Whiterocks Resort - Bafra, Northern Cyprus - Costs & Taxes - A Mediterranean Paradise

With no income tax, import duties, corporation tax and little or no council tax, Northern Cyprus is a tax haven waiting to be discovered. Many grants are offered by the government to help with the setting up of business, particularly tourism. Government statistics say that from 1999-2002 there were over 6,000 foreign investors. Property prices have risen more than 120% in the last 3 years making Northern Cyprus one of the best places in the Mediterranean for property investment.

Vat

At present the Vat rate is set at 5% - this is highly beneficial to all investors.

Property Tax

From a taxation viewpoint there are two main ways to own property in Northern Cyprus.
The first is as a foreign resident within North Cypriot law. This means that your main country of residence, such as England, will be the country that you declare your Northern Cyprus property as an asset for tax purposes on income from rental and any Capital Gains Tax due upon sale of the property. The second is as a Northern Cyprus Resident. This means applying for tax residence in Northern Cyprus as your main country of residence.

If your intention is to retire in Northern Cyprus once you have residential status, you'll only have to pay five percent tax on your pension’s income and there will be no inheritance taxation for your willed successors to pay on the property.

If you are intending to gain an income from renting your Northern Cyprus property then tax residency of Northern Cyprus will be very beneficial. The TRNC actively support property investment by tourists and you may be eligible for taxation incentives, as well as being exempt from inheritance tax payments.

CGT will be charge upon sale of your property regardless of whether you are a North Cypriot resident or UK resident. Creative tax planning before you make a North Cyprus property purchase can significantly reduce your CGT liability when you come to sell, for example gifting a share of the property to your wife will enable you to use a larger amount of your personal CGT allowance.

Property Costs

Buying Costs

• All property sale transactions in Northern Cyprus are normally conducted in British Pounds Sterling.
• Purchase Tax for foreigners in North Cyprus is 3%, which is calculated on the nominal value of the property as assessed by the Land Registry Office (LRO). The LRO valuation is not directly related to the current market value and is typically around 60% of the purchase price. (If the one-time option to pay at this rate has already been exercised, the rate is currently 6%)
• VAT of 5% of the LRO valuation is payable to the LRO on transfer of title, if the vendor is a company.
• Municipality Tax of 1% is payable in most regions.
• Legal service costs are normally a fixed price of £1000 or as negotiated with your solicitor. This service normally includes land search, drafting the purchase contract and application to Council of Ministers for permission to buy.
• Most property purchases in Northern Cyprus require a connection fee to be paid to the electricity and water utilities based on the cost of connection. Usually £500 - £800 and itemised in the contract.
• There are a number of reliable lawyers that offer a complete service.
• Purchase Tax and VAT is not normally included in the purchase price.

Selling Costs

• There are no government restrictions on selling your property in North Cyprus.
• The Vendor pays 3.5% capital gain tax when selling. On the first sale of up to one dönüm, it is possible to get an exemption from this duty.
• If you want to pass the property to the name of your children then there is a transfer tax of 0.2%, i.e. £2 per £1000.

Running Costs

• Annual Municipal Taxes are normally less than £100 p.a.
• Electricity supply is 240 volts AC 50Hz. The power supply is subject to disruption but has improved greatly over the past few years.
• Water in Northern Cyprus is by mains supply and in some properties supplemented by wells. Water is stored in tanks - usually located on the roof large enough for three days supply as some areas are only refilled every other day. Water can also be purchased via tanker.
• Drainage is via individual septic tanks, which require servicing every 18-24 months at a typical cost of £25.
• Telephone lines can take several months to be connected but do provide International direct dialing. Internet connections are relatively cheap at no more than £10 p.m. Broadband is available by satellite, but is expensive at present.