Capital Gains Tax in Cyprus
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Overview · Property-Rich Companies · Lifetime Exemptions · Listed & Unlisted Shares · Calculation of Gain · Debt Restructuring · Exempt Disposals · Anti-Avoidance · CGT Losses · What Is a Disposal · Penalties
1. Overview and Scope
Capital Gains Tax (CGT) under Law 52/1980 applies to gains derived from the disposal of property. As a distinct tax from income tax, CGT is levied on gains that do not constitute trading profits under the Income Tax Law.
CGT operates as a flat-rate tax of 20% on the chargeable gains from qualifying property disposals (Article 4). The scope of CGT is defined by the concept of “property,” which encompasses:
Property includes:
- Immovable property situated in Cyprus
- Shares in companies whose property includes immovable property in Cyprus
- Shares in companies that directly or indirectly participate in companies holding Cyprus immovable property, where at least 20% of the value of the shares derives from Cyprus immovable property
- Sale agreements for Cyprus property
2. Property-Rich Company Rules
One of the most significant changes to CGT law in 2026 is the reduction of the property-rich company threshold. Companies holding Cyprus immovable property are now subject to CGT scrutiny if a certain percentage of their share value derives from such property.
Previous Provisions
Until 2025: Shares in property-rich companies were subject to CGT only if 50% or more of the company’s property value comprised Cyprus immovable property. From 2026: The threshold has been significantly reduced to 20%.
New from 2026 The threshold is now 20%. This means that shares in any company where 20% or more of the share value derives from Cyprus immovable property will be subject to CGT upon disposal.
Important: When calculating the 20% threshold, liabilities are NOT expected to be taken into account — only assets are considered. This applies to both direct shareholdings and indirect holdings through multiple corporate layers. Therefore, property-rich company status is determined by the relationship between Cyprus immovable property asset value and total asset value only. Note: the tax authorities have not yet formally clarified the detailed mechanics for calculating the relevant percentage — taxpayers should monitor for official guidance.
CGT Basis for Property-Rich Share Disposals: 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-immovable property) assets held by the company. This ensures the CGT calculation isolates the immovable property component from other business assets.
Double Tax Treaty Considerations: Foreign investors disposing of shares in Cyprus property-rich companies should assess the impact of any applicable Double Tax Treaty (DTT). The vast majority of Cyprus DTTs either do not contain a property-rich clause or establish the relevant percentage threshold at the pre-existing 50% level. Where a DTT applies, the treaty provisions may override the new domestic 20% threshold, potentially providing protection for foreign investors.
3. Lifetime Exemptions
Cyprus law provides significant lifetime exemptions from CGT for certain categories of property, with substantially increased thresholds from 2026 onwards.
| Exemption Category | Amount (From 2026) |
|---|---|
| General lifetime exemption | €30,000 |
| Agricultural land (farmer as primary occupation) | €50,000 |
| Primary residence (5+ years occupation, up to 1.5 decares) | €150,000 |
Previous Provisions
Until 2025: General exemption €17,086 | Agricultural land €25,629 | Primary residence €85,430. These thresholds increased substantially from 1 January 2026.
Primary Residence Exemption – Conditions
The primary residence exemption is subject to strict conditions:
Key conditions:
- The property must be used exclusively for your own habitation for at least 5 consecutive years immediately preceding disposal
- Land area is limited to 1.5 decares (1 decare = 1,000 sq meters)
- If the gain exceeds €150,000, CGT at 20% applies only on the excess amount
- If the land exceeds 1.5 decares, the proportionate gain on the excess land is subject to CGT
- For a second or subsequent primary residence disposal, the occupation requirement is 10 years (not 5 years)
- Property must be disposed within 1 year of ceasing to use it as your primary residence — otherwise the exemption is lost
- A person cannot claim both the general lifetime exemption AND the primary residence exemption — only the higher amount applies
4. Listed and Unlisted Shares
Shares are treated differently for CGT purposes depending on whether they are listed on a regulated or unregulated market. The 2026 amendments introduced significant changes to these rules.
