Cyprus tax legislation has undergone a number of changes in recent years. This is mainly due to the increasing interest of foreign buyers in the Cypriot property market. The island's authorities strive to make taxation as favourable as possible for everyone, so they regularly review and amend existing legislation.
Sometimes it is difficult for a person far removed from law and related fields to understand what is still relevant and what is outdated. In our article, we provide the information that is relevant for the first half of 2024.
So, it is quite obvious that when selling a property in Cyprus, the seller will be faced with various fees and taxes. Here is what these include:
- Capital Gains Tax (CGT).
- A 0.4% sales tax to support housing for Cypriot refugees (IPTL).
- Professional services and fees for estate agents and lawyers.
- Payment of debts, utilities and accumulated taxes.
- The cost of providing the buyer with the necessary documents.
It should be noted that the loyal attitude of the Cypriot authorities towards property owners allows you to receive benefits for almost any item. So do not think that taxes and fees will cost you a fortune when you sell your property on the island - this is not the case at all.
1. Capital Gains Tax (CGT)
Capital gains tax is basic and compulsory for everyone. The maximum rate is 20%, but (good news!) not on the value of the property itself.
1.1 Who pays CGT in Cyprus
Capital Gains Tax (CGT) is payable on the sale of property in Cyprus. CGT is payable by both residents and non-residents if the capital gains arise in Cyprus. A tax resident is a person who spends more than 183 days a year in Cyprus or has the status of an 'unusual tax resident' under the '60 day rule' if certain conditions are met.
One of these conditions is the ownership of property in Cyprus, so Russian citizens are subject to the '60 day rule' in any case.
In addition, Russians must pay capital gains tax not only in Cyprus but also in Russia if the property has been held for 3 or 5 years. A shorter holding period of three years is possible in the following cases
- The property was donated or inherited from relatives;
- the owner has no other property.
This applies in particular to Cypriot property acquired by a Russian citizen. In other cases, the minimum period of ownership is 5 years. If it is more than this, there is no need to pay tax on it in Russia.
Tip: Cyprus and Russia have a double taxation treaty, so you can apply to the tax authorities of either country to avoid payments in both countries - and pay them in only one.
1.2 How to calculate CGT
CGT is calculated as the difference between the cost of buying and selling a property. The purchase price can be increased by various expenses such as the cost of improving the property and professional fees associated with the purchase. The tax rate is 20 per cent.
The value of a purchase made before 1 January 1980 is determined by its cadastral value on that date, and thereafter by its purchase price. Inflation must be taken into account and the cost of acquiring the property may be added.
Example of calculations:
A buyer bought an apartment for 100,000 euros in 2000 and sold it for 350,000 euros in 2024. At the time of purchase, he also spent 1000 euros on lawyers and fees. Taking into account the inflation index, the cost of the property will be around 105,000 euros. The amount subject to CGT will therefore be (350,000 - 105,000 - 1,000) = 244,000 euros.
Now we have to multiply it by 20% and we get the amount to be paid: 244 thousand * 0.2 = 48.8 thousand euros.
In addition, each seller has a benefit that "removes" the first 17,086 euros from the capital gains of each owner. Therefore, our calculations can be slightly modified. The capital gain was 244,000 euros, from which we must deduct 17,086 euros, giving us 226,914 euros. This is subject to a tax of 20%, i.e.: 226,914 * 0.2 = 45,382.8 euros.
1.3 Tax exemptions
There are certain exemptions from CGT in Cyprus. The main one is that if the property has been used as a permanent residence for at least 5 years and the owner sells it for the first time, the first €85,430 is not taxable.
You should also be aware that CGT is not payable on the sale of property in Cyprus:
- on gifts of property (there is a small tax);
- on inheritance of property (there is a small tax);
- on the exchange of property of equal value;
- when relinquishing ownership of the property;
- when donating property to charity.
The transfer of property from one spouse to the other in the event of divorce is also considered to be between a gift and an inheritance.
2. Tax in favour of refugees (IPTL)
A 0.4 per cent sales tax (Immovable Property Tax Law or IPTL) was introduced in 2021 to support housing for Cypriot refugees. It was amended with some modifications in 2024.
2.1 When and why it was introduced
The IPTL was introduced on 22 February 2021 to support Cypriot refugees, especially those who suffered from the 1974 conflict and still have property problems as a result. According to the authorities, it will somewhat reduce socio-economic disparities.
In 2024, amendments were introduced to clarify and strengthen the mechanism for collecting this tax. Namely, those who sell their property for the purpose of repaying the DOL (including mortgage properties) or for restructuring purposes are exempt from the tax.
2.2 How the IPTL works
The IPTL is 0.4% of the value of the property as stated in the contract of sale. This tax is added to Capital Gains Tax (CGT), increasing the total tax burden on the vendor. Using the same example as in 1.2, we can also calculate this tax.
For example, the value of the property was stated to be €350,000. Therefore, the IPTL will be €350,000 * 0.004 = €1,400. As the two taxes are added together, the seller of the flat or house will have to pay the following to the State 45,382.8 euros + 1400 euros = 48,182.8 euros.
We remind you that if a person has lived in the property for 5 years and sells it for the first time, he will only have to pay IPTL, i.e. 1,400 euros, since the first 85,430 euros are not taxable.
3. Professional services and fees for estate agents and lawyers
When selling a property in Cyprus, the seller also incurs the costs of estate agents and lawyers. The estate agent's commission is usually 3-5% of the sale price. Legal fees can vary depending on the complexity of the transaction, but on average are around 1% of the value of the property.
Approximate calculation:
If you sell the flat mentioned above for 350,000 euros, the agent's commission will be between 10.5 and 28,000 euros. Legal fees will be around 3.5 thousand euros. In total, if you leave all the actions completely to professionals, to pay for the sale of such an apartment should be in the range of 14-31,5 thousand euros. On this point you can save money if you do the sale completely independently. This is possible if the vendor is familiar with the legislation in force and has a good knowledge of Greek and/or English.
4. Payment of debts, utilities and taxes
Before closing, the vendor must pay all utility and tax debts associated with the property. This includes paying water, electricity, maintenance and other bills, as well as any property tax debts. If the owner has no debts, this item can be disregarded.
5. Costs of providing the buyer with the necessary documents
The vendor bears the cost of preparing and supplying all the necessary documents to the purchaser. This includes land registry extracts, title deeds and any other documents required to complete the transaction. This is not a very large amount - around 100 euros plus 300-500 euros for the energy certificate. So, on average, you can add another 500 euros to all the costs.
Conclusion
The sale of property in Cyprus involves a number of taxes and charges that need to be taken into account when planning the transaction. It is advisable to seek professional advice to ensure that taxes are correctly calculated and the tax burden is optimised. One of the leading agencies providing advice and assistance on property transactions in Cyprus is DOM Real Estate agency The agency's portal also features a large property database, news section and blogs on living in Cyprus.
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