Purchasing a Property as a Foreigner in North Cyprus: Full Guide

March 11, 2021

North Cyprus

Buying Property in North Cyprus:

Here is a statement that can be found on every website about the topic “foreign national individuals or lawfully married couples are entitled to purchase one house or a maximum of 14,400 sqft of land per person.” However there are many ways that legally a foreign national can acquire properties, this statement only applies for