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capital gains tax exemptions??inflation allowance?

Posted by emba - Created: 8 years ago
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7 replies (Showing replies: 1 to 7)

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Posted by emba - 8 years ago

Ok called the tax people and this is how they explained it to me....

For calculation purposes the consumer price index (CPI) is used for the month preceding the disposal of the asset and the month of acquisition

http://www.mof.gov.cy/mof/ird/ird.nsf/All/4ABDA3D7295613CDC225738D003EA340?OpenDocument this link

contains pdf(greek alas) with monthly inflation figures,

so for example in dec 2005 a property purchase price 100,000k and index is for nov 197,38
sale price in sept 2010 is 150,000 and index is for sept 2010 is 219,23

the inflation allowance is 219,23/197,38 *100 = 1.1107

1.1107 * 100,000( orginal price) =111,070 (price to include inflation) so the 11070.00000 is increase is due to inflation....which is exempt from cgt calculation. Hope this helps.

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Posted by emba - 8 years ago

ah great thanks, found some more notes, looks like i calculate how much is accrued due to annual inflation the difference between this figure and my sales figure is what actually counts as a capital gains,then there is the 17,086 allowance and as noted below after all has been deducted there is not much left that is taxable....

http://www.souniliving.com/index.php?page=cyprus_property_taxes

The cost of acquisition and sale includes interest of payments paid for the acquisition. Additions to the property etc. are also deductible from gains. On the acquisition cost, the inflation rate (as this is published by the Government) is added on. Thus the tax is charged on gains which takes into account the inflation (which for the last years is 2.5%- 3.5% p.a.). The Gains, Tax as a whole, has minimal effects since the appreciation of value coupled with the following allowances and inflation leaves little for taxation

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Posted by emba - 8 years ago

ah thanks great

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Posted by Limassol T - 8 years ago

When you make the transfer or register the sale agreement at the land registry office, you will need to present a certificate that all relevant capital gains tax has ben paid. So you will need to take your calculations to the Tax office, get a certificate that any (or none) tax has been paid, then take this with you to arrange the transfer.

T

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Posted by emba - 8 years ago

thanks Nigel, so once I have this final figure for inflation allowance on a property I am selling, who do i submit it too? tax authorities?? also taking inflation allowance into account I doubt whether profit on a property i am selling will exceed the 17,086 one time allowance (17,806 applies for a property that is not the primary residence for the last five years, 85k allowance for a property that you can prove you have lived in for the last 5 years)....so if this is the case do I need to tell the tax authorities or just have the figures to hand to prove my case that my profit has not exceeded the 17,086?

I will crunch the figures again as have found a study at
http://www.london.com.cy/services/taxation/capital_gains_tax.htm‏ this shows an example and shows an index from 1/1/1980 to end of 2009...

any other input again much appreciated....

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Posted by Nigel Howarth - 8 years ago

Hi Emba,

Capital Gains Tax does apply to profits made on the sale of property in Cyprus irrespective of whether you are resident here.

In the example you have shown, the 83.88% is the inflation adjustment. The Cyprus Statistical Service (CySTAT) publishes the Consumer Price Index and Inflation at http://www.mof.gov.cy/mof/cystat/statistics.nsf/economy_finance_14main_en/economy_finance_14main_en?OpenForm&sub=4&sel=2 - but I suggest that you get an accountant to calculate your CGT liability - it is not done automatically by a tax officer.

REgards,

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Posted by emba - 8 years ago

this is an old example of a calculation but still not sure where they dig up the 83.88% figure, is the the annual inflation between purchase date and sale date?

Determination of capital gainThe taxable gain is the result of the difference between sale proceeds and the original cost of property plus improvements cost. The total cost of property should be adjusted to include inflation from the date of acquisition (earlier date 01/01/1980) to the date of disposal. Inflation can be estimated through the Cyprus consumer price index.

Example C(£) Selling price 31/12/2004 90.000 Cost of acquisition 01/01/1988 (40.000) Inflation (01/01/1998 - 31/12/2004) (C£40.000 x 83.88%) (33.552) Taxable profit 16.448