cyprus.
- Departure and arrival in Cyprus in the same day counts as one day of residence outside Cyprus.
The following income tax applies to individuals:
|Chargeable Income (€)||Tax Rate (%)||Accumulated tax (€)|
|19,500 - 28,000||20||1,699.80|
|28,000 - 36,300||25||2,074.75|
* €3,774.55 plus the incremental amount over €36,301 multiplied by 30%
Social insurance, provident fund, medical fund, pension fund contributions and life insurance premiums are deducted from income (only up to 1/6 of the chargeable income).
The pension for a person, who is resident in the Republic, paid for services which have been rendered abroad, is taxable at 5% on any amount exceeding €3,417.20 in a tax year.
The following income sources of pensioners are taxable at the normal tax rate:
- Interest Income
- Dividend Income
- Profits from the disposal of securities 9Shares, debentures, government bonds)
- Profits from a permanent establishment which is maintained abroad
- The emoluments from salaried services performed abroad for an aggregate period in the tax year exceeding 90 days.
The registration fee of a mortgage is one 1 per cent (1%) of the amount secured, plus the relevant stamps
Double Taxation Treaties
Cyprus has signed double taxation treaties with a considerably large number of countries and more are under negotiation. These treaties may affect favorably the ownership of immovable property in Cyprus and also groups of people who decide to relocate to Cyprus, such as retired residents, employees and business investors.
Some of the countries with which Cyprus has entered into double taxation treaties are UK, Ireland, Greece, USA, Canada, France, Italy, Russia, Belarus, Romania, China, Austria, Belgium, South Africa, Yugoslavia and many others.