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.