Home | Finance | Real Estate | Buying

North Cyprus Property and Real Estate Guide to Taxes

By: Duncan Johnson

Read More About Buying

There are four main taxes involved in any property sale and purchase transaction These taxes are:

* The transfer fee which is payable to Land Registry Office
* The capital gains tax which is payable to the Tax Office
* The VAT (KDV) which is payable to the Tax Office or to the vendor
* The Stamp Duty which is payable to the Tax Office

Different taxes apply to gifts of property for no consideration and transfers of property between family members.

As a general rule, capital gains tax is payable by the vendor and the transfer fee and Stamp Duty is payable by the purchaser, although this can always be varied by the parties by an express clause in the Contract of Sale.

The payment of VAT depends on two factors:

* Whether or not the transaction is subject to VAT. This depends on whether the vendor 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, the transaction will not be subject to VAT.

* Terms of the Contract of Sale. If the transaction is subject to VAT, who will actually pay the VAT depends on the terms of the Contract of Sale i.e. whether or not the sale price is stated to be inclusive or exclusive of VAT.

Taxes are generally paid on transfer of title. The percentages listed below are calculated as follows: the Transfer Fee is generally paid as a percentage of the assessed value of the property which is carried out just before transfer of title takes place. The Land Registry assesses the property in the state it is in at the date of the assessment i.e. if there is a new construction on the property, this will be included in the assessment of the value of the property. The VAT, Capital Gains and the Stamp Duty are based on either the assessed value or the contract value, whichever is the highest. Under new regulations, the Tax Office now requires a copy of the contract of sale to be presented to it prior to transfer of title.

The percentages levied for each of the three types of tax are shown below:

* TRANSFER FEE - The transfer fee is 6%. However, every person has a once in a lifetime option to reduce this to 3%. 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%.

* VAT FOR PROPERTY TRANSACTIONS - 5% of either the assessed value or the sale price. Please note that some vendors require the VAT to be paid on the actual sale value of the property as stated in the Contract of Sale on the date that possession of the property is delivered to the purchaser. You should check the terms of your contract of sale on this point.

* CAPITAL GAINS TAX - As stated above, this is usally paid by the Vendor. The amount payable depends on whether the vendor is a professional vendor a private individual as defined under VAT above. If the vendor is a professional vendor, the rate will be 6.25%. Otherwise, the rate will be 3.5%

* STAMP DUTY - This 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%.

FREQUENTLY ASKED QUESTIONS

Vat For Property Transactions

Will I have to pay VAT on my property purchase?

In determining whether you will be liable to pay VAT on your property purchase, you need to establish the following:

* Whether the vendor is a professional vendor as defined above.
* Whether your contract requires you to pay the VAT.

Where the contract does not expressly mention VAT, it is our opinion that the purchase price shall be deemed to be inclusive of VAT.

CAPITAL GAINS TAX

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 private individual has a once in a lifetime tax free sale option (for a house and land not exceeding approximately 1 donum). If you use this 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%.

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.

Article Source: http://depositarticles.com/

Duncan Johnson has a strong understanding of client needs and a deep knowledge of the Property Market in Northern Cyprus and are answerable to the client on every level. For more information on North Cyprus Real Estate Agents please visit www.MeridiesHomes.com

Please Rate this Article

 

Not yet Rated

Click the XML Icon Above to Receive Buying Articles Via RSS!
Additional Articles From - Home | Finance | Real Estate | Buying
Sign Up for a free account.
Our other websites
All about SEO
Beauty Tips Forum
Submit Articles
Member Login
Link Us
Submission Guidelines
Ezine Notifications
Article RSS Feeds
Sitemap
New Stuff
About Us
Developer
Good shopping portal
Link to Us
Contact Us
Privacy Policy
Terms of Service

counter easy hit

Powered by Article Dashboard