| There are four main taxes involved in | | | | * VAT FOR PROPERTY TRANSACTIONS - 5% of |
| any property sale and purchase | | | | either the assessed value or the sale |
| transaction These taxes are: | | | | price. Please note that some vendors |
| * The transfer fee which is payable to | | | | require the VAT to be paid on the actual |
| Land Registry Office | | | | sale value of the property as stated in |
| * The capital gains tax which is payable | | | | the Contract of Sale on the date that |
| to the Tax Office | | | | possession of the property is delivered |
| * The VAT (KDV) which is payable to the | | | | to the purchaser. You should check the |
| Tax Office or to the vendor | | | | terms of your contract of sale on this |
| * The Stamp Duty which is payable to the | | | | point. |
| Tax Office | | | | * CAPITAL GAINS TAX - As stated above, |
| Different taxes apply to gifts of | | | | this is usally paid by the Vendor. The |
| property for no consideration and | | | | amount payable depends on whether the |
| transfers of property between family | | | | vendor is a professional vendor a |
| members. | | | | private individual as defined under VAT |
| As a general rule, capital gains tax is | | | | above. If the vendor is a professional |
| payable by the vendor and the transfer | | | | vendor, the rate will be 6.25%. |
| fee and Stamp Duty is payable by the | | | | Otherwise, the rate will be 3.5% |
| purchaser, although this can always be | | | | * STAMP DUTY - This is 0.5% of the |
| varied by the parties by an express | | | | contract price provided this is paid |
| clause in the Contract of Sale. | | | | within 1 month of the date of the |
| The payment of VAT depends on two | | | | contract. If it is not paid within this |
| factors: | | | | time, the rate increases in stages until |
| * Whether or not the transaction is | | | | after 6 months it becomes 1.5%. |
| subject to VAT. This depends on whether | | | | FREQUENTLY ASKED QUESTIONS |
| the vendor is deemed by the Tax Office | | | | Vat For Property Transactions |
| to be a "professional vendor" (i.e. | | | | Will I have to pay VAT on my property |
| whether the transaction is of a | | | | purchase? |
| commercial nature or for profit). If the | | | | In determining whether you will be |
| vendor is deemed to be a professional | | | | liable to pay VAT on your property |
| vendor, the transaction will be subject | | | | purchase, you need to establish the |
| to VAT. If the vendor is a private | | | | following: |
| individual, the transaction will not be | | | | * Whether the vendor is a professional |
| subject to VAT. | | | | vendor as defined above. |
| * Terms of the Contract of Sale. If the | | | | * Whether your contract requires you to |
| transaction is subject to VAT, who will | | | | pay the VAT. |
| actually pay the VAT depends on the | | | | Where the contract does not expressly |
| terms of the Contract of Sale i.e. | | | | mention VAT, it is our opinion that the |
| whether or not the sale price is stated | | | | purchase price shall be deemed to be |
| to be inclusive or exclusive of VAT. | | | | inclusive of VAT. |
| Taxes are generally paid on transfer of | | | | CAPITAL GAINS TAX |
| title. The percentages listed below are | | | | Will I have to pay Capital Gains Tax on |
| calculated as follows: the Transfer Fee | | | | my purchase? |
| is generally paid as a percentage of the | | | | Generally, no. Capital Gains Tax is |
| assessed value of the property which is | | | | usually paid by the Vendor, unless |
| carried out just before transfer of | | | | otherwise stipulated in your contract. |
| title takes place. The Land Registry | | | | Will I have to pay Capital Gains Tax on |
| assesses the property in the state it is | | | | the sale of my property? If so, how much |
| in at the date of the assessment i.e. if | | | | will this be? |
| there is a new construction on the | | | | This depends on whether you are a |
| property, this will be included in the | | | | private individual or a professional |
| assessment of the value of the property. | | | | vendor (as defined above): |
| The VAT, Capital Gains and the Stamp | | | | Every private individual has a once in a |
| Duty are based on either the assessed | | | | lifetime tax free sale option (for a |
| value or the contract value, whichever | | | | house and land not exceeding |
| is the highest. Under new regulations, | | | | approximately 1 donum). If you use this |
| the Tax Office now requires a copy of | | | | use this option, you will not be liable |
| the contract of sale to be presented to | | | | to Capital Gains Tax on that sale. On |
| it prior to transfer of title. | | | | all subsequent sales, Capital Gains Tax |
| The percentages levied for each of the | | | | will be payable at 3.5%, provided you do |
| three types of tax are shown below: | | | | not sell more than 3 properties in one |
| * TRANSFER FEE - The transfer fee is 6%. | | | | year, making you a professional vendor. |
| However, every person has a once in a | | | | For professional vendors, there are no |
| lifetime option to reduce this to 3%. If | | | | tax exemption rights. Capital Gains Tax |
| a purchaser elects to use this option on | | | | is payable on every sale at a rate of |
| the purchase, he or she will only pay | | | | 6.25%. |
| 3%. Once this option right has been | | | | What if I sell my property before taking |
| used, the transfer fee payable on all | | | | title? Will I still have to pay Capital |
| future purchases by that person will be | | | | Gains Tax? |
| 6%. | | | | |