North Cyprus Property and Real Estate Guide to Taxes

There are four main taxes involved in any* VAT FOR PROPERTY TRANSACTIONS - 5%
property sale and purchase transaction Theseof either the assessed value or the sale price.
taxes are:Please note that some vendors require the VAT
* The transfer fee which is payable to Landto be paid on the actual sale value of the
Registry Officeproperty as stated in the Contract of Sale on the
* The capital gains tax which is payable to thedate that possession of the property is delivered
Tax Officeto the purchaser. You should check the terms of
* The VAT (KDV) which is payable to the Taxyour contract of sale on this point.
Office or to the vendor* CAPITAL GAINS TAX - As stated above, this
* The Stamp Duty which is payable to the Taxis usally paid by the Vendor. The amount payable
Officedepends on whether the vendor is a professional
Different taxes apply to gifts of property for novendor a private individual as defined under VAT
consideration and transfers of property betweenabove. If the vendor is a professional vendor, the
family members.rate will be 6.25%. Otherwise, the rate will be
As a general rule, capital gains tax is payable by3.5%
the vendor and the transfer fee and Stamp Duty* STAMP DUTY - This is 0.5% of the contract
is payable by the purchaser, although this canprice provided this is paid within 1 month of the
always be varied by the parties by an expressdate of the contract. If it is not paid within this
clause in the Contract of Sale.time, the rate increases in stages until after 6
The payment of VAT depends on two factors:months it becomes 1.5%.
* Whether or not the transaction is subject toFREQUENTLY ASKED QUESTIONS
VAT. This depends on whether the vendor isVat For Property Transactions
deemed by the Tax Office to be a "professionalWill I have to pay VAT on my property
vendor" (i.e. whether the transaction is of apurchase?
commercial nature or for profit). If the vendor isIn determining whether you will be liable to pay
deemed to be a professional vendor, theVAT on your property purchase, you need to
transaction will be subject to VAT. If the vendorestablish the following:
is a private individual, the transaction will not be* Whether the vendor is a professional vendor as
subject to VAT.defined above.
* Terms of the Contract of Sale. If the* Whether your contract requires you to pay the
transaction is subject to VAT, who will actuallyVAT.
pay the VAT depends on the terms of theWhere the contract does not expressly mention
Contract of Sale i.e. whether or not the sale priceVAT, it is our opinion that the purchase price shall
is stated to be inclusive or exclusive of VAT.be deemed to be inclusive of VAT.
Taxes are generally paid on transfer of title. TheCAPITAL GAINS TAX
percentages listed below are calculated as follows:Will I have to pay Capital Gains Tax on my
the Transfer Fee is generally paid as a percentagepurchase?
of the assessed value of the property which isGenerally, no. Capital Gains Tax is usually paid by
carried out just before transfer of title takesthe Vendor, unless otherwise stipulated in your
place. The Land Registry assesses the property incontract.
the state it is in at the date of the assessment i.e.Will I have to pay Capital Gains Tax on the sale
if there is a new construction on the property,of my property? If so, how much will this be?
this will be included in the assessment of the valueThis depends on whether you are a private
of the property. The VAT, Capital Gains and theindividual or a professional vendor (as defined
Stamp Duty are based on either the assessedabove):
value or the contract value, whichever is theEvery private individual has a once in a lifetime
highest. Under new regulations, the Tax Officetax free sale option (for a house and land not
now requires a copy of the contract of sale to beexceeding approximately 1 donum). If you use
presented to it prior to transfer of title.this use this option, you will not be liable to Capital
The percentages levied for each of the threeGains Tax on that sale. On all subsequent sales,
types of tax are shown below:Capital Gains Tax will be payable at 3.5%,
* TRANSFER FEE - The transfer fee is 6%.provided you do not sell more than 3 properties in
However, every person has a once in a lifetimeone year, making you a professional vendor.
option to reduce this to 3%. If a purchaser electsFor professional vendors, there are no tax
to use this option on the purchase, he or she willexemption rights. Capital Gains Tax is payable on
only pay 3%. Once this option right has beenevery sale at a rate of 6.25%.
used, the transfer fee payable on all futureWhat if I sell my property before taking title? Will
purchases by that person will be 6%.I still have to pay Capital Gains Tax?