About Cyprus

INCOME TAX FOR INDIVIDUALS IN CYPRUS

All Cyprus tax resident individuals are taxed on all chargeable income accrued or derived from all sources in Cyprus and abroad. Individuals who are not tax residents of Cyprus are taxed on certain income accrued or derived from sources in Cyprus. An individual is tax resident in Cyprus if he spends in Cyprus more than 183 days in any one calendar year. Days in and out of Cyprus are calculated as follows:

The day of departure from Cyprus counts as a day of residence outside Cyprus - Departure and arrival in Cyprus in the same day counts as one day of residence outside Cyprus
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The day of arrival in Cyprus counts as a day of residence in Cyprus - Arrival and departure from Cyprus in the same day counts as one day of residence in Cyprus

Foreign taxes paid can be credited against the personal income tax liability.

Personal tax rates
Foreign pension income is taxed at the flat rate of 5%. An annual exemption of €3.420 is granted. The taxpayer can however elect to be taxed at the normal tax rates and bands set out above. This is a choice which may be made year-on-year.

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CAPITAL GAINS TAX IN CYPRUS

Capital Gains Tax in Cyprus is imposed on gains from disposal of immovable property situated in the Republic including shares of companies not listed on a recognised Stock Exchange which own immovable property situated in the Republic at the rate of 20%.

In calculating the capital gain, the value of the immovable property as at 1 January 1980 (or cost if the date of acquisition is later), the cost of any additions after 1 January 1980 or the date of acquisition if later, any expenditure incurred for the production of the gain and the indexation allowance, are deducted from the sale proceeds.

The following expenses are not considered expenses wholly and exclusively for the production of the profit and therefore are not deductible:
a) Immovable Property Tax
b) Immovable Property Fees
c) Sewerage Council Fees

Exemptions
The following disposals of immovable property are exempt from capital gains tax:
• transfer on death
• gifts between spouses, parents and children and relatives up to third degree
• gift to a company whose shareholders are members of the donor’s family and continue to be members of the family for a period of five years from the date of the gift
• gift by a family company to its shareholders, if the company had also acquired the property in question via donation. However if the shareholder disposes the property within 3 years then the shareholder will not be entitled to the deductions listed below
• gifts to a charitable organisation or the Republic
• exchange or disposal under the Agricultural Land(Consolidation) Laws
• exchange provided the gain is used for the acquisition of new property. The gain derived from the exchange reduces the cost of the new property and the tax is paid when the latter is disposed
• expropriations
• transfer of ownership or share transfers in the event of company reorganisations
• transfer of property of a missing person under administration
• transfer of ownership between spouses that their marriage has been dissolved by a court order or in case of transfer of ownership between the same persons for the purpose of settling their property according to the Settlement of Property Relationships between Spouses Law.

Deductions
Individuals are entitled to deduct from the gains the following:
                                                                       
Disposal of principal private residence             €85.430
(subject to conditions)
Disposal of agricultural land by a farmer           €25.629
Other disposals                                                  €17.086
The above are lifetime deductions.

Administrative penalties
Administrative penalties amounting to €100 or €200 depending on the specific case, will be imposed for late submission of declarations or late submission of supporting documentation requested by the Commissioner. In the case of late payment of the tax due, an additional penalty at the rate of 5% will be imposed on the unpaid tax.