Selling Your House in Cyprus: Key Tax Obligations for Sellers

When someone sells their house in Cyprus, there are several legal obligations and costs to anticipate. The most significant is often Capital Gains Tax (CGT), but there are also special levies, exemptions, and various deductions which can materially affect net proceeds. A seller who fails to account properly for these can underprice or over-commit financially. Here’s what to know.

What is Capital Gains Tax (CGT)

• Nature: CGT is a tax on the profit (“gain”) made when disposing of immovable property in Cyprus (or shares in a company whose assets are primarily immovable property in Cyprus).
• Rate: The standard rate for CGT is 20% on the taxable gain.
• Who pays: it is solely the seller’s (whether individual or legal entity) responsibility to pay CGT.

How the Gain is Calculated: What Gets Deducted

To arrive at the taxable gain, the following are relevant:

1. Acquisition Cost
   • What you paid to acquire the property. If the acquisition was before 1 January 1980, then the market value at that date is used.
2. Indexation / Inflation Adjustment
   • The acquisition cost (and in some cases costs of improvements) is adjusted for inflation using the Cyprus Consumer Price Index from acquisition (or 1 January 1980, if earlier) up to disposal. This helps reduce the taxable gain by reflecting that part of the increase is due to general inflation rather than “real” profit.
3. Improvement Costs
   • Costs for capital improvements (major renovations, additions, structural works) which are documented and formally acceptable are deductible. Maintenance works likely do not qualify.
4. Costs of Acquisition and Disposal
   • Legal fees, real estate agent commission, stamp duty or transfer fees paid when buying, and allowable professional fees when selling.
5. Other Deductions
   • Depending on the condition, possibly interest on loans linked to the purchase, provided sufficient documentation.
     Thus the taxable gain = (Sale Price) − (Adjusted Acquisition Cost + Improvements + Acquisition & Disposal Costs + Other Allowed Deductions) − Exemption (if applicable). Then 20% is applied to that taxable amount.

Exemptions, Allowances and Thresholds

There are important reliefs which can reduce or even eliminate a CGT liability in certain circumstances. Sellers should check carefully whether they qualify.

Exemptions and Allowances

Important notes:

• These allowances can only be used once in a lifetime each and cannot always be combined.
• The main residence must satisfy specific requirements regarding the duration of ownership and exclusive use.

Other Seller-Side Obligations / Costs

Besides CGT, a seller should be aware of these additional legal or statutory costs:

1. Levy for Housing Displaced by Turkish Invasion (“Property Disposal Levy” / Refugee-Housing Levy)
   • Since November 2022, there has been a 0.4% tax on sales of Cyprus properties (and sales of company shares owning such properties), payable by the seller.
2. Outstanding Debts and Expenses
   • Any unpaid mortgage, management or communal fees (for apartment blocks), utilities, taxes etc., must be cleared before or at transfer. The buyer generally expects no encumbrances.
3. Legal, Agent, Surveyor, Energy Certificate Costs
   • Fees for preparing required documentation: energy performance certificate, surveys, architectural or site plans, title deed searches, legal due diligence etc. These are part of transaction-preparation costs.
4. Land Registry and Transfer Duties for Buyer
   • These are mostly buyer’s costs, but a seller must ensure documentation is properly delivered, and any delays or missing paperwork can delay the sale or reduce net receipt. Sellers often work with lawyers to ensure all is in order.

Legal and Practical Considerations Before Setting the Sale Price

To avoid unpleasant surprises, a seller should run through the following checklist before determining what net amount they want to receive and what asking price makes sense.

1. Obtain all purchase documentation
   Including purchase contract, proof of improvements (receipts), legal fees, mortgage statements if relevant. Without these, deductions might not be accepted.
2. Check date of acquisition
   Properties acquired before 1980 have special rules: cost for calculation is often deemed as value as at 1 Jan 1980.
3. Review the use history of the property
   • Has it been your main residence? For how long?
   • Was the use continuous? Exclusive?
   • Is the land size within the 1.5 hectares limit?
     These influence eligibility for the larger main residence exemption.
4. Calculate possible exemptions
   Apply the general exemption first, then see if main residence or agricultural land exemptions apply. Sometimes only part of the gain may be exempt. It’s essential to compute both with and without exemptions to decide on asking price.
5. Estimate allowable deductions and indexation
   Audit what improvement or renovation expenses you can prove, what legal/agent/disposal costs you have. Also check the inflation indices for the period you held the property to adjust cost base.
6. Check any additional legal obligations / Levies
   • 0.4% levy on sale (refugee housing levy) – must be included.
   • Verify whether there are any local municipal or other charges.
7. Consult a tax professional or lawyer
   Given that laws change (For instance amendments, interpretations, recent revisions), it is wise to get up-to-date legal advice. Some exemptions depend on recent law (for example, the 2022 amendment N.197(I)/2022 is relevant).

