If you are considering investing in property or land in North Cyprus you may find the information in this online guide of some help. Buying a villa, bungalow, apartment, building land, or other property in North Cyprus is not a difficult process but some basic knowledge may help you understand what is taking place. This information on procedures and taxes that apply to property buying and selling in North Cyprus has been gathered together purely to assist those seeking such information. Our over-riding recommendation is that you employ a good local solicitor before undertaking any property transaction. This guide is not intended as a substitute for legal or commercial advice.
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Property Buying and Selling in Northern Cyprus.
Procedures
Whether buying property in North Cyprus either through an agent or privately, it is most important that you obtain the services of a professional and independent solicitor. He/she will check that the title deed is valid and will visit the land registry in person . If your property purchase forms part of a development, this will be divided to provide title deeds for each plot upon completion.
Contracts will be drawn up and will be notarised. At this point a 10% deposit becomes payable and the date for completion of the transaction is set. It is usually possible to leave power of attorney with your solicitor who can be left to complete the purchase for you. This is particularly useful for those not currently resident in North Cyprus as it allows you to return home during the purchasing period.
Your solicitor will now lodge the contract with the Land Registry and the signed contract is legally binding on both vendor and purchaser.
An application to purchase is now made by your solicitor, on your behalf, to the Council of Ministers. This procedure can be quite protracted depending upon circumstances but your solicitor is best placed to be able to expedite this as much as possible by making sure all is in order at first submission. This is another good reason for not attempting to go it alone.
The Land Registry is responsible for valuation of the property for purchase tax purposes. This is normally excluded from the purchase price and is payable upon transfer of the title. Should the vendor be a company, then VAT will be payable on transfer of the title. (See details in the taxes section).
The contract will specify details of further or final payment. In the case of off plan or new build developments this could include split payment or staged payments in line with building stages. This form of arrangement motivates the developer or builder to keep to agreed schedules and is an excellent control mechanism.
Where your purchase is part of a development as above, the breakdown of title into the individual plots will take place either at the start of the project or when the entire development is completed. These individual deeds will be transferred to you and you will be issued with the new title deed applicable to your plot by the Land Registry.
Taxes
Your solicitor will advise you on taxes payable in respect of your specific transaction and these are broadly as follows. Transfer Fee. This is payable at the Land Registry Office and must be done before transferring the title to the buyer's name. The current transfer fee is 12% of the estimated value. It should be noted however, that all persons have an option that can be used once only which reduces the percentage to 3%. Once this option has been taken up, all further transfer fees on future purchases will be at the full rate. Ex Pats make this pay the fee in two payments: 6% upon registration and the remaining 6% is due upon transfer of title.
VAT. This is payable either to the Tax Office or to the vendor. Currently the rate of VAT for property transactions is 5%. Your Contract of Sale document should state if the vendor requires payment of VAT on the sale price on the date of completion. Check with your solicitor.
Stamp Duty. This is payable to the Tax Office. The percentage is based upon a sliding scale according to date of payment. Currently this is: 0.5% of the contract price if paid within one month of date of contract. Thereafter the rate increases in stages until after 6 months when it becomes 1.5%
Capital Gains Tax. This is payable to the Tax Office. This tax, as indicated above, is normally paid by the vendor and as such the percentage used for the calculation will depend on his/her status as a vendor. A private vendor will pay tax based upon currently 3.5%. A professional vendor will pay based upon a percentage figure of currently 6.25%. There is one exemption whereby a private vendor selling a house and land of not more than about one donum has a once only option for a tax free sale. When this option has been used the standard rate applicable at the time will apply. If you sell more than 3 properties in a year you will be deemed to be a professional vendor and taxed accordingly. Normally the Transfer Fee and Stamp Duty are paid by the purchaser and Capital Gains Tax by the vendor. This arrangement can be varied with the agreement of the parties concerned and supported by a specific clause in the contract. Apart from the taxes mentioned above there are some different taxes applicable to gifts of property for no consideration and transfers between members of the same family.
Summary. Whether or not you have to pay VAT on your property purchase depends on whether or not the vendor is deemed to be a professional vendor or a private vendor. Also any requirement to pay VAT will be specified in your contract if applicable. Normally Capital Gains Tax is not payable when you purchase your property as this is paid by the vendor. When selling, you can exercise your one off tax free option. For future sales as a private vendor you will pay the full private vendor rate. Professional vendors have no reductions rights and all sales currently attract the rate of 6.25%. Normally the Transfer Fee and Stamp Duty are payable by the purchaser at the rates currently applicable. Check with your solicitor for any clauses that may vary this.
Capitol Gains Tax & VAT
Your solicitor will advise you on taxes payable in respect of your specific transaction and these are broadly as follows. Transfer Fee. This is payable at the Land Registry Office and must be done before transferring the title to the buyer's name. The current transfer fee is 12% of the estimated value. It should be noted however, that all persons have an option that can be used once only which reduces the percentage to 3%. Once this option has been taken up, all further transfer fees on future purchases will be at the full rate. Ex Pats make this pay the fee in two payments: 6% upon registration and the remaining 6% is due upon transfer of title.
VAT. This is payable either to the Tax Office or to the vendor. Currently the rate of VAT for property transactions is 5%. Your Contract of Sale document should state if the vendor requires payment of VAT on the sale price on the date of completion. Check with your solicitor.
Stamp Duty. This is payable to the Tax Office. The percentage is based upon a sliding scale according to date of payment. Currently this is: 0.5% of the contract price if paid within one month of date of contract. Thereafter the rate increases in stages until after 6 months when it becomes 1.5%
Capital Gains Tax. This is payable to the Tax Office. This tax, as indicated above, is normally paid by the vendor and as such the percentage used for the calculation will depend on his/her status as a vendor. A private vendor will pay tax based upon currently 3.5%. A professional vendor will pay based upon a percentage figure of currently 6.25%. There is one exemption whereby a private vendor selling a house and land of not more than about one donum has a once only option for a tax free sale. When this option has been used the standard rate applicable at the time will apply. If you sell more than 3 properties in a year you will be deemed to be a professional vendor and taxed accordingly. Normally the Transfer Fee and Stamp Duty are paid by the purchaser and Capital Gains Tax by the vendor. This arrangement can be varied with the agreement of the parties concerned and supported by a specific clause in the contract. Apart from the taxes mentioned above there are some different taxes applicable to gifts of property for no consideration and transfers between members of the same family.
Summary. Whether or not you have to pay VAT on your property purchase depends on whether or not the vendor is deemed to be a professional vendor or a private vendor. Also any requirement to pay VAT will be specified in your contract if applicable. Normally Capital Gains Tax is not payable when you purchase your property as this is paid by the vendor. When selling, you can exercise your one off tax free option. For future sales as a private vendor you will pay the full private vendor rate. Professional vendors have no reductions rights and all sales currently attract the rate of 6.25%. Normally the Transfer Fee and Stamp Duty are payable by the purchaser at the rates currently applicable. Check with your solicitor for any clauses that may vary this.
Stamp Duty
Stamp duty is a tax that was not normally paid on property purchases but since the requirement to produce Contracts of Sale was introduced by the Tax Office, the ruling was made that stamp duty must be paid. The amount is based upon the contract price. There is some uncertainty as to which value will be used for calculating the taxes due in the future therefore an exact prediction is not possible. Your solicitor will handle these issues and will be able to advise the current Tax Office requirement at time of purchase.
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