In Cyprus, the rules for calculating capital gains tax have been updated — the tax you pay when you sell real estate or shares and make a profit. The reform affected property swaps, property sales, and transactions involving shares of companies that are linked to real estate in one way or another. The main idea is to make the market more transparent, close “grey” schemes, and at the same time give people more beneficial allowances, especially when selling their own home.
Property swaps have become easier
Previously, if property was transferred not for money but in exchange for another asset, tax complications could arise. Now such transactions have officially been equated to a standard swap. This means you no longer have to pay capital gains tax immediately at the moment the property is transferred. You will only have to pay it when you actually receive and can use the asset you were given in exchange.
Allowances on sales have increased
The most welcome change is the increase in the amounts that are not taxed at all. Now each person can sell property or shares and pay no tax on profit up to 30,000 euros. Previously, this limit was only 10,000 pounds sterling.
For farmers disposing of agricultural land, the tax-free amount has increased to 50,000 euros instead of the previous 15,000 pounds sterling. When selling property that is your main residence, you can pay no tax on profit up to 150,000 euros. Previously, this amount was only 50,000 pounds sterling.
It is important to understand that these limits are granted for a lifetime, not for each transaction. If a person has already used the general 30,000-euro limit once, then when selling their main residence their maximum allowance is reduced from 150,000 euros to 120,000 euros.
What changed for mortgages and primary residences
The state also simplified tax rules for those who had a mortgage on their primary residence. Previously, tax relief applied if the property value was up to 350,000 euros. Now this threshold has been increased to 450,000 euros. This also applies to loans that were considered non-performing as of the reporting date December 31, 2020, if they were later restructured. Relief for primary residences will remain in force until 2030.
Why shares may now be taxed
Many people previously structured transactions through companies in order to avoid property tax. Now that no longer works. If at least 20% of a company’s value is linked to real estate in Cyprus, then selling its shares is subject to capital gains tax. Even if the company itself does not formally own buildings but holds stakes in other companies with real estate, the rule still applies. In such cases, the profit is taxed at a rate of 20%. The tax is calculated not on the entire company, but specifically on the value of the real estate behind it.
Control over undervalued prices
The tax authorities will now look more closely at the price at which shares and property-owning companies are sold. If it is clear that the value has been deliberately understated, the tax will be calculated based on the real market value of the assets and liabilities.
A rule has also been introduced under which the sale of shares in property-owning companies on unregulated markets is taxable if the transaction amount exceeds 50,000 euros. Transitional rules are for those who owned the shares before the law was changed.
What this means in practice
For ordinary people, this is first and foremost good news: allowances when selling a home have become significantly larger, and the rules are clearer. For investors and companies, it means more oversight and fewer opportunities to “hide” real estate inside corporate structures. As a result, the market becomes fairer, and transactions involving Cypriot real estate become more transparent and predictable.