Most capital gains are exempt from tax in Cyprus, and the only
gains that are subject to tax are gains relating to real estate
located in Cyprus. The Capital Gains Tax Law ("CGT Law")
provides for capital gains tax at the rate of 20% to be charged on
gains arising from the disposal of real estate in Cyprus, including
gains from the disposal of shares in unlisted companies owning real
estate in Cyprus to the extent that the gain derives from the
company's real estate assets. Laws 119(I) of 2013 and Law
120(I) of 2013 have made detailed amendments to the CGT Law.
Law 119(I) extends the definition of gains subject to capital
gains tax to include gains accruing on disposal of rights derived
from a contract for sale of immovable property in Cyprus, including
the assignment of rights derived from such a contract. This
amendment addresses the situation where an initial purchaser of
property disposes of his interest in the property by assigning his
contract to buy the property to a new purchaser before the title
has formally been transferred. For example, A enters into an
agreement to buy a property from B at a price of €100,000. He
pays the purchase price and the contract is deposited with the
Department of Lands and Surveys but the property is not transferred
because title deeds are not available. A year later, the property
has appreciated in value and A agrees to assign the contract to a
new purchaser, C, for €150,000 (meaning that C takes over
A's rights under the original contract). The new amendment
makes clear that A's gain of €50,000 is subject to capital
gains tax.
Gains are generally calculated by reference to the value of the
property on 1 January 1980. Law 120(I) of 2013 amends the CGT Law
to provide that the value is to be determined in accordance not
only with the general valuation of property at that date carried
out under the Immovable Property (Tenure, Registration and
Valuation) Law but also with other relevant provisions of that law.
Provision is also made for the Director of the Lands and Surveys
Department to determine property values in certain cases, including
where the property disposed of was created following a division
into building plots to which no property title has been issued.
Furthermore, provision is made to deal with cases where property is
sold at public auction by or on behalf of the Lands and Surveys
Department.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.