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To Buy Property in Northern Cyprus |
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Following new laws passed by the Government of the Turkish Republic of
Northern Cyprus in early 2008 it became a legal requirement for all
businesses wishing to trade in real estate/estate agency, to obtain
official registration and licencing. This required all those currently
trading, and wishing to continue, to submit to searching enquiries and
to provide a wide range of documentation supporting their applications.
This includes an insurance backed bond and is intended to offer
protection and reassurance to their clients. It is most important that
buyers of property and land in the T.R.N.C. ensure that they deal with
a registered agent. There are a number of very good estate agents in
all parts of North Cyprus who will be pleased to quote their registration number.
Freehold Title Deeds
There has been things written about title deeds in North Cyprus. Not
unnaturally, most prospective property buyers will try to understand
why so many different versions of the facts are talked about. Most of
the issues under discussion arise from the division of the island in
1974 and claims to property ownership made by Greek Cypriots in respect
of land left behind when they moved to the south (like many Turk
Cypriots moved to the North). Today North Cyprus is also referred to
as The Turkish Republic of North Cyprus. The freehold title that you
can buy today is The Turkish Republic of North Cyprus Freehold.
This TRNC Freehold title deed can be broken down to four possible variants, one of which will apply to your purchase. These are:
Pre. 1974 Foreign Title: This applies to land or immovable property
that was owned by foreign nationals or Greek Cypriots before 1974.
Pre. 1974 Turkish Title: As the name implies, this applies to land or immovable property owned by a Turkish Cypriot before 1974.
TMD Title: This applies to land given by the government to Turkish and
Turkish Cypriot people after 1974 for military service and to
encourage settlers. Exchange Title.(Esdeger): This applies to land or
property awarded by the government to a Turkish Cypriot in exchange for
land or property that they were forced to leave behind when leaving the
south in 1974.
It is as always most important that a prospective purchaser
employs a local solicitor well versed in the property and land laws.
They will be able to assure you that your intended freehold is
legitimate and clear of any debts or liens.
Buying Leasehold Property.
The actual process for buying leasehold is similar to freehold but the
application is made to the Ministry of Tourism rather than the Ministry
of the Interior. This is effectively obtaining permission for you to
purchase property in North Cyprus. Again it is highly recommended that a good local solicitor is employed from the start.
New Build Purchases.
When buying off plan for a new build property it is normal to agree a
staged payment plan. Your solicitor will draw up a contract detailing
price, specifications, payment plan and timescale.
Procedures and Taxes
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.
ProceduresWhether 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 to the Land Registry Office.
VAT: This is payable either to the Tax Office or to the vendor.Stamp
Duty. This is payable to the Tax Office.Capital Gains Tax. This is
payable to the Tax Office.
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.
Is the transaction subject to VAT ?
The Tax Office will consider the status of the vendor. If the vendor is
a professional vendor and is selling the property as part of a
commercial business then the transaction will be subject to VAT. If
the vendor is a private seller then the transaction will not be subject
to VAT. The vendor in this respect means the person having title to the
property. If the seller is only effectively assigning contractual
rights to the property to the buyer and the person registered on the
title deeds is in fact a professional vendor, then VAT will still be
payable. If the transaction is deemed to be subject to VAT who actually
pays the tax will depend upon the Contract of Sale. This should clearly
state whether or not the price is inclusive or exclusive of VAT. Taxes
are normally paid on transfer of Title.
Transfer fee: Changes have taken place from early in 2007 that
effect the way that transfer tax is calculated. This was previously
based upon an assessed value calculated by the Land Registry before
transfer of Title. This based the valuation upon the property at date
of assessment, meaning for example, that any new construction on the
property would be included in the assessment of value. The Land
Registry changed the method in January 2007 in favour of using the
contract price as the means of calculating the transfer fee. As of now
it is uncertain whether or not the Land Registry will continue with
this formula or will revert to the old system.
Capital Gains Tax and VAT: As with Transfer Fees, Capital Gains
Tax and VAT were previously based upon assessed value. This has now
changed and the Tax Office will require a copy of the Contract of Sale
before transfer of Title. It will calculate any Capital Gains or VAT
due based on either contract price or assessed value depending upon
which is the higher.
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.
Current Percentages for tax calculationsTransfer Fee:
The transfer fee is 6%. 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.
Capital Gains Tax: 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.
Stamp Duty: 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%
VAT: 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.
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.
Payment plans
Many developers offer staged payments plans for those making an off
plan investment. This not only allows you to spread the payments over
the period of construction but also provides an extra incentive for the
developer to keep to agreed schedules. It is important that your
solicitor has recorded details of such an arrangement in the contract
of sale. Other variations of payment plans may be available and you
should always seek the advice of your solicitor before signing as with
any such transaction.
Cash purchses
Cash purchases are obviously an option but once again make sure that
your solicitor has sanctioned any payments before they are made. Apart
from possibly a small holding deposit to secure a property, all
payments should be made through your solicitor to ensure that they are
properly recorded and receipted. It is normally possible to pay using
most leading currencies such as pound sterling or euros.
Inter-bank transfers
Bank transfers are another method of paying for your purchase and again
it is wise practice to make these payments via your solicitor’s account
rather than direct to an agent or to the vendor. As with any
international transfer there is likely to be a charge for this. Check
this with your bank.
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Please note! This information should only be seen as general
guidance. Since laws, taxes and fees often change, a buyer must always
inform himself of the latest rules and regulations.
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Population: 215,000
Area: 3242 km²
Capital: Nicosia (Lefkosa)
Currency: Turkish Lira (TL)
Language: Turkish
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