BUYING A PROPERTY IN THE TURKISH REPUBLIC OF NORTHERN CYPRUS (TRNC)
Buying property in TRNC can be complicated and strenuous for those who are not familiar with the law and legal procedure.
TAXES IN RELATION TO PROPERTY PURCHASE
There are four main taxes involved in any property sale and purchase transaction these taxes are:
Capital Gain Tax
Capital Gain Tax (Stopaj) which is payable to the Tax Office is generally payable by the Vendor although this can always be varied by the parties by an express clause in the Contract of Sale.
The Tax Office requires a copy of the Contract of Sale to be presented prior to the transfer of title. It will then calculate the Capital Gains Tax based on the basis of the assessed value of the property and is currently 4%.
The Tax Office requires a copy of the Contract of Sale to be presented prior to the 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 not be subject to VAT.
Transfer Fees payable to the Land Registry Office just before the transfer of title takes place is usually paid by the purchaser and has currently been reduced from 6% to 3% of the property assessed value.
The Land Registry will view the Contract of Sale before the transfer of title to assess the value of the property and will calculate the Transfer Fee on the basis of the assessed value.
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, although this can always be varied by the parties by an express clause in the Contract of Sale.
All Contract of Sale must be registered at the District Land 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.
HOW CAN A SOLICITOR HELP?
At the initial meeting with Solicitor, he will obtain 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. He will explain the procedure that you will need to follow including the taxes and fees you will need to pay and may be involved in investigations on your behalf to ensure the transactions are carried out securely and efficiently. This stage may also involve taking a power of attorney from you to ensure that Solicitor can act on your behalf to sign documents if you are away from North Cyprus for long periods of time.
As a result of recent legislation, a Solicitor will also required to establish your identity prior to undertaking work on your behalf. Identification documents required are as follows:
- full passport/full driving license
- 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.
The general principles of Solicitor services are as follow:
- a) Solicitor will undertake a land registry search at the relevant Land Registry Office in order 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. He will analyze the documents and check that the relevant building permits, construction permissions, and approvals have been obtained.
- b) In order to protect your rights and interests Solicitor will prepare a Contract of Sale 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.
- c) Once Solicitor is satisfied with the results of the search and the contract has been signed and exchanged he will proceed to register the Contract of Sake 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 Register 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.
- d) 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 the 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. Solicitor will make the application for a purchase permit on your behalf and follow up on the application until the same is completed.
- e) 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. Solicitor will notify you once your permission has been granted and he will complete the necessary land registry valuation forms. The taxes due on completion will be paid and Solicitor will then instigate the transfer of the title deeds into your name.
The obtaining of permission to purchase is a protracted procedure and can take up to two years or longer but this does not mean that you will be unable to take possession of your new property once a contract has been exchanged.
BUYING A PROPERTY IN THE TRNC-FREQUENTLY ASKED QUESTIONS
I am not a citizen of the TRNC, but I want to purchase two properties in the TRNC. How can I do this?
You can sign the contract of sale for the two properties in your name; however, you can only apply for purchase permission for and take title to one property. Therefore, you will need to find a nominee (this person should be a friend or relative or someone you know and trust) to take a title to the property and hold the property on trust for you or you will need to set up a TRNC company. Please ask your Solicitor for more detailed advice on trust and companies.
Can my spouse and I purchase one property each?
No. Husband and wife are counted as one household and the current property restrictions are one property per household.
How long will the purchase permission process take and what does it involve?
This process can take some time-current estimations are around two years. The process involves searches being taken from the Land Registry, the Immigration, and the Military. Please note that in order to apply for permission to purchase you will need to produce a Criminal Record Bureau Disclosure Report from your country.
Do I need to wait for my purchase permission before I can move into my property?
No. Once your property is completed, you will be able to take possession of your property and move in. Once the contracts are exchanged between the partied and registered at the Land Registry you will then acquire beneficial interest and contractual rights of the property. 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.
Can I sell my property before I obtain my purchase permission?
This depends on the terms of your contract sale. Your Solicitor will always try to negotiate with the vendor to insert a clause allowing you to sell the property before taking the title. Solicitor simply prepares an assignment of contract to be signed between you, the vendor, and the new purchasers assigning all of your rights and obligations under the contract to the new purchaser.
What taxes are payable on the purchase and when are these payable?
Taxes, apart from stamp duty which is payable 21 days of the date of the Contract, are usually payable right at the end of the transaction after your purchase permit has been granted and the title deeds are being transferred into your name. However, some vendors require VAT to be paid on the sale price at the date of delivery of possession of the property.
The rates of taxes are the following:
- Land Registry Transfer Fee-3%
- Stamp Duty-0.5%
RESIDENCY IN THE TURKISH REPUBLIC OF NORTHERN CYPRUS
Because laws and regulations of the European Union are not applied in the TRNC; European Union citizens still have to follow the residency procedure in the same way as other nationals. There is no automatic right to reside and work in the TRNC for EU Citizens.
Whenever a person enters the TRNC, their passport is stamped at the port of entry and this entitles that person to remain in the TRNC for the period of time stated on the tourist visa (usually three months) without working. On the expiry of this period, that person must leave the TRNC or face heavy fines for exceeding Turkey, thereby obtaining a further tourist visa, For those people who wish to stay in the TRNC for a longer period than the period of tourist visa, a residency permit must be obtained. To obtain this, the first port of call is the local police station’s immigration department. You will need to produce to the police the following documents:
- Passport original and photocopy
- If you have the title deeds to property in your name, the title deeds (original) and photocopy. If you have purchased a property under Contract of Sale, but have not yet received the title deeds to the property, the Contracts of Sale (original) and photocopy. If you are living in rented accommodation the Tenancy Agreement (original) and photocopy.
- A letter from your local village chief (Muhtar as they are known in Turkish) to say that you reside in his village. This letter is called Ikametgah Belgesi in Turkish. You can usually find your Muhtar in the center of the village where you live near to the local municipality (belediye in Turkish) building or the post office.
- Bank documents showing that you have a TRNC bank account which has sufficient funds or a regular income to enable you to support yourself in the TRNC without working.
- 2 passport photographs
- 6 TL stamps (Damga Pulu in Turkish) (the amount required is constantly changing, so you should make a selection of stamps with you in case of further stamps are required).
The police will then refer you to the Lefkosa State Hospital, or now there are certain clinics that are licensed to carry out this work, for a health test. The test will check for infectious diseases such as HIV, hepatitis, and TB. After you have had the health test, you will collect results and take them unopened to the immigration office in Lefkosa for the residency permit to be stamped in your passport. The immigration office is called the Muhaceret Dairesi in Turkish.
It is important to note that the residency permit only entitles you to live in the TRNC. It does not entitle you to work or to set up a business in the TRNC. To do these things you will need either a work permit or a permit to set up a business. The residency permit is valid for a period of 1 year. It must be renewed every year by following the same procedure (except for the hospital check).
Please note that children under the age of 18 years do not require residency permits. This is only applicable to adults. Therefore, families moving to the TRNC only need to apply for residency for the adult members of the family. Non-citizens who give birth to a child in the TRNC will need to notify the embassy or consulate of their country of origin of the birth of the child and once this has been done and a letter to this effect has been obtained from the embassy or consulate, they will need to apply to the District Office (Kaymakamlik in Turkish) in the area in which they live to register child’s birth.
Becoming a citizen of the TRNC is more complex. Citizenship is granted to all persons whose mother or father is a Turkish Cypriot or to those married to a Turkish Cypriot. At the moment, there is a new law in Parliament to allow foreign nationals to become citizens of the TRNC after 10 years of residence in the TRNC.