Low taxation and straight forward bureaucratic procedures attract business people and investors from all over the world to invest in the Republic of Cyprus. Cyprus’ low taxation regime facilitates the expansion of business activities in the island. In the current article, I will present some useful information about capital gains and immovable property taxation schemes in Cyprus. The recent amendments of the Law 119(I)/2013 and the Law 120(I)/2013 aim at encouraging economic activity, attract more investors and simplify even more the Cyprus tax regime. According to the amendments Lentor Modern Condo of the legislations mentioned above, more capital gains are not taxed in Cyprus. The only capital gains that are taxed are those associated with the disposal of real estate located in Cyprus. Following the amendments of the Law 119 (I)/2013 and the Law 120(I)/2013, real estate owners will be taxed based on the value of their property.
Capital Gains Taxation:
Subject to certain exceptions (see the list below), the capital gain tax is charged on profits arising after the 1st January 1980, from the sale or transfer of immovable property in the Republic of Cyprus or company’s shares, located in Cyprus, that owns immovable property (Reference 1). Briefly, the net profit derived from the sale or transfer of real estate is taxed at the rate of 20%. The calculation of the net profit derived from the disposal embeds the inflation rate. Inflation is calculated based on the official Retail Price Index. Moreover, according to the amendments of the Law 119 (I)/2013 and the Law 120(I)/2013 the value of the real estate is calculated following the related provisions of the Immovable Property Law.
List of Exemptions:
- Transfer of property due to death.
- Gifts to children, spouses and any other relative up to the third degree.
- Gift to a company. The shareholders of the particular company are and continue to be members of the donor’s family for five years after the offer of the gift.
- Gift offered by a firm to its shareholders, given that the particular property was originally donated to the company. Moreover, the recipient is obliged to keep the immovable property for at least three years.
- Gift to the government or to local authorities of the Republic of Cyprus for educational or other charitable purposes.
- Exchange or sale based on the Agricultural Land (Consolidation) Laws.
- Exchange of properties. In this case, the values of the real estate properties that have been exchanged must be the same.
- Gain derived from the disposal of shares, listed on any Stock Exchange.
- Transfers resulted by reorganisation.