April 15, 2024

Illuzzi Letter

Envisioning And Creating Your Dream Home

Cyprus Buying Investment Property – How to handle CGT

The Capital Gains Tax rate in Cyprus is 20{bc1e42e53d8565163e9cec719c82f5e0892e054fb5d628f08363879e07731a2f} of the chargeable gain as adjusted for inflation, but certain lifetime exemptions apply to individuals for the disposal of their main residence. The first CYP10,000 of a gain is exempt. This exemption limit rises to CYP50,000 if the seller has lived in the property continuously for the previous five years. Further allowances are granted in relation to transfer fees, inflation and improvements made to the house, services of registered estate agents, but the total exemption cannot exceed a CYP50,000 limit. Capital Gains Tax does not apply to profits from the sale of overseas real estate by residents who were not resident when they purchased the asset.

Note that these are personal allowances. So if the property is owned in joint names, e.g. husband & wife, each owner is entitled to the exemption of CYP 10,000 or CYP 50,000.

Don’t forget that in addition to the personal CGT allowances you can also claim an Inflation Allowance.The indexation factor is based on the cost of the property if purchased after 01/01/80, using the Consumer Price Index (CPI) in the month preceding disposal and CPI in month of acquisition. Disposals of building sites use the 1980 valuation for CPI purposes.

The data is below.

Also you can deduct the following:

Allowable expenses:-

Land Transfer Fees

Stamp Duty

Estate Agent’s Commission – (but only if a licenced agent)

Professional Charges

Advertising

Capital Additions or Improvements – (receipts required and planning permission where necessary)

Indexation can be applied to the above expenses as well as the initial purchase price.

Additional allowable expenses:-

Immoveable Property Tax
Interest on Loan used for the Acquisition of the Property

These expenses cannot be indexed.

If you’re selling a property partly/fully furnished there is a perfectly legal way to reduce your CGT liability.

Have two contracts; one for the sale of the property and the other for the furniture, etc (this is known as a furniture agreement).

For CGT purposes, the IR will only be interested in the gain you make from the sale of the property.

http://www.mof.gov.cy/mof/cystat/statistics.nsf/All/F799BCBF16A29708C2256D640042C313/$file/CPI-HISTORICAL{bc1e42e53d8565163e9cec719c82f5e0892e054fb5d628f08363879e07731a2f}20DATA-EN-090106.xls?OpenElement

Avoid CGT in Cyprus

In Cyprus there is no taxation on the profits from the disposal of securities for individuals that are residents of Cyprus. “Securities” is defined as shares and other securities of companies or other legal persons, incorporated under the law in Cyprus or abroad and options thereon.

So to legitimately avoid all Cyprus CGT then you could purchase your property in Cyprus using a Limited Company registered in Cyprus.

But you will still have to pay UK CGT but the good news is that you can set off what you have paid in Cyprus. Finally the article tells you how to avoid paying Cyprus CGT all together.