Calculation Example

Here’s a hypothetical scenario to illustrate how one might compute the net gain and what CGT might be owed.

• Purchased house in 2010 for €200,000
• Costs of improvements over years (major renovation, approved permits etc.): €20,000
• Legal & agent fees when acquiring: €5,000
• Legal & agent costs for the sale: €5,000
• Inflation adjustment increases the acquisition cost base to, say, €230,000 after indexation. (These indices are published by the government.)
• Sale price in 2024: €350,000
  So:

1. Sale proceeds = €350,000
2. Deduct adjusted cost basis + improvements + acquisition costs etc. Suppose total cost side comes to €230,000 + €20,000 + €5,000 = €255,000
3. Gain before exemptions = €350,000 − €255,000 = €95,000
4. Apply lifetime exemption (if not used before) of €17,086: €95,000 − €17,086 = €77,914
5. If main residence exemption also applies (say qualifies for up to €85,430), then entire €95,000 might be below that threshold → possibly no CGT beyond general exemption. But if not fully qualifying, then maybe only part.
6. Assuming only the general exemption, CGT would be 20% of €77,914 = €15,582.80
7. Also add the 0.4% levy on the selling price (or another base as prescribed): 0.4% × €350,000 = €1,400
8. Subtract other selling costs to get net proceed.

Strategic Advice for Sellers

• Decide what net you need: Estimate all costs (CGT, levies, improvements, fees) before choosing your asking price. Factor them in so you don’t end up with less than you expect.
• Time matters: Holding a property longer may allow you to apply the main residence exemption; make sure periods of ownership and residence satisfy statutory requirements.
• Document thoroughly: Receipts, permits, invoices – for improvements and professional fees. Without proof, deductions may be denied.
• Consider the tax calendar and law changes: Tax laws are amended (e.g. N.197(I)/2022), so what was valid a few years ago might no longer hold. Ensure you rely on current statutes and you have the correct, adequate and up-to-date information. This is one of the reasons why consulting a lawyer is highly recommended.
• Negotiate on costs with professionals: Legal, real estate agents—sometimes their fees are negotiable; lower fees reduce disposal costs.
• Beware public levies and local charges: The 0.4% levy on property disposals is relatively new; ensure you include it in your calculations.
• Assess how big the land portion is: If the land exceeds allowed hectares, part of the gain may not be exempt. Also, if size is large, some limitations may apply.

Conclusion

Selling a house in Cyprus involves more than finding a buyer and agreeing a price. For the seller, the important obligations are: calculating the capital gains accurately (with indexation and allowable deductions), applying possible exemptions (general, main residence, agricultural), accounting for levies like the 0.4% disposal levy, ensuring all documentation is in order, clearing any outstanding taxes, utilities or charges. By understanding these obligations in advance, sellers can set an asking price that covers all costs, avoid unpleasant surprises, maintain good legal standing, and maximise their net proceeds. Before making the final decision to sell, it is strongly advisable to get up-to-date legal/tax advice (especially for high-value or complex properties), so the seller knows exactly where they stand.

Advice and Recommendations for Each Seller

• Consider how much money you will keep after selling and not just the asking price.
• After the five-year residence requirement, you might save an enormous amount of money on taxes if you wait.
• You will always be charged for the lost invoices, keep each document.
• The 2022 Tax Levy is an example of how invoices do change.
• Tax lawyers and property lawyers are able to provide you with shelter that you may not normally have.

Selling a property in Cyprus takes legal processes and is usually accompanied with financial profit. The real question becomes, “What is the real net profit”? Without knowing how to calculate the CGT tax, the seller cannot set the correct price and decide if the sale is a good idea. By knowing all the facts, the seller is able to control the situation by anticipating taxes, fees, and preparing the right documents. Sellers who have an elaborate plan to set the price to avoid risk are in control of their profit.

“Making informed decisions is the only correct way to do business”.