Capital Gains

Capital gains from sale of shares in property companies 

• Previously, capital gains tax is charged on disposal of immovable property located in Cyprus or on disposal of shares of companies, which own immovable property located in Cyprus.
• Under the proposed legislation, gains from the sale of shares in companies, which indirectly own immovable property in Cyprus by holding directly or indirectly shares in a company, which owns immovable property located in Cyprus will also be subject to capital gains tax. This will apply only in case the value of the immovable property represents more than 50% of the value of the assets of the company whose shares are sold.

Trading gains from sale of shares of property companies 

• Currently, if a company is selling shares of companies which ‘would be considered as transactions of a trading and thus fall under the provisions of the income tax laws, any gains from the sale of such shares are exempt from income tax. Since these gains would not fall under the capital gains tax law, then the gains are tax free, even if the company whose shares are sold owns immovable property located in Cyprus.
• Under the proposed legislation, such gains, which are exempt from income tax, would now be subject to capital gains tax.
• Company A owns the shares of Company B, which owns the shares of Company C, which in turn owns immovable property located in Cyprus.

• Currently, capital gains tax will arise if;

• If Company B sells the shares of Company C.
• Company C sells the immovable property or

• Under the proposed legislation capital gains tax will arise also if Company A sells the shares Company B.
• In the case of sale of shares of a company owning immovable property, the gain to be taxed will be calculated only based on the market value of the immovable property.

For more information and/or advice, feel free to contact us via email at [email protected]