Who Has to Pay Capital Gains Tax in Cyprus?

If you are considering purchasing some property abroad in Cyprus and eventually selling that immovable property you may want to familiarize your self with the Cypriot laws regarding capital gains tax. Unlike the personal income tax where your liability depends on your resident status, the liability for capital gains tax is mandatory for anyone that sells their immovable property in Cyprus. This applies to both residents and non residents of Cyprus. In this regard the liability laws regarding capital gains tax is closely related to the liability laws regarding the immovable property tax.

Under the current Cypriot law, anyone that sells property in Cyprus and makes a profit on it is liable for capital gains tax. Capital gains tax liability applies to people that are residents of Cyprus as well as foreigners that are classified as non residents. The Cypriot capital gains tax is assessed at a rate of 20 percent on the financial gains from the sale of immovable property in Cyprus.

There are a few other rules in regards to capital gains tax that can limit the liability that you experience when selling immovable property in Cyprus. If the property that you have sold was your principle residence in Cyprus then you are given a small amount of reprieve. There is a one time lifetime exemption in the amount of CYP 50,000 towards capital gains tax is the property in question was your principle residence.

If the immovable property that you sold was not your primary residence you are still entitled to a one time lifetime exemption in the amount of CYP 10,000 towards your capital gains tax liability. Note that this exemption is per registered owner and not per property. And you are not allowed to claim both the CYP 50,000 exemption and the CYP 10,000 exemption. You will only be able to choose one of the exemptions for your lifetime exemption. This means that you cannot sell a second home and take the CYP 10,000 this year and then sell your primary home in five years and take the CYP 50,000 exemption.

You are also allowed to take exemptions in a few other instances. You are allowed exemptions for transfers due to a death, for gifts to close relatives, for a gift to a charity or the government, for exchanges or a sale in accordance with the agricultural land laws or for exchanges of equal value properties.

Also, if you have made any improvements, renovations or additions to the property then they will be deducted from your profit. This will also reduce your capital gains tax liability.