The number of people who want to own a property in Cyprus, which hosts both domestic and foreign tourists in every period, especially during the summer holidays, is quite high. One of the most curious issues for those who plan to buy real estate in Northern Cyprus, which has managed to be among the favorite places for real estate investment, is the details about the transfer of title in Cyprus. In particular, the main taxes to be applied to the transfer transactions are frequently researched.
Taxes Due After Title Deed Transfer
The taxes applied after the title deed transfer in Cyprus can be listed as follows:
- Transfer Fee
- VAT
- Withholding tax
While the transfer fee is paid to the Land Registry Office, VAT is paid to the tax office or the seller. Of course, at this point, the transaction must be subject to VAT. Otherwise, this payment will not be made. Withholding tax, that is, the seller’s tax, is also paid to the tax office. While the buyer pays the transfer fee, the seller pays the value increase tax. If the transfer is subject to VAT, which party will make the payment is specified in the sales contract.
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Transfer Fee:
When the title deed is transferred, 6% of the appraised value for the immovable is paid as transfer fee. However, for once, everyone has the opportunity to reduce this tax to 3%. Today, every foreigner has to meet the transfer fees as follows when purchasing real estate.
- 3% of the first real estate
- 9% of the second real estate
- 10% of the third real estate
These percentages are valid for 6 months as of 29 August 2018. Knowing this, you need to act. In addition, a small municipal contribution is paid when paying the transfer fee. This contribution is equivalent to 1% of the transfer fee.
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VAT:
VAT, which is determined as 5% of the sales price or the appraised value, is only incurred if the seller is considered as a professional seller. In addition, VAT is not paid only before the title deed transfer. Depending on the seller’s request, payment can also be made during the transfer of disposition of the relevant immovable property. If VAT has been paid before the title deed transfer, it is necessary to ensure that the VAT receipt and invoice are received. Because in order to prove that these payments have been made, the receipt and invoice must be submitted to the tax office. Therefore, it is important that the relevant documents are kept reliably.
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Withholding tax:
Withholding tax, another type of tax, occurs when the seller is classified as a professional seller. If the seller is doing this job professionally, a 4% value increase tax is applied. However, if the seller is not interested in real estate business and sells this immovable property as a person, the right to be exempted from tax can be used for once. If this right has not been used before, the withholding tax is determined as 2.8%. At this point, the land should not exceed 1 acre for this right that each person can use once. Thus, withholding tax is not applied. It should be noted that professional sellers cannot benefit from this right. In addition, all withholding tax rates are determined by calculating over the appraised value. This fee is paid with the title deed transfer.
