Capital gains tax is payable by both residents and non-residents at a rate of 20% on the gains made from the disposal / sale of immovable property in Cyprus in relation to the cost acquisition. If the property was acquired prior to 1.1.1980 the property's value is adopted as at 1.1.1980 and this value is so recorded on the title deed. If after 1.1.1980 the actual cost of acquisition is adopted. In both cases the acquisiton cost is upgraded / inflated, based on the cost of living index, so published on a monthly basis by the Cyprus Government. So, if a property is acquired at a cost of say CP100,000 2 years ago and the index is, say, now + 7%, the indexed cost [the cost which will be taken into account by the tax authorities is CP100,000 x 107%] = CP107,000.
There are several allowances to the tax which is worth mentioning:
- If the property is the sellers' primary residence, with land extent upto 1.500 sq.mts., There is a lifetime [ie once only] exception of CP50,000. If it is in the names of both spouses then again the sum of CP50,000 [ie CP25,000 each] is in total. This is so, provided that one lives in the residence for the past five years prior to sale and there are no other previous claims [for the CP10,000 mentioned below in paragraph 3]. If a previous allowance has been made, this previous allowance is deducted from the CP50,000 allowance. This allowance of 50,000 holds good provided one claims it, within 12 months after the house is sold or within 12 months from not living in the residence.
- If one has a house which was sold and has claimed the exception, which did not warrant the full allowance of CP50,000 then the balance can be claimed from the new permanent residence, purchased. He can claim the difference provided he lives in the new residence for a period of 10 years, prior to the sale. It is repeated here that the CP50,000 is for life in total of any number of residences.
- For any other kind of property (eg a holiday home, plots, land), only CY10,000 is exempt, and this exemption is for each registered owner, [once only] not per property, so if a gain is made by two co -owners each one is allowed the CP10,000 exception. For agricultural land sold by a bona fide farmer, the exception increases to CP15,000. [One cannot claim both  and  of these esceptions. The total amount that can be claimed for both allowances must amount to CP50,000 maximum.
- Exchange of property. Capital gains tax is paid on the difference between the value of the property given and the value of the property obtained. So, if for example, one exchanges a 500,000 property with another property of 300,000, then the capital gains tax is applied on the difference of 200,000. If the exchange is equal in value, then no Capital Gains Tax is paid.
- Part – exchange [antiparochi]. This refers to cases where a property is "given" to say, a developer, who undertakes development on the same property and part of the new development is given to the original registered property owner, in part exchange against the value of the plot of land . If a property is given for the development, the sales price is calculated based on the land value in analogy. So if you "give" a part exchange, a plot to the extent of say 70%, to a developer and the total land value under the exchange is say CP300,000, then the tax authorities will consider a sale of the land at [ CP300,000 x 70%] = CP210,000 [less the relevant allowance]. All the calculations are made as follows: Sales price: 70% of the value Allowances: 70% of all allowances.
- 6.1.1. Exception from capital gains tax include the following:
- Transfers due to death and compulsory acquisition are not considered as disposal.
- Gifts to close relatives such as spouses or children;
- Gift to the Government or a charity;
- Exchanges or sale in accordance with Agricultural Land Laws [Land consolidation]
6.1.2. Added allowances
If one undertakes any improvements or additions to the property, from the acquisition date / or from 1.1.80, this will be added to the cost of the property [the indexation factor covers also the additions] and deducted from the assumed profit made from the sale, thereby reducing the liability. This is so provided there is written proof of the improvements [including a planing permit] and in case where VAT is applicable, VAT must have been paid, indexed accordingly.
6.1.3.Also the following can be deducted:
- Land transfer fees – * Not indexed.
- Legal estate agents commission + Vat on sale
- Interest on loan made for acquisition purposes of the said property, provided it is not for rent.
- Caution. Please note that the allowance of CP50,000 or CP10,000 is not deducted from the final tax amount calculated, but from the gains made from the sale. eg sale of a property:
Sale of a property 100,000
Total indexed cost of the property 60,000
Gain from the sale 40,000
Less allowance say 10,000
Taxable gain 30,000
Capital gains tax, 20% x 30,000 6.000
Please refer to your accountant for further information and details of any particular transaction.