Capital Gains Tax (CGT) in Cyprus – update on VAT

Capital Gains Tax (CGT) in Cyprus – update on VAT

The Contract for Sale will refer to a figure for selling you the property.  It will give a figure and there will be a clause in the contract saying that VAT is payable at the rate of 15% of this figure.  The Contract and Invoice are seperate instances with the Invoice arising from fulfilment under the Contract.  The Invoice will act as a Tax Point and the VAT is accounted for seperately as an addition to the contractual sale price.

So the VAT included purchase price cannot be counted as the total price against CGT.

IPT would be on the price paid in the Contract for Sale exclusive of VAT and in any event it is based on a 1980 valuation when VAT did not exist.  But until you have your Title Deeds, Developers will no doubt charge you on the Gross figure in accordance with The Great Cyprus Immovable Property Tax Scam where they are charged IPT on their whole land portfolio and they charge it out to you based on the sale price they sold to you at. 

Property Transfer Tax.  According to EU Legislation you should not be charged a tax on a tax but as they say “this is Cyprus” and it is not clear at the present time how this will be charged.  Bearing in mind that VAT is not charged on resales, my view is that the lower figure, ex VAT, and in line with EU rules.

Both in the UK and Cyprus you can only set off for CGT purposes the interest paid on a loan used to purchase the property where that loan is secured on on the property in question.  If you re-mortgage then the interest only relates to the property that secures the mortgage.

As far as I am aware there are no provisions in Cyprus or the UK  for mortgage interest to be allowed against income tax.

If you want to estimate your own CGT and calculate the indexation allowance use this link to download the CPI figures.  Remember that it is year to year cumulative. Use the non harmonised figures.

http://www.mof.gov.cy/mof/cYSTat/STATIsTics.NSF/prices_inflation_en/prices_inflation_en?OpenDocument

Allowances for CGT are set out here.

VAT on Land Sales in Cyprus

This begins in 2008 and it is still not clear whether VAT will be charged only on the sale of development or designated building plots rather than plots of agricultural land.

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