Cyprus Capital Gains Tax: Why Most Tech Founders Pay Zero

#tax #startup #fintech #europe

Cyprus has a capital gains tax. Most people reading about it assume it applies broadly. In practice, for tech founders and developers holding shares or crypto, the rate is 0%. Here is why, and the exceptions that matter.

The rule

Cyprus CGT at 20% applies only to:

Gains from immovable property in Cyprus (land, buildings)
Gains from shares in companies that own immovable property in Cyprus (where more than 50% of value is Cypriot real estate)

That is it.

What is explicitly exempt

Gains on shares in publicly listed companies: 0%
Gains on shares in private companies (where the company does not mainly hold Cypriot property): 0%
Crypto gains: 0% (no specific CGT treatment, no income tax if capital in nature)
Foreign real estate: 0%
IP disposals covered by IP Box: 2.5% effective rate (separate regime)

For a developer who built a startup, holds equity in a tech company, or trades crypto: the gain on exit is zero.

How Non-Dom status interacts

Non-Dom status removes your liability for Special Defence Contribution (SDC), which applies to dividends and interest. It does not affect CGT because CGT applies to everyone equally on Cypriot property.

If you are a Non-Dom resident selling shares in a UK or US startup: 0% in Cyprus. 0% SDC. 0% income tax (if classified as capital, not trading income).

Cyprus Non-Dom explained

The property exception

If you buy Cypriot real estate and later sell it at a gain, CGT at 20% applies. The lifetime exemption for a primary residence is EUR 85,430. For inherited property from a spouse or parent, the exemption is higher.

This is worth knowing if you are planning to buy in Limassol or Nicosia. The gain calculation uses original cost plus inflation adjustments.

Why this matters for founders structuring an exit

If you are planning a company exit (M&A or secondary sale) and you hold shares directly as a Cyprus tax resident:

Gain on shares in a non-property operating company: 0%
No requirement to route through a holding structure to achieve 0%
Clean, direct treatment

Compare this to the UK (20% CGT on gains above annual exemption), Germany (26.375% flat), or France (30% flat PFU).

The 60-day residency angle

To be taxed in Cyprus, you need to be a Cyprus tax resident. The 60-day rule allows founders who travel frequently to qualify for Cyprus tax residency without living there full-time.

Timing matters: if you are planning an exit, you want to be Cypriot tax resident at the point the gain crystallises, not in the year before or after. Take advice early.

Cyprus 60-Day Rule