|Property taxes and rates|
1. IMMOVABLE PROPERTY TAX
The annual immovable property tax is imposed on the market value of the property as at 1st January 1980 and applies to the immovable property owned by the taxpayer on 1st January each year.
Please note that before the title deed is transferred into the purchaser’s name, the registered owner who is still the vendor (example the developer) pays the taxes on behalf of the purchaser. However since the purchaser already has possession of the property it is reasonable to pay such this taxation. The developer who usually has a large amount of property on its name or company is usually obliged to pay the maximum taxation and the purchaser is obliged to refund any such amounts paid plus interest before the transfer of the title deed on his/her/their names.
2. CAPITAL GAINS TAX
Capital Gains tax is imposed at the rate of 20% on gains arising from the disposal of immovable property or the disposal of shares of companies the assets of which consist mainly on immovable property.
As a general rule, the gain is calculated as the difference between the sales proceeds and the original cost of the property. Interest on payments paid for the acquisition, additions to the property and inflation rate, as published yearly by the Government, are deducted form fees.
Capital gains tax as a whole has minimal effect, since the appreciation of values, coupled with the following allowances and inflation, tend to leave little excess.
Individuals who are the registered owners are entitled to the following lifetime allowances on Capital Gains Tax:
The above allowances are not available separately and an individual claiming a combination of the above allowances is only allowed a maximum lifetime allowance of € 85,430.10
Cyprus residents and companies registered in Cyprus are subject to Capital Gains Tax when disposing their property, wherever it is, in Cyprus or overseas. However, under certain conditions, Capital Gains Tax can be reduced significantly if the purchase of the immovable property is carried out through a Cyprus registered company.
The following categories of immovable property disposals are exempted from the Capital Gains Tax:
1. Transfers by reason of death
2. Gifts between relatives up to third degree of kindred
3. Gifts to limited liability companies when, at the time of transfer and for a period of five years following the transfer, all the shareholders of the company are members of the family of the donor
4. Gifts by family companies to their members, but only in cases where the property transferred, was obtained by the company as a gift
5. Exchanges of immovable properties
6. Compulsory acquisitions
7. Gifts to charitable institutions
8. Gifts to charitable institutions or the Republic of Cyprus
3. ESTATE DUTY
Estate Duty tax has been abolished as from the first of January 2000
4. IMMOVABLE PROPERTY LOCAL AUTHORITY RATES
The registered owner of immovable property is also subject to minor taxation under other laws, such as municipal or village regulations. These taxes are calculated according to the area and the size of the property and cover sewerage, refuse collection, street lights. The charges range in total from €80 to €200 per annum.
5. PERSONAL INCOME TAX
All Cyprus tax residents are taxed on all income accrued or derived from all sources in Cyprus and abroad. Individuals who are not tax residents of Cyprus are only taxed on income accrued or derived from sources in Cyprus. An individual is a tax resident in Cyprus if he/she spends in Cyprus more than 185 days in any one year. Days in and out of Cyprus of Cyprus are calculated as follows:
(a) The day of departure from Cyprus counts as a day of residence out of Cyprus.
(b) The day of arrival in Cyprus counts as a day of residence in Cyprus.
(c) Arrival and departure from Cyprus in the same day counts as one day of residence in Cyprus.
(d) Departure and arrival in Cyprus in the same day counts as one day of residence outside Cyprus.
The following income tax applies to individuals:
* €3,774.55 plus the incremental amount over €36,301 multiplied by 30%
Social insurance, provident fund, medical fund, pension fund contributions and life insurance premiums are deducted from income (only up to 1/6 of the chargeable income).
The pension for a person, who is resident in the Republic, paid for services which have been rendered abroad, is taxable at 5% on any amount exceeding €3,417.20 in a tax year.
The following income sources of pensioners are taxable at the normal tax rate:
1. Interest Income
2. Dividend Income
3. Profits from the disposal of securities 9Shares, debentures, government bonds)
4. Profits from a permanent establishment which is maintained abroad
5. The emoluments from salaried services performed abroad for an aggregate period in the tax year exceeding 90 days.
6. CORPORATION TAX
All companies tax resident of Cyprus are taxed on all their income accrued or derived from all sources in Cyprus and abroad. A non-Cyprus tax resident company is taxed on income accrued or derived from a business activity which is carried out through a permanent establishment in Cyprus.
A company is resident of Cyprus if it is managed and controlled in Cyprus.
Corporate Tax Rates:
For the years 2003 and 2004, any profits in excess of €1,708,601.44 are subject to an additional tax of 5%.
All expenses incurred wholly and exclusively in earning the income of the company are deducted.
7. DOUBLE TAXATION TREATIES
Double taxation treaties exist between Cyprus and a considerably large number of countries and more are under negotiation. These treaties may affect favorably the ownership of immovable property in Cyprus and also groups of people who decide to relocate to Cyprus, such as retired residents, employees and property investors.
Some of the countries with which Cyprus has entered into double taxation treaties are UK, Ireland, Greece, USA, Canada, France, Italy, Russia, Belarus, Romania, China, Austria, Belgium, South Africa, Yugoslavia and many others.
All articles on this website are general descriptions and their accuracy is not guaranteed.