Regulated Market Shares
New from 2026 Shares traded on a regulated market (such as the Cyprus Stock Exchange – CSE) are fully exempt from CGT, regardless of the disposal value or holding period (Article 5(3)).
Previous Provisions
Until 2025: The exemption applied to shares listed on a “recognised” stock exchange. From 2026: The terminology has changed to “regulated” market, which is defined by reference to the Investment Services and Activities and Regulated Markets Law. However, grandfathering rules apply: shares listed on a recognised stock exchange that were acquired before 1 January 2026 remain exempt from CGT upon disposal, even if the relevant market does not qualify as a “regulated” market under the new definition.
Unregulated Market Shares
Shares traded on unregulated or non-regulated markets (or not traded on any regulated market) are subject to the following rules:
Unregulated shares exemption: If the total value of disposals of unregulated shares in the same calendar year does not exceed €50,000, CGT does not apply. However, if total disposals in a calendar year exceed €50,000, CGT applies on the amounts exceeding the €50,000 threshold at the time the threshold is breached.
Previous Provisions
Until 2025: Different rules applied to unregulated shares. From 2026: The €50,000 annual exemption threshold is now the primary measure.
Transitional Relief
New from 2026 Shares held at 31 December 2025 that were listed on an unregulated market at that date are fully exempt from CGT upon disposal, regardless of the disposal value or date of sale. This provides protection for shareholders who held shares in unregulated markets before the reforms.
5. Calculation of Gain
The CGT gain is calculated as the difference between the disposal proceeds and deductible costs:
CGT Gain = Disposal Proceeds – Deductible Costs
Deductible Costs
Deductible costs include the base value of the property adjusted for inflation:
- For property acquired before 1 January 1980: The official government valuation of the property at 1 January 1980, plus an inflation adjustment calculated using the Retail Price Index (RPI) published by the Statistical Service
- For property acquired after 1 January 1980: The acquisition cost plus inflation adjustment from the date of acquisition to disposal
- For shares: The deductible cost is the highest of: (a) the immovable property value at 1 January 1980, (b) the acquisition cost of the shares, or (c) the market value of the underlying property at the date the shares were acquired
Related Party Transactions: If property is disposed to a related party at a price below market value, the Commissioner of Tax may determine that the disposal price shall be the market value for CGT purposes. This anti-avoidance provision ensures that gains cannot be artificially reduced through below-market sales within families or controlled entities.
6. Debt Restructuring Exemption
Cyprus law provides relief from CGT for primary residence disposals that result from debt restructuring or personal insolvency proceedings. This provision was designed to assist borrowers whose property is sold to settle problematic loans.
Exemption applies when: A primary residence is disposed as part of a debt restructuring with the lender, a court-approved settlement, bankruptcy proceedings, or under the Personal Insolvency Scheme, provided the disposal proceeds do not exceed €450,000.
Previous Provisions
Until 2025: The debt restructuring exemption threshold was €350,000. From 2026: Increased to €450,000 to reflect changes in property values and borrower circumstances.
Key conditions:
- The exemption applies only to primary residence disposals
- The threshold applies to the entire disposal proceeds — if proceeds exceed €450,000, the exemption is lost
- If any part of the proceeds is returned to the borrower (not applied to the debt), CGT becomes payable on that returned amount
- The debt must be classified as non-performing at 31 December 2015 (or 31 December 2020 for primary residence restructuring)
- The exemption applies only until 31 December 2030
Warning: The debt restructuring exemption is subject to strict anti-avoidance provisions. If the Commissioner determines that the restructuring or settlement was not genuine or was designed purely to avoid CGT, the exemption may be reassessed.
