How is capital gains tax determined in Cyprus.
The CGT rate is set at 20% of the chargeable gain realized from the sale of a property as adjusted for inflation, certain lifetime exemptions and other allowable expenses.
The profit is calculated as the difference between the sale price and the purchase cost less any interest paid on payments (e.g. housing loans) in the course of acquiring the property, the inflation rate as published by the government, services of registered estate agents, the costs of any approved additions to the property and certain personal allowances.
(A) Personal allowances which are provided and deducted at the time of calculating the gain made by selling the immovable property. These lifetime personal allowances are basically twofold. On the one hand everyone is entitled to the first €17.086.01 of profit from the sale of any property free of any imposition of CGT. However, under certain conditions if the property was in use by its owner(s) for a continuous and uninterrupted period of five years prior to its disposal and exclusively used for residential purposes and given that it is sited on land which does not exceed 1500 square metres, the maximum lifetime allowance is €85,430.07.
(B) Inflation: under normal circumstances, is entitled to an inflation allowance if the property was purchased after 01/01/80. For calculation purposes the consumer price index (CPI) is used for the month preceding the disposal of the asset and the month of acquisition. Inclusion and thus deduction of the relevant inflation allowance is normally done automatically by the tax officer at the time of his/her calculating the liability for CGT.
(C) Other allowable expenses: interest on loan used for the acquisition of the property, estate agents’ fees/commission (but only registered estate agents), professional charges, additions or improvements to the property after acquisition and before disposal of the asset.
On calculation of all allowances any gain above the maximum profit allowed attracts 20% CGT.