When purchasing a home, it is essential to follow all legal regulations in order to safeguard yourself from any harm.
On resale properties, it is advised that a search is conducted at the District Land office, to ensure that there are no encumbrances, charges or impediments placed on the property. This is search is also carried out to warrant the owner of the property and find out the type of Title Deed.
Whether the property is a resale or new built, a contract must be written and registered at the Land office and we are obligated to complete the registration procedures, within 21 days from the date of the contract.
Taxes
In any property sale or buy process, there are four key taxes to consider:
Capital Gains Tax is only payable when the person selling the property (Vendor), has previously taken title of the property. The standard procedure is that the Vendor is usually liable to pay the Capital Gains Tax to the Tax Office on the sale of a property. However, in the event the parties of the acquisition agree differently this can be implemented into the Contract of Sale and paid either by the Purchaser or by both parties.
First time sellers are given the option of using their Tax exemption right, thus meaning they will not be liable to pay the Capital Gains Tax, to the Tax office when selling the property. It must be advised that the Tax Exemption right is only given to each individual once.
If the client does not wish to use their Tax Exemption right or has used it prior to the sale of the property, the Capital Gains Tax payable during the sale will be calculated in the amount of 2.8 % of the valued price of the property.
VAT is usually paid for new built properties, in the amount of 5% of the Contract price. Generally, this amount is paid to the Developer on the date of possession of the property. The VAT is established based on TRNC Laws and can change if there has been an amendment to the current regulation.
In the case of resale properties that are subject to VAT, this will only occur if the Vendor has sold 3 properties within a period of 12 months or 5 properties within a period of 36 months. The Vendor will be classed as a professional body and will be subject to paying the VAT and Capital Gains Taxes.
The purchaser usually pays the transfer fee, which is now 6% of the property assessed value or the contract price, to the Land Registry Office simultaneously to the transfer of the title. If the Purchaser is a first-time buyer, they will be eligible for a Tax reduction of 3%
Stamp Duty is payable to the Tax office, in the amount of 0.5% of the amount specified within the Contract of Sale. This fee is paid prior to the registration of the Contract of Sale and certified original is obtain and handed into the District Land office in order to register the Contract. The registration procedure must take place within 21 days from the date of the Contract of Sale or a penalty will be implemented.
