Buying a property in Turkish Republic of Northern Cyprus (TRNC)
Buying a property in the TRNC may seem complicated and strenuous for those who are not familiar with the law and legal procedures. This information is based on the benefit of many years of experience in the conveyance procedure for the sale and purchase of residential and commercial property here in North Cyprus.
What type of Title does the property have?
After the division of the island, in 1974, North Cyprus has developed its own rules and regulations and a different legal system has been constituted by the Turkish Cypriots in relation to conveyancing procedures. The first and foremost issue which should be clarified is the various types of title deeds that exist in the TRNC today. The various Title Deeds are as follows:
Turkish Cypriot or other foreign ownership pre-1974 - this type of title deed is considered to be the best and to be totally safe.
Greek Cypriot owned pre-1974: TRNC Freehold also called Esdeger or Exchange Land. This is the land that was given to Turkish Cypriots by the TRNC Government in exchange for land that they lost in the South when the island was divided. Based on 1983 TRNC Constitution, all the deeds are rectified and named as TRNC deeds and are freely transferable to foreigners.
Tahsis (TMD) Deeds: It was land originally owned by a Greek Cypriot prior to 1974. Tahsis title deeds were issued by the TRNC North Cyprus government post-1974 to a Turkish Cypriot refugee or to a Turkish mainland settler.
Mucahit Points: This is land that was issued as a number of points for time served in the Military services.
Leasehold – Properties owned by the TRNC Government who will grant long-term leases of 49 years
Taxes in Relation to Property Purchase
There are four main taxes involved in any property Sale/Purchase transaction, these taxes are as follows:
The Tax Office requires a copy of the Contract of Sale to be presented prior to transfer of title. It will then calculate the VAT based on the Contract value of the property and is currently 5%.
The payment of VAT depends on whether or not the transaction is subject to VAT.
This depends on whether the Vendor (the person who has title to the property not simply contractual ownership or possession of the property) is deemed by the Tax Office to be a ‘Professional Vendor’ (i.e. whether the transaction is of a commercial nature or for profit). If the Vendor is deemed to be a Professional Vendor, the transaction will be subject to VAT. If the Vendor is a private individual, not a Professional Vendor, the transaction will not be subject to VAT. Please note that when buying a new property from a construction company then this property will be liable for VAT to be paid before it can be transferred into your name.
Transfer Fees payable to the Land Registry Office just before transfer of title takes place is usually paid by the purchaser and is currently 6% of the property assessed value. However, if you are purchasing for the first time, you have the right to exercise your discount for “once in a lifetime option” which is 3% of the assessed value of the property. Sometimes there are special offers available at the tax/land office which allow you to transfer at reduced rates. E.g If your property is less than 140m2 then recently they have been allowing a 1% transfer for first time purchase and 4% for subsequent times. At present this is valid until the end of March 2021 but should always be checked in advance as things can change at short notice.
The Land Registry will view the Contract of Sale before transfer of title to assess the value of the property and will calculate the Transfer Fee on the basis of the assessed value. The Transfer fee is generally payable by the Purchaser.
Stamp duty which is payable to the Tax Office and is calculated on the contract value of the property. Generally Stamp Duty is payable by the Purchaser.
All Contracts of Sale must be registered at the District Lands Office within 21 days of being signed and it is now compulsory for the Stamp Duty to be paid at the rate of 0.5% before registration can take place.
This is 1% of the Land Registry transfer fee figure payable on transfer of title alongside the Transfer fee. It could also be viewed as 0.01% of the sale price.
Capital Gains Tax
Capital Gains Tax (Stopaj) which is payable to the Tax Office is generally payable by the Vendor.
The Tax Office requires a copy of the Contract of Sale to be presented prior to transfer of title. It will then calculate the Capital Gains Tax based on the assessed value of the property and is currently 2.8%. At present there is a one time sale option where you do not have to pay this tax and you can choose to use that one time sale option or use it on a further sale.
How can we help?
We only work with solicitors who are fluent in English and Turkish, and who are familiar with UK law, can offer independent and professional services to clients wishing to purchase immovable property and assist and facilitate secure and efficient transactions from preliminary stages to post completion.
At an initial meeting you will discuss the particulars of the property you have chosen to purchase and look at any informal agreements you have made with the vendor regarding the purchase price, payment schedule and any items included within the sale. The procedures that you will need to follow including the taxes and fees you will need to pay plus investigations on your behalf to ensure the transactions are carried out securely and efficiently will all be explained. This stage may also involve taking a power of attorney from you to ensure that action on your behalf to sign documents if you are away from Northern Cyprus for long periods of time, can be carried out.
As a result of recent legislation, your identity will be validated prior to undertaking work on your behalf. Identity required as follows:
- Full Passport/Full Driving Licence
- Recent Bank Statement/ Utility Bill (not more than 3 months old)
Please also note that further documentation might be required in compliance with the current Money Laundering Regulations. This would be explained to you if extra documentation is necessary.
The general principles of the Conveyancing Services are outlined below:
A land registry search will be carried out at the relevant Land Registry Office to confirm that the seller is the registered freehold owner of the immovable property, that the property is free from any liens, charges or encumbrances. All documents will be analysed and checked that the relevant building permits, construction permissions and approvals have been obtained.
To protect your rights and interests, a Contract of Sale will be prepared and tailored to your specific requirements identifying the particulars of sale, the completion dates, payment schedule and any fixtures and fittings, responsibilities of both parties and default penalties and compensation clauses. The contract will be given to you and the vendor for review and if both parties are satisfied with the contents the contract will be signed.
Once satisfied with the results of the search and contracts have been signed and exchanged, the Contract of Sale will be registered at the District Land Registry Office. It is compulsory for the registration of all contracts of sale for the purchase of immovable property at the District Land Registry office within 21 days of the contract being signed and for the stamp duty to be paid at the rate of 0.5% of the property value before registration can take place. Registering the contract ensures that you are protected from the property being sold or transferred to a third party and from any subsequent liens being placed on the property.
Under the laws of the TRNC, non-TRNC Citizens are entitled to take title to only one property at any one time up to a maximum area of 5 donums per household providing that the property only consists of one dwelling and the property is completed at the time of transfer (unless you form a company or constitute a trust with a local person). The Immovable Property Acquisition and Long term Lease (Aliens) Law (52-2008) of Turkish Republic Northern Cyprus (TRNC) requires that every non-TRNC citizen has to obtain Permission to Purchase from the TRNC Council of Ministers before the title to the property can be registered in their name. The application for a purchase permit will be carried out on your behalf and followed up until the application is completed.
The Council of Ministers will carry out relevant searches; these include land searches, military searches and immigration authorities searches. The Council of Ministers will also need to be satisfied that you are of good character and have no criminal records. Provided that these are satisfactory permission to purchase will be granted. You will be notified once your permission has been granted and necessary land registry valuation forms will then be completed. Taxes due on completion will be paid and then the transfer of the title deeds into your name will be carried out.
The obtaining of permission to purchase is a protracted procedure and can take up to one year but this does not mean that you will be unable to take possession of your new property once contracts have been exchanged.
For more information you can email us at [email protected]