In Cyprus, the profits from the disposal or sale of immovable property is not taxable under the Income Tax Law, but based on the Capital Gains Tax Law. The term immovable property is not explicitly explained in the Law, but by using the interpretations given to it in other laws of Cyprus we can conclude that it includes:
(a) land
(b) buildings or other structures or works on land
(c) privileges, rights of use and any benefits relating to buildings or other structures or works on land
(d) springs, wells, boreholes, water and water rights, whether held together with the land or separately
(e) trees, vines and everything growing on the land.

The tax imposed on profits from the disposal of immovable property is 20%. The gain is defined as the sale price minus the cost of the purchased real property increased at the rate of inflation since acquisition and deductible expenses. By adjusting the acquisition price with the rate of inflation, as monthly reported by the Ministry of Finance of Cyprus, the taxable profit is reduced and the seller is not required to pay tax on that part of the profit generated by the general rise in prices. Other deductible expenses include:
(a) selling expenses (commissions, professional fees, advertising)
(b) additions, improvements, expansions on property
(c) interest on loans taken for purposes of acquiring and improving the property

The Cyprus Capital Gains Tax Law provisions offer a range of incentives to foreign investors. The most important are:
(a) no tax on profits from sale of shares and other securities/titles
(b) no tax on profits from disposal of immovable property situated outside the territory of the Republic.

For questions, comments and selection of topics that might interest you please contact the author of the column:

Charilaos Hadjiioannou, BSc, ACA