Gain Tax and Cost of purchase
COSTS OF SALE:
- Gain Tax if applicable – further explanations below:
This is imposed on the difference between purchase price of the property and sale price of the property and you will be given exemption for the amount of 17.086,01 EUR to be deducted from the gain amount for every of the owners in case that the property was bought jointly. Under the law, the chargeable gain is adjusted for inflation. To calculate the inflation adjustment, the Consumer Price Index is used for the month preceding the disposal of the asset and the month of its acquisition.
Further allowances are granted for "Allowable Expenses"
- Property transfer fees
- Estate agent`s commission (if the estate agent is licensed by association)
- Accepted capital additions and improvements - planning permission where necessary.
Indexation can be applied to the above expenses as well as the initial purchase price and must be submitted with invoices and receipts for the costs incurred.
Additional allowable expenses are also granted for:
- Interest on loans used to buy the Property, assuming that the interest payments have not been used to offset other tax liabilities; e.g. Income Tax.
These expenses cannot be indexed.
Note that the €17,086 is a personal allowance. So if the property is owned in joint names, e.g. husband & wife, each owner is entitled to the exemption of €17,086.
Reducing your capital gains tax liability There are legal ways of reducing your Capital Gains Tax liability:
- Capital losses may be used to offset the gain.
- If you are selling your property partly or fully furnished, come to an arrangement with your buyer whereby they purchase any furniture, etc. using a separate agreement. This will reduce your Capital Gains Tax liability as the items included in the agreement should not be liable for Capital Gains Tax.
-Capital gains: No capital gains tax from the sale of property purchased from the 25th of July 2015 until the 31st of December 2016 irrespective of when you decide to sell the property.
- Any outstanding utility and local Tax, communal fees to be paid up to date
- Agent fees (5% of the sale price + VAT),
- Legal fees (1% of the sale price + VAT, minimum 1.000 EUR + VAT)
- Bank charges to proceed funds and transfer abroad
COSTS TO PURCHASE:
- STAMP DUTY
- For Contracts with a value of €1 up to €5.000 there is no stamp duty payable.
- For Contracts with a value between €5.000 up to €170.000 the stamp duty payable is of €1,50 for every €1.000.
- For Contracts with a value over €170.000 the stamp duty payable is €2,00 for every €1.000 with a maximum stamp duty of €20.000.
- LAND REGISTRY FEES – Power of Attorney deposit (50 EUR), contract deposit (50 EUR), etc.
- LAND REGISTRY TRANSFER FEES
Transfer fees is a progressive tax paid by property purchasers to the land registry when the title deed of the property is transferred to their name. For newly built properties, if VAT is paid on the property, no Property Transfer Fees are payable.
Purchase price bands (€) Percentage rate (%)
Up to 85,000 3
Above 85,000 Up to 170,000 5
Above 170,000 + 8
Currently there is a 50% discount on transfer fees payable.
(Please note that the Land Registry will value the property at the time we will appear for transfer and the transfer fees may be more)
VAT payable on the property:
Regarding property units, where an application for a town permit is filed before the 1st of May 2004, VAT will not be charged.
Since the accession of Cyprus in the E.U., the VAT which is now calculated on the rate of 19% must be paid when a purchaser is buying a land or a house.
However, purchasers who are purchasing a house are entitled to reduced rate of 5% VAT according to the law if:
-The application for the planning permission has been deposited in the appropriate authority after the 1/5/2004.
-The purchaser uses the purchased property as his principal and permanent residence in the Republic and he had not acquired any other residence in the Republic.
-Reduced percentage of 5% will be imposed for the first 200 square meters ONLY.
Total Area: means the summation of the area of the cover spaces of the property including engine room storage areas and parking covered spaces and covered verandas.
- Transfer fees:
The transaction is concluded with the transfer of ownership by a simple process of registration at the Land Registry Office as soon as separate title deeds for the property sold are issued by the Land Registry Office reflecting the property erected on the land. At this stage the buyer is responsible for the transfer fees.
- Purchasers who are eligible for VAT on their property purchase will be absolved of all transfer fees.
Purchasers, who are not required to pay VAT on any immovable property, will receive a reduction of 50% on their transfer fees
- LEGAL FEES (1% of the sale price + VAT, minimum 1.000 EUR + VAT)
- DEPOSITS needed for utilities connection, communal funds (if applicable)
- BANK CHARGES to proceed funds and transfer from abroad