Capital Gains Tax in Cyprus
Introduction
Capital Gains Tax (CGT) in Cyprus is governed by the Capital Gains Tax Law of 1980 (Law 52/1980), as amended (the “CGTL”). The tax applies to gains arising from the disposal of immovable property situated in Cyprus, or from the disposal of shares in companies that directly or indirectly hold such property. As part of the comprehensive 2026 Tax Reform Package enacted on 31 December 2025, the CGTL has undergone significant amendments affecting definitions, exemption thresholds, the treatment of listed shares, and penalty provisions. This article provides a comprehensive overview of the CGT regime in its current, post-reform state.
1. Scope and Tax Rate
CGT is levied at a flat rate of 20% on gains arising from the disposal of “property” as defined in the CGTL. The tax applies to both individuals and companies. The concept of “property” for CGT purposes encompasses:
- Immovable property situated in Cyprus (land, buildings, and rights thereon)
- Shares in property-rich companies — companies that directly or indirectly hold shares in entities owning immovable property in Cyprus, where the immovable property value represents at least a specified percentage of total assets
2. Definition of Immovable Property
↑ Amended 2026 The CGTL now derives its definition of “immovable property” from the Immovable Property (Tenure, Registration and Valuation) Law. This alignment ensures consistency of definitions across all relevant tax legislation and eliminates prior ambiguities regarding the scope of property subject to CGT.
Previous Provisions
Prior to the 2026 reform, the CGTL contained its own standalone definition of immovable property. The new approach aligns the CGT definition with that used by the Land Registry and other property-related legislation.
3. Property-Rich Companies
↑ Amended 2026 A company is classified as “property-rich” — and thus its shares fall within the scope of CGT — when the market value of Cyprus-situated immovable property held directly or indirectly represents at least 20% of the total market value of the company’s shares.
| Parameter | Until 2025 | From 2026 |
|---|---|---|
| Immovable property threshold (% of total assets) | 50% | 20% |
Impact Note: The reduction from 50% to 20% significantly widens the net of companies whose share disposals may trigger CGT. Companies that previously fell outside the property-rich definition — for example, those holding a diversified mix of property and other assets — may now be caught. Note, however, that for foreign investors, the impact of applicable double tax treaties must also be assessed, as the vast majority of Cyprus treaties either do not have a property-rich clause or retain the 50% threshold.
Basis for Calculation of CGT on Property-Rich Shares
↑ Amended 2026 When shares of a property-rich company are sold, the disposal consideration for CGT purposes is the consideration declared by the contracting parties, adjusted with the fair market values of any other (non-property) assets held by the company. This approach brings the disposal of shares in property-rich companies onto a similar footing as direct disposals of immovable property.
The CGTL now also codifies an existing practice: when establishing the base cost for shares in companies directly holding Cyprus immovable property, any CGT already incurred on a prior sale of such property is taken into account, thereby preventing double taxation.
4. Meaning of Disposal
The CGTL defines “disposal” broadly. It includes:
- Sales (including Land Registry public auctions)
- Sales agreements and assignment of rights from such agreements
- Exchanges of immovable property
- Leases registered with the Land Registry
- Gifts and donations
- Any other form of property transfer
5. Calculation of Capital Gain
The capital gain subject to CGT is calculated as follows:
| CGT Calculation Formula | |
|---|---|
| Disposal proceeds | Amount declared by both parties to the transaction |
| Less: Original cost / 1.1.1980 value | The higher of actual cost or the value as at 1 January 1980, as determined by the Land Registry |
| Less: Inflation adjustment | Indexation allowance based on the official consumer price index from 1.1.1980 to the date of disposal |
| Less: Allowable expenditure | Improvements, additions and capital expenditure incurred after acquisition |
| = Taxable capital gain | CGT at 20% |
Practical Example: An individual acquired a property in 1995 for €100,000. The 1.1.1980 indexed value is €60,000, and the inflation adjustment to 2026 amounts to €35,000. The property is sold in 2026 for €300,000. Capital gain = €300,000 − (€100,000 + €35,000) = €165,000. CGT payable = €165,000 × 20% = €33,000 (before lifetime exemptions).
Special Cost Basis Rules
- Properties held before 1.1.1980: The base cost is the value as at 1 January 1980, as assessed by the Land Registry, adjusted for inflation.
- Subdivided properties: The original 1.1.1980 value is allocated proportionally among the subdivided parcels.
