SERVICES
3 main taxes involved in any property sale transaction (different taxes apply to gifts of property). These taxes are:
The Capital Gains is usually payable by the vendor and the transfer fee is usually payable by the purchaser (although this can be varied by the parties in the Contract of Sale). VAT, however, is subject to the terms of the Contract of Sale agreed between the parties (i.e. whether or not the sale price includes or excludes VAT).
The amount of tax levied depends on whether or not the vendor is a ‘professional vendor’ (i.e. whether the transaction is of a commercial nature or for profit). The table below indicates the percentages levied accordingly. The percentages for all three types of tax are percentages of assessed value of the property which is carried out just before transfer of title takes place. The valuation assesses the property in the state it is in at the date of the valuation i.e. if there is a new construction on the property, this will be included in the assessment of the value of the property.
|
Vendor’s Band: |
Transfer Fee: |
Capital Gains: |
VAT: |
Private Individual |
6% |
3% (with option right) |
0% on first sales |
0% |
Professional |
6% |
3% (with option right) |
6.25% |
5% |
TRANSFER FEE
The transfer fee payable is 6% upon Land Registry’s valuation of the property purchased with the option to pay 3%. Once this option right is used, the fee payable is 6% for future transfers.
In order to determine Inheritance tax a complicated calculation must be made. Every case should be considered on its own merit.
We are in a position to provide summary information of inheritance tax:
TAX RATES
All companies and other corporate bodies (except cooperative societies) are chargeable with Corporation Tax. Corporations which are registered in the state as «Local Companies» are chargeable with 10% tax on chargeable income.
Corporations which are «Foreign Companies» are also chargeable at the rate 10% on chargeable income only derived from trade or other income in TRNC.
A corporation is «Locally Registered Company», where the central management and control of its business is in TRNC. For tax purposes, all profits of such companies, including profits from other countries are liable to Corporation Tax. For the avoidance of double taxation, a set off for similar tax paid abroad is allowed. Corporation tax is paid in 2 installments – May and October of each year.
The corporations which are specified under the Corporation Tax Law have to withhold income tax at source at a standard rate of 15% on the net chargeable income after corporation tax is deducted. Companies (registered in the State) engaged in education and health facilities and engaged in industrial activities in the regions approved by the council of Ministers, withhold income tax according to the Undistributed Profit/ Paid Up Capital ratio. ( The ratio must not exceed the standard rate).
Foreigners operating in the field of transportation, including corporations, shall not be subject to withholding tax on taxable income to be ascertained under the provisions of the Corporation Tax Law and the Income Tax Law.
The net amount of earnings and revenues obtained from all sources within the borders of the TRNC in a calendar year depends on the Income Tax.
For permanent residents income arising within or outside the TRNC is subject to income tax, but for the avoidance of double taxation a set off for income tax paid abroad is allowed.
Before income tax is charged, allowances granted to individuals under Income Tax Law are as follows;
Individuals are liable to income tax under a progressive tax system. The personal income tax is levied at the statutory rates ranging from 10% to 37%.
Value Added Tax
Value Added Tax was introduced in 1996 as a Consumption Tax. Five VAT rates are applied in accordance with VAT rates regulation. Applied VAT rates are: 0%, 5%, 10%, 16% and 20%.
Free Zone Companies
All income derived from activities and operations undertaken by producers in the Free Port and Zone are exempt from Corporate and Income Taxes (including all kinds of trade, production and service).
All kinds of operations including sale of goods to foreign countries and Free Port and Zone in North Cyprus as well as buying of goods are exempt from custom duties, VAT and indirect taxes. All income derived from activities and operations undertaken by investors other than producers are exempt from Corporate and Income Taxes when the goods and services are not directed to the Turkish Republic of Northern Cyprus.