GUIDE TO TAXES FOR PROPERTY TRANSACTIONS IN NORTHERN CYPRUS

GUIDE TO TAXES FOR PROPERTY TRANSACTIONS IN NORTHERN CYPRUS

There are mainly three kinds of taxes involved in any property sale transaction in Northern Cyprus. These taxes are:

1. The transfer fee which is payable to District Land Registry Office.
2. The capital gains tax which is payable to the Income & Tax Office.
3. The VAT which is payable to the Income & Tax Office.

Although this can be varied by the parties to the Contract of Sale, the capital gains tax is usually payable by the vendor and the transfer fee is usually payable by the purchaser. VAT (KDV in Turkish) is also subject to the terms of the Contract of Sale, which should specify whether or not the sale price includes or excludes VAT.

The percentage of capital gains tax levied depends on whether or not the vendor is a ‘professional vendor’ as defined by the law (i.e. whether the transaction is of a commercial nature or for profit).

The table below indicates the percentages of capital gains taxes levied accordingly. The percentages given below are levied on the assessed value of the property, which is calculated by the Land Registry Department just before transfer of title takes place. When such valuations are carried out, the property is assessed in the state that it is in at the date of the valuation i.e. if there is a new building on the property, this will be included in the assessment of the value of the property.

VENDOR’S POSITION	TRANSFER FEE		CAPITAL GAINS TAX	VAT (KDV)
PRIVATE INDIVIDUAL	6%	3% (with option right)	0% on first sale 3.5% for 2nd and on	0%
PROFESSIONAL	6%	3% (with option right)	6.25%	5%

The transfer fee payable is 6% calculated on Land Registry Department’s valuation of the property purchased with the option to pay only 3%. Once this option right is used, the transfer fee payable is 6% for all future transfers.


Frequently asked questions by purchasers regarding VAT on property transactions in Northern Cyprus

VAT is levied only on sales where the vendor is a ‘professional vendor’. What is the definition of a ‘professional vendor’?
A professional vendor is a limited company or an individual person who has sold more than three immovable properties within one year or an individual person who is deemed to be in the construction or eal estate business and is deemed to be a professional vendor.

Will I have to pay VAT on my property purchase?
In determining whether you will be liable to pay VAT on your property purchase in Northern Cyprus, you need to establish:
a. whether the vendor is a professional vendor as defined above and
b. whether your contract requires you to pay the VAT.

Frequently asked questions by purchasers regarding Capital Gains Tax on property transactions in Northern Cyprus

Will I have to pay Capital Gains Tax on my purchase?
Generally, no. Capital Gains Tax is usually paid by the Vendor, unless otherwise stipulated in your contract.

Will I have to pay Capital Gains Tax on the sale of my property? If so, how much will this be?
This depends on whether you are a private individual or a professional vendor (as defined above):
Every individual person in Northern Cyprus has a once in a lifetime tax free sale option (for a house and land not exceeding approximately 1 donum). If you use this option, you will not be liable to pay Capital Gains Tax on that first sale. On all subsequent sales, Capital Gains Tax will be payable at 3.5%, provided you do not sell more than 3 properties in one year, making you a professional vendor.

For professional vendors, there are no tax exemption rights. Capital Gains Tax is payable on every sale at a rate of 6.25%.

What if I sell my property before taking title? Will I still have to pay Capital Gains Tax?
Capital Gains Tax is not payable if you sell the property before taking title by doing an assignment of contract. However, you will have to pay stamp duty on the contract which is charged at 0.5% of the contract value, if you pay within 2 months of signing the Contrat of Sale. This amount is multiplied by 2 if you pay within 2 to 6 months of signing the Contract and is multiplied by 3 if you pay after this period.

Akan Gurkan LLB (University of Warwick)
Property Department
Gurkan and Gurkan Advocates and Legal Advisers