North Cyprus Property Tax and Additional cost
Buying a property: 1) Transfer Fee: The fee is payable to Land Registry Office and is set at 6%. However, every person has a once in a lifetime option to reduce this to 3% if the property's total area is less than 200 m². If a purchaser elects to use this option on the purchase, he or she will only pay 3%. Once this option right has been used, the transfer fee payable on all future purchases by that person will be 6%. This tax is paid upon Land Registry's valuation of the property purchased (which is practically 40% less than the market price of a property). Note: Tax is paid when the title is registered on your name. 2) VAT:This is currently set at 5% and is paid to the Tax Office. This tax is paid upon Land Registry's valuation of the property purchased (which is practically 40% less than the market price of a property). With respect to VAT, the status of the Vendor is important. If the Vendor is a private person who is not deemed to be a 'property professional', then VAT would not normally be levied on the transfer. However, if the Vendor is a TRNC property company then VAT will be due. Note: tax is paid when the title is registered on your name. 3) Stamp Duty: This tax is paid to the Tax Office. The rate is 0.5% of the contract price provided this is paid within 1 month of the date of the contract. If it is not paid within this time, the rate increases in stages until after 6 months it becomes 1.5%. This means that if contracts are exchanged in the UK, then the purchaser should request that his solicitor registers the contract in TRNC within 1 month in order to secure the lowest tax rate. 4) Other costs: Water and Electricity connection fee: around £1,000. Solicitor's fee: around £1,500. Utility bills: for a standard family (four persons) total of all the local utility bills (electricity, water, telephone, municipal, ect.) is not more than £100 per month. Yearly property tax: around £50
Selling a property: Capital Gains Tax: Paid by the vendor. This depends on whether you are a private individual or a professional vendor. Every private individual has a once in a lifetime tax free sale option (for a house and land not exceeding 1 donum). If you use this option, you will not be liable to Capital Gains Tax on that 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%. This tax is paid to the Tax Office. This tax is paid upon Land Registry's valuation of the property purchased (which is practically 40% less than the market price of a property). Capital Gains Tax is not payable if you sell the property before taking on the title. Note: Tax is paid when the title is registered on the buyer's name.
Transfer of property to the name of relatives:If you want to pass the property to the name of your relatives then there is a transfer tax: A. From parents to their children is 0.2 %. (2 per every one thousand). B. From grand parents to grand children is 0. 4 %.( 4 per every one thousand). C. Between Spouses is 0. 4 %. (4 per every one thousand). D. In any other case on gift or sale the rate is 6% (Six on per Hundred). There is no transfer fee payable to Inland Revenue on property ownership transfer from parents to children and between spouses. Also there is no Gift Tax applicable in the TRNC. Read wills and succession law of North Cyprus.
Example of buying a property in North Cyprus: VAT, Capital Gains and Transfer fees are normally paid when the customer is issued with Title Deeds. The Vendor is unable to do this until the customer is in possession of a 'Permission to Purchase' certificate, which is issued by the Council of Ministers. The purchaser's solicitor will normally make the application. It often takes up to 1,5 years for the certificate to be issued. This means that these taxes will fall due at a future date. Assume: a customer buys a property at £100,000. On exchange of contracts: the solicitor will request part or all of his fees. This can be up to £1,500. The Stamp Duty is 0.5%, namely, £500.
On issue of Title Deeds: Land Registry's valuation of the property purchased is say £60,000. VAT at 5% will be £3,000 and the Transfer Fee is 3%, namely, £1,800. Purchaser pays water and electricity connection fees: £500. Capital Gains, payable by the seller at 6.25%, will be £3,750. Total Purchaser's tax payable: £7,300.Total Vendor's tax payable: £3,750
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