Following the referendum of the United Nations Peace Plan (the Annan Plan) held in Cyprus in April 2004, I have written numerous articles pointing out that it is the Greek Cypriots who do not want to come to a fair settlement in Cyprus.
As a result of the referendum and probably because the Turkish Cypriots have earned the sympathy of the international communities, Northern Cyprus has been brought to the attention of the world media. Consequently many European nationals, the greater majority of them from Britain, have purchased land and villas in Northern Cyprus, and continue to show great interest in this beautiful holiday island. In the past few years a large number of developments have taken place, including the construction of large sites, complexes and luxurious villas, throughout the TRNC, but especially in Girne to the North and at Magusa, Iskele and Bafra to the East of the island, all aimed at this tourist market.
Therefore as I am constantly being contacted by email and by telephone, repeatedly and asked, in this article I intend to devote myself to explaining the procedures of buying property, the taxes payable on property purchases and the law concerning wills and inheritance in Northern Cyprus.
Firstly I would like to inform my readers that foreign national, for their private use, are allowed to buy, up to a maximum of one donum of land or a house or villa built on up to one donum of land in Northern Cyprus (one donum of land equates 14400 square feet, or 1338 square metres and in another words approximately 1/3 Acre). This is subject to permission being given by the Council of Ministers. Due to the great demand for obtaining this permission and the back log of the applications, this can take up to two years. After the permission has been obtained from the Council of Ministers, if the purchase is land the buyer will be entitled to register the land in his/her name at the Land Registry Office in the area where the land is situated and can then be issued with and given the title deeds by the Land Registry. If it is not a lease hold property that you have purchased then depending on the type of property you have bought you will be given one of the four title deeds below. (A) Free Hold Absolute Ownership, (B) Free Hold Flat Ownership, (C) Free Hold Joint Ownership and under íhe newly passed Site Law (D) Free Hold Site Ownership. It is advisable that the buyers, When buying a property, employ an advocate to draw up a proper and binding sale contract, to make various checks such as the title deeds of the land, to find out if there are any mortgage, charges and/or any burden or impediment on the land and also to check the site plan where the land is situated so that the buyer is not shown one place and sold land at another place. When buying a house/villa under construction this is a more complex matter and the buyer not only should be concerned with the legal aspect of the purchase but they must also find out about the strength and the reputation of the seller and/or the construction Company from whom they intend to purchase a house/villa.
The other frequent questions I am asked especially by foreign nationals and investors is how much tax they liable to pay on their property purchases in Northern Cyprus. The answers to these queries are explained below.
The Four Catagories of Taxes Which You May be Liable for When Buying and Selling Property in the T.R.N.C.
A.The Taxes and Charges Payable By The Property Buyers:
Property Purchase Tax: The value of property i.e. Land. House, Villa or Flat on which tax is payable is based on the current value of the property purchased and that current value is decided by the Land Registry Office at the time of transfer.
The Current Rate of Purchase Tax (Land Registry Charge) which is payable by TRNC citizens, Foreign Nationals as well as by companies is 6% of the current value of the property.
But if the Buyer is a TRNC citizen and is purchasing for the first time up to (a) one Donum of a Plot or Land (One Donum =14400 square feet-1338 square metre) or (b) a house/vilia, or (c) a flat or (d) a small place of business, they can use a preferential right to pay the Land Purchase Tax of 3% on the current value of the property. This right is granted according to T-955-2004 Land Registration Office, Expenses and Fees Regulation approved by the Council of Ministers. However TRNC citizens can choose to defer this preferential right and use it on the second or third or other purchases.
At the present time the Property Purchase Tax during the transfer of ownership is payable direct to the Land Registry Office. However with new regulation being planned, it will be possible for payment to be made at any bank into the bank account of the Land Registry Office.
B. Land Registration
Charge: The current charge for registering property and issuing Title Deeds by the Land Registry Office in the name of the Buyer is 10 YTL (New Turkish Lira) which is approximately £4.34.
C. The Taxes Payable by the Property Sellers:
Property Sale Tax is divided into two categories:
a. The Property -Sale Tax payable by Private Sellers
b. The Property Sale Tax payable by Professional Sellers.
a. The Property Sale Tax payable by Private Sellers: The current rate of Property Sale Tax payable by a private individual who has not sold more than three properties in a year is classed as a Private Seller and the tax is 3,5%. A private citizen can sell up to 3 properties a year in consecutive years and still stay as a Private Seller and pay Property Sale Tax at the rate of 3,5% on the current value of the property sold. If an individual sells more than three properties in a year he/she is classed as a Professional Seller.
b. The Property Sale Tax payable by Professional Sellers: Once a Private Seller becomes a Professional, he/she is always classed as a Professional Property Seller and the current rate of the Property Sale Tax payable by the Professional Property seller is 6,25% on the current value of the property sold.
Both the Property Sale Taxes as well as the VAT described below are payable direct to the Inland Revenue.
If a Private Seller (whether be a TRNC Citizen or Foreign National) is selling a property, such as a plot of land or a house/villa or a Apartment for the first time and or that the exemption right has not been used before, he/she can use his/her right of exemption not to pay Property Sale Tax once in his/her life time.
D. Value Aded Tax Payable on Property Sales:
Once a Property Seller becomes a Professional Seller, he/she is also bound to pay 5% V.A.T. If a property sale price is paid in full at the time of the sale, the amount of the V.A.T will be based on the current value of the property. However if the property sold is payable in installments the amount of the V.A.T will be based on the total amount of the installment payable. The V.A.T will be calculated on whichever method of payment is the higher amount.
A company selling property (Land/House/Villa/Flat) is always treated as a Professional Seller and on every property they sell, they are liable to pay 6,25% Property Sale Tax and 5% Value Added Tax. The director of such company whilst selling his private properties will also be regarded as a Professional Seller.
Property Sale Tax is payable at the time of the transferring of the title deeds ot the property and V.A.T must be paid the subsequent month after completion (i.e. handing over the keys of the house/villa/flat) by the Seller to the Inland Revenue.
In my next article, I will be writing about the Wills and Succession Law affecting both the TRNC Citizens and the Foreign Nationals and the taxes payable on inheritance in Northern Cyprus.
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