Capital Gains Tax (CGT)
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What is CGT
Capital Gains Tax (CGT) is generally charged at a flat 20% on gains from certain disposals where the disposal is not taxed as trading income under Income Tax (i.e., it’s a capital disposal rather than a trading activity).
In practice, CGT is most relevant in real estate transactions and share disposals involving Cyprus real estate exposure.
CGT is imposed at 20% on profit arising from:
- the disposal of immovable property situated in Cyprus; and
- the disposal of shares in companies that own Cyprus immovable property (directly - and, in certain cases, indirectly), subject to the CGT rules and relevant treaty considerations.
Historically, where a company indirectly owned Cyprus immovable property, CGT applied if at least 50% of the market value of the shares derived from Cyprus immovable property (this changes from 2026 - see below).
Listed shares (existing principle): CGT did not apply to shares listed on a recognised stock exchange (this is refined from 2026 - see below).
CGT is charged on net profit (gain), broadly calculated as:
Disposal proceeds
minus (acquisition cost / value basis + allowable expenses + indexation where applicable).
Common deductible items include:
- acquisition cost (or, for older properties, the statutory value basis),
- capital improvements/additions,
- selling costs incurred wholly and exclusively for the disposal (e.g., certain professional fees/commissions), and
- an inflation indexation adjustment (commonly applied in Cyprus CGT computations). Indexation applies only to capital elements and not to the full sale price.
Certain disposals are typically exempt from CGT, subject to conditions. The exemptions commonly referenced in Cyprus practice include:
- transfers on death (inheritance/succession);
- gifts between relatives up to 3rd degree, gifts between spouses, and certain family transfers;
- gifts to charities / the state / local authorities (and certain gifts to political parties);
- expropriations (compulsory acquisition);
- transfers in the context of qualifying company reorganisations (subject to conditions);
- specific exemptions for foster parent → foster child gifts were also legislated.
Cyprus provides lifetime CGT allowances (subject to conditions). Under the 2026 reform, the amounts increased to:
- Primary private residence: €150,000 (increased from €85,430).
- Agricultural land (by a farmer): €50,000 (increased from €25,629).
- Other disposals (general): €30,000 (increased from €17,086).
From 1 January 2026, Cyprus introduced important CGT changes aimed at closing avoidance routes and aligning definitions:
1) Property-rich shares threshold reduced (50% → 20%):
The “property rich” test was reduced from at least 50% to at least 20% of the shares’ market value deriving (indirectly) from Cyprus immovable property.
This means more share disposals can fall within CGT where there is Cyprus real estate exposure.
2) Listed shares: regulated vs unregulated markets:
The reform refines the listed-share exemption:
- Regulated market shares of a recognised stock exchange: gains are not taxed (CGT exemption).
- Unregulated market shares: exemption applies only up to a €50,000 annual disposal value threshold; above that, CGT applies to the excess (with grandfathering for holdings as at 31 December 2025).
3) Basis for calculating CGT on shares (mechanics refined):
Where shares are disposed and their value is essentially represented by Cyprus immovable property, the reform introduces a refined approach for determining the consideration/basis for CGT purposes (intended to align share disposals more closely with direct property disposals).
4) Land exchange / “land for apartment / land for development” exemption introduced:
A specific exemption is introduced for qualifying land exchange arrangements (subject to conditions).
Our CGT practice portfolio
We advise on CGT scope and structuring (asset vs share deals), confirm availability of exemptions/allowances, prepare computations, and coordinate filings - especially where property is held through corporate structures or part of a wider reorganisation.
FAQs for Capital Gains Tax (CGT)
CGT generally applies at 20% on gains from disposal of Cyprus immovable property and certain disposals of shares in companies that derive value from Cyprus immovable property (subject to definitions and exclusions).
Not always. CGT applies where the gain is capital in nature and not taxed as trading income, and exemptions/allowances may reduce or eliminate tax.
Broadly, CGT is computed on net gain: sale proceeds minus acquisition base (cost/value basis), qualifying improvement costs, and certain disposal expenses (with Cyprus computation mechanics applied).
Cyprus provides lifetime personal allowances (e.g., for main residence and other disposals). These were increased under the 2026 reform.
The reform reduced the property-rich threshold test from 50% to 20%, expanding when a share disposal may be treated as CGT-relevant due to Cyprus real estate exposure.
The reform refines how listed shares are treated (regulated vs unregulated markets) in determining CGT exposure in specific cases.