7. Exempt Disposals
Certain disposals of property are not treated as disposals for CGT purposes and therefore no CGT is due, even if a gain is realized. These exempt disposals include:
| Category of Exempt Disposal | Description |
|---|---|
| Transfer on death | Property passing to heirs by will or intestacy; the beneficiary’s cost basis is the original cost or 1980 valuation |
| Gifts between family members | Gifts between parent and child, spouse, or relatives up to third degree of kinship |
| Foster child gifts | Gifts from foster parent to foster child (recognized by law) |
| Donations to state entities | Donations to the Republic of Cyprus, local authorities, or approved charitable institutions |
| Agricultural consolidation | Land exchanges under agricultural land consolidation laws |
| Corporate reorganizations | Property transfers in mergers, divisions, or share exchanges meeting statutory conditions |
| Divorce transfers | Property transfers between ex-spouses pursuant to a court-approved divorce settlement order |
| Family company gifts | Gifts to family-owned limited companies (members must remain family-related for 5 years after gift) |
| Land exchange with developer | New from 2026 Where a landowner gives part of their land to a developer in exchange for building units, provided completion occurs within 5 years; if not completed within 5 years, CGT applies at the 5-year anniversary |
Important: Exempt disposals do not trigger CGT liability for the donor or seller. However, the recipient typically acquires the property at the original cost basis (or 1980 valuation for transfers on death), which may create a future CGT liability if that property is subsequently sold at a gain. Careful tax planning is advisable for significant transfers between family members.
8. Anti-Avoidance Provisions
CGT law includes anti-avoidance measures to prevent tax planning strategies that misuse or artificially apply the exemptions and reliefs available:
- Debt restructuring re-assessment: The Commissioner may re-assess CGT if a restructuring exemption was wrongly applied due to non-genuine or fictitious transactions. The burden is on the taxpayer to demonstrate that the restructuring was legitimate and arm’s length.
- Related party enforcement: Related party transactions must be conducted at market value. If not, the Commissioner can impose market value for CGT calculation purposes.
- Multiple exemption restriction: A person cannot claim both the general lifetime exemption (€30,000) and the primary residence exemption (€150,000) on the same gain — only the higher exemption applies.
- Substance over form: The Commissioner may challenge transactions structured to avoid CGT if they lack economic substance or represent artificial arrangements.
9. CGT Losses
CGT losses arise when the disposal proceeds from the sale of property are less than the deductible costs. These losses provide significant tax relief:
Loss carry-forward: CGT losses can be carried forward indefinitely with no time limit and offset against future CGT gains. This is a significant advantage compared to income tax losses, which can only be carried forward for 7 years.
CGT losses are calculated in the same manner as gains (using the same cost basis and inflation adjustments) and are recorded in tax filings. If an individual or company has excess losses in any year, those losses are available to reduce CGT liability in future years when gains are realized.
Note: CGT losses cannot be offset against income tax liability and income tax losses cannot be offset against CGT. The two taxes operate independently, though both relate to disposals of property.
10. What Constitutes a Disposal
For CGT purposes, a “disposal” is broadly defined to capture most transactions that result in a change of ownership or relinquishment of property rights:
Disposals include:
- Sale of property for cash or other consideration
- Exchange of property for other property or assets
- Grant of a registered lease over property
- Gift of property (even without consideration)
- Abandonment of property rights
- Grant of a purchase option, exchange option, or lease option
- Receipt of a cancellation payment for the right to acquire or lease property
NOT treated as disposals:
- Transfer of property on death (as noted above)
- Qualifying gifts to family members, charitable organizations, or state entities
- Property transfers in qualifying corporate reorganizations, mergers, or divisions
- Transfers pursuant to court-approved divorce settlements
Practical Note: The definition of disposal is intentionally broad. If you have any doubt about whether a transaction constitutes a disposal, consult with a tax professional. Even informal arrangements can trigger CGT if they meet the definition.
11. Penalties
The 2026 amendments updated the CGT penalties regime for taxpayers who fail to meet their obligations:
- Fixed penalties: Ranging from €250 to €2,000 for failure to meet certain CGT obligations (e.g. filing, notification requirements)
- Late payment surcharges: 5% of the outstanding CGT amount, plus an additional 5% if payment remains outstanding for more than two months after the due date
- Escalation: The Commissioner of Taxation reserves the right to increase penalties for persistent non-compliance after a written notice has been issued to the taxpayer
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.
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