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Taxation of immovable property

CAPITAL GAINS TAX

Capital Gains Tax

It is imposed on gains from disposal of immovable property within Cyprus, including shares of companies not listed on a recognized Stock Exchange which own immovable property situated in the country, at the rate of 20%.

In computing the capital gain the value of the immovable property as at 1 January 1980 (or cost if the date of acquisition is later), the cost of any additions after 1 January 1980 or the date of acquisition if later, any expenditure incurred for the production of the gain and the indexation allowance, are deducted from the sale proceeds.

The following expenses are not considered expenses wholly and exclusively for the production of the profit and therefore are not deductible:

a) Immovable Property Tax

b) Immovable Property Fees

c) Sewerage Council Fees

Exemptions 

The following disposals of immovable property are exempt from capital gains tax:

  • transfer on death
  • gifts between spouses, parents and children and relatives up to third degree
  • Gift to a company whose shareholders are members of the donor’s family and continue to be members of the family for a period of five years from the date of the gift
  • Gift by a family company to its shareholders, if the company had also acquired the property in question via donation. However if the shareholder disposes the property within 3 years then the shareholder will not be entitled to the deductions listed below
  • gifts to a charitable organization or the Republic
  • Exchange or disposal under the Agricultural Land (Consolidation) Laws
  •  Exchange provided the gain is used for the acquisition of new property. The gain derived from the exchange reduces the cost of the new property and the tax is paid when the latter is disposed
  • Expropriations
  • Transfer of ownership or share transfers in the event of company reorganizations.
  • Transfer of property of a missing person under administration
  • Transfer of ownership between spouses that their marriage has been dissolved by a court order or in case of transfer of ownership between the same persons for the purpose of settling their property according

to the Settlement of Property Relationships between Spouses Law.

Deductions

Individuals are entitled to deduct from the gains the

following:

Disposal of principal private residence

(subject to conditions)

€ 85.430
Disposal of agricultural land by a farmer € 25.629
Other disposals € 17.086

The above are lifetime deductions.

Administrative penalties

Administrative penalties amounting to €100 or €200 depending on the specific case will be imposed for late submission of declarations or late submission of supporting documentation requested by the Commissioner.

In the case of late payment of the tax due, an additional penalty at the rate of 5% will be imposed on the unpaid tax.

IMMOVABLE PROPERTY TAX

Immovable property tax

Under the revised provisions of Immovable Property Tax Law (No.24/1980) all owners of property in Cyprus whose 1980 market value exceeds €12,500 are liable to pay an annual tax to the Inland Revenue.

It is imposed on the market value of immovable property as at 1 January 1980 and is calculated on the immovable property owned by the taxpayer on 1 January of each year.
Rates

Value of Property

Rate

%

Tax

Cumutative Tax

1-12,500

0

0

0

12,501-40,000

0,6*

240

240

40,001-120,000

0,8

640

880

120,001-170,000

0,9

450

1.330

170,001-300,000

1,1

1.430

2.760

300,001-500,000

1,3

2.600

5.360

500,001-800,000

1,5

4.500

9.860

800,001-3,000,000

1,7

37.900

47.260

3,000,001 and over

1,9

*with minimum tax of €75

Exemptions

The following properties are exempt from immovable

Property tax:

  • Public cemeteries
  • Public hospitals
  • Schools
  • Immovable property owned by the Republic, foreign embassies and consulates
  • Buildings under a preservation order subject to conditions
  • Buildings of charitable organizations
  • Agricultural land used for agriculture or animal husbandry by a farmer
  • Immovable property situated in inaccessible or depressed areas
  • Property of a missing person under administration.

 

Other Property tax issues:

  • Miscellaneous Charges/Rates: A registered owner of a property is subject to other minor charges under other laws imposed by the municipality or other authorities such as:
  • Municipal/Town Rate : Tax charged annually by the municipality to properties of physical & legal persons within the town boarders based on the market value of the property as at 1st of January 1980. Rates vary from 1‰ – 2‰. Municipality tax is payable to your local municipal authority.
  • Village rate: Tax charged annually by the muktar of the village to properties of physical & legal persons within the village boarders based on the market value of the property as at 1st of January 1980 (Around €25 to €150 per annum)
  • Refuse collection charge: Charged by the municipality to properties to properties within the town boarders (Arpproximately €111)
  • Betterment Charge: Annual tax charged on physical & legal person’s properties in the areas where there are community boards based on the estimated improvement value of the property due to works on those areas carried out by the government & is calculated by the Council of Ministry
  • Sewerage rate: Charged by the Sewerage Board, calculated on the market value of the property as at 1st of January 1980 on properties within the town boarders that are included in the sewerage scheme. The total cost of the rates/charges depend on the size & value of the property ranging from (€25 to €400 per annum). Sewerage taxes are payable annually to your local sewerage board.