- Post-1980 improvements: Capital additions and improvements made after 1.1.1980 are added to the cost base, with their own inflation adjustment calculated from the date of expenditure.
The Tax Commissioner retains the right to challenge the declared disposal proceeds within 6 months of the filing date if the declared amount appears understated. The Commissioner may assess CGT on the actual consideration if the declaration is found to be false.
6. Capital Losses
Capital losses are computed using the same methodology as capital gains. Key rules:
- Losses may be offset against capital gains arising from other property disposals in the same or future years.
- There is no time limit for carrying forward capital losses — they can be carried forward indefinitely until fully utilised.
- Capital losses may not be set off against income taxable under the Income Tax Law.
7. Lifetime Exemptions
↑ Increased 2026 Natural persons (individuals) are entitled to the following lifetime exemptions from CGT. These are cumulative amounts — once used, they reduce the remaining available exemption for future disposals.
| Lifetime Exemption Category | Until 2025 | From 2026 | Change |
|---|---|---|---|
| General exemption (any property disposal) | €17,086 | €30,000 | +76% |
| Agricultural land (farmer’s main occupation) | €25,629 | €50,000 | +95% |
| Disposal of primary residence | €85,430 | €150,000 | +76% |
Impact Note: The upward revision of lifetime exemptions reflects current market realities. For instance, an individual selling their primary residence with a capital gain of up to €150,000 will pay no CGT — nearly double the previous exempt amount. The unused portion of the exemption carries forward indefinitely for use against future disposals.
Previous Provisions
Until 2025, lifetime exemptions were denominated in amounts that had remained unchanged since the conversion from Cyprus pounds to euro and had not been updated for inflation for many years (€17,086 general / €25,629 agricultural / €85,430 primary residence).
8. CGT on Shares of Listed Companies
↑ Amended 2026 The 2026 reform introduces a clear distinction between shares listed on regulated versus unregulated markets of recognised stock exchanges.
8.1 Shares on a Regulated Market
Capital gains from the disposal of shares listed on a regulated market (as defined in the Investment Services and Activities and Regulated Markets Law) of a recognised stock exchange are fully exempt from CGT, without any threshold or conditions.
8.2 Shares on an Unregulated Market
Capital gains from the disposal of shares listed on an unregulated market of a recognised stock exchange are exempt from CGT provided that the total value of all such disposals in a calendar year does not exceed €50,000.
- If the total value of disposals exceeds €50,000 in a calendar year, CGT at 20% is applied on the amounts exceeding the threshold, at the time the threshold is exceeded.
- Transitional rule: Gains on the sale of shares that were listed on an unregulated market and were held as at 31 December 2025 are exempt from CGT regardless of the disposal value.
Previous Provisions
Until 2025, the CGT exemption applied broadly to shares listed on any recognised stock exchange without distinguishing between regulated and unregulated markets. The 2026 reform narrows the unconditional exemption to regulated markets only, while imposing a €50,000 annual threshold for unregulated market transactions.
Practical Impact: This amendment may reduce the appeal of the unregulated market of the Cyprus Stock Exchange for new listings, as share disposals above €50,000 per year will now attract CGT. The transitional rule protects existing holders of unregulated-market shares acquired before the reform.
9. Specific Exemptions from CGT
In addition to the lifetime exemptions above, the CGTL provides specific exemptions from CGT for certain categories of disposals:
9.1 Primary Residence — Debt Restructuring
↑ Increased 2026 Gains from the disposal of a primary residence within the context of debt restructuring transactions (such as debt-for-asset swaps) are exempt from CGT where the disposal consideration does not exceed €450,000.
| Parameter | Until 2025 | From 2026 |
|---|---|---|
| Maximum consideration for exemption | €350,000 | €450,000 |
The CGTL now also provides definitions for the terms “debt restructuring”, “borrower” and “lender” for the purposes of this exemption.
9.2 Land for Apartment / Land for Development Exchanges
New 2026 The CGTL now introduces an exemption from CGT for exchanges of land for apartments or land for development, subject to the following conditions:
- The exchange must be made with a “land developer” as defined in the Streets and Buildings Regulation Law (CAP.96).
- The relevant development must be completed within 5 years from the date the agreement is entered into.
Practical Impact: This is a welcome amendment addressing a common transaction type in Cyprus. It has become increasingly popular for landowners to exchange their land for apartments or developed land rather than selling outright. Until this reform, such exchanges triggered CGT, making them tax-inefficient compared to outright sales followed by repurchase.
9.3 Mortgaged Property
↑ Extended 2026 The existing exemptions for disposals of mortgaged property (Article 4(a)(v) of the CGTL) have been extended to 31 December 2030.
9.4 Corporate Reorganisations
Gains from disposals of property in the context of qualifying corporate reorganisation transactions (mergers, divisions, transfers of activities, and share exchanges) remain exempt from CGT, provided the conditions of Article 5A of the CGTL are met.
10. Filing Requirements and Deadlines
The disposal of property triggers the following obligations:
| Obligation | Details |
|---|---|
| Filing deadline | Within 1 month of the date of disposal, and before the property transfer is registered at the Land Registry |
| Payment of CGT | Must accompany the filing — the computed tax is payable at the time of declaration |
| Lease payments | Pro-rata monthly payments of CGT for leases registered at the Land Registry |
| Commissioner’s review | The Tax Commissioner may challenge the declared proceeds within 6 months of the filing |
| Supplementary assessment | May be issued within 3 months of the self-assessment if the assessed tax is deemed insufficient |
| Document retention | 6 years from the submission deadline of the return (per the reformed ACTL) |
11. Penalties for Non-Compliance
↑ Amended 2026 The 2026 reform introduces a revised penalty framework for non-compliance with CGT obligations.
Fixed Penalties
| Offence | Penalty |
|---|---|
| Failure to file / late filing | €250 – €2,000 |
| Failure to provide information when requested | €250 – €2,000 |
Percentage-Based Penalties (Late Payment)
| Timing | Penalty |
|---|---|
| Initial late payment | 5% of outstanding tax |
| Payment delayed by more than 2 months | Additional 5% (total 10%) |
| Continued non-compliance after written notice | Commissioner may increase penalties further |
Previous Provisions
Until 2025, penalties for non-compliance were denominated in Cyprus pounds (up to £500) and had not been materially updated. The 2026 reform replaces these with a more structured and proportionate penalty framework.
Criminal Offences
Intentional tax evasion remains a criminal offence under the CGTL. This includes making false declarations, providing false answers during enquiries, falsifying records, concealing information, and assisting others in evading CGT.
12. Interest on Unpaid Tax and Refunds
| Scenario | Rate | Period |
|---|---|---|
| Interest on unpaid CGT | Simple interest at the Unified Public Interest Rate (UPIR) | From 1 month after disposal until payment |
| Interest on overpaid CGT (refunds) | Simple interest at 9% per annum | From 1 month after payment date until refund |
13. Summary of Key 2026 Changes
| Area | Pre-Reform (Until 2025) | Post-Reform (From 2026) |
|---|---|---|
| Immovable property definition | Standalone CGT definition | Aligned to Immovable Property (Tenure, Registration and Valuation) Law |
| Property-rich company threshold | 50% of total assets | 20% of total assets |
| Lifetime exemption — General | €17,086 | €30,000 |
| Lifetime exemption — Agricultural land | €25,629 | €50,000 |
| Lifetime exemption — Primary residence | €85,430 | €150,000 |
| Shares — Regulated market | All listed shares exempt | Exempt (regulated market only) |
| Shares — Unregulated market | All listed shares exempt | Exempt up to €50,000/year; taxed above |
| Shares held pre-31/12/2025 (unregulated) | N/A | Exempt regardless of value (transitional) |
| Land-for-apartment exchanges | No specific exemption | Exempt (with land developer, 5-year completion) |
| Primary residence — Debt restructuring | Exempt up to €350,000 | Exempt up to €450,000 |
| Mortgaged property exemption | Temporary provision | Extended to 31 December 2030 |
| Penalties — Fixed | Up to £500 (unconverted) | €250 – €2,000 |
| Penalties — Late payment | Interest-based only | 5% + additional 5% after 2 months |
Disclaimer
Please note that the information provided here is for general guidance only and does not constitute professional tax advice. Tax laws and interpretations are subject to change, and individual circumstances can significantly affect tax obligations and benefits.
Contact Us
For personalized tax advice tailored to your specific situation, we strongly recommend consulting with a qualified tax professional. Our team is equipped with the expertise to navigate the intricacies of Cyprus tax law and provide you with customized solutions. Contact us to ensure that you are making the most informed decisions for your tax-related matters.
Stay In Touch