In an ever-changing commercial environment, we always find it important for our clients and collaborators to refresh their knowledge on the Cyprus tax system. We will therefore use our best to provide an overview on certain matters pertaining to the Cyprus tax system, such as capital gains tax, stamp duty, and capital duty. Other topics will be covered in the near future.
B. Capital gains tax
Capital Gains Tax (CGT) is imposed where the disposal is not subject to income tax, at the rate of 20% on gains from the disposal of immovable property situated in Cyprus including gains from the disposal of shares (gain from shares listed on any recognised stock exchange is excluded from CGT) in companies which directly own such immovable property. In addition, as from 17 December 2015, shares of companies which indirectly own immovable property located in Cyprus and at least 50% of the market value of the said shares derive from such immovable property are also subject to Capital Gains Tax. In the case of share disposals only that part of the gain relating to the immovable property situated in Cyprus is subject to CGT.
Disposal under the CGT provision includes exchange, leasing, gifting, abandoning use of right, granting of right to purchase, and any sums received upon cancellation of disposals of property.
The following disposals of immovable property are not subject to CGT:
- Subject to conditions, land as well as land with buildings, acquired in the period 16 July 2015 up to 31 December 2016 will be exempt from CGT upon its future disposal subject to certain anti-avoidance provisions.
- Transfers arising on death
- Gifts made from parent to child or between husband and wife or between up to third degree relatives
- Gifts to a company where the company's shareholders are members of the donor's family and the shareholders continue to be members of the family for five years after the day of the transfer
- Gifts by a family company to its shareholders, provided such property was originally acquired by the company by way of gift. The property must be kept by the donee for at least three years
- Gifts to charities and the Government
- Transfers as a result of reorganisations
- Exchange or disposal of immovable property under the Agricultural Land (Consolidation) Laws
- Exchange of properties, to the extent that the gain made on the exchange has been used to acquire the new property. The gain that is not taxable is deducted from the cost of the new property, i.e. the payment of tax is deferred until the disposal of the new property
C. Stamp duty
The following table was prepared with the intention to provide the amount or rate of duty payable on certain documents, as per the applicable law. It is important to note that transactions which fall within the scope of reorganisations are exempt from stamp duty. Also, documents relating to assets situated outside Cyprus or business affairs that take place outside Cyprus are exempt from stamp duty.
Nature of documents
|Receipts (if not exempt) - for sums of over €4||7 cents|
|Letters of credit||€2|
|Letters of guarantee||€4|
|Bills of exchange (payable within three days, on demand or at sight)||€1|
|Contracts with a fixed amount|
- the first €5.000
- between €5.001 - to €170.000
- above €170.000
|Contracts without fixed sum||€35|
|Customs declaration documents (depending on document type)||€18-€35|
|Bills of lading||€4|
|Powers of attorney|
|Certified copies of contracts and documents||€4|
* Capped at a maximum of EUR 20.000
D. Capital duty
The Capital duty is been charged on the nominal value of the authorised share capital upon incorporation of a Cyprus company or on the nominal value of the increased authorised capital upon any subsequent increases of the company's authorised share capital.
Upon incorporation the amount of €105 plus 0,6% is charged on the authorized share capital. It is important to note that there is no capital duty payable if the shares are issued at their nominal value. If however the share are issued at a premium, a flat duty of €20 is imposed.
Subsequently, upon increase of the authorised share capital, the rate of 0,6% is being charged on the additional authorized share capital. Upon issuance of the share capital, a flat duty of €20 is imposed on every issuance irrespective if the shares are issued at nominal or at a premium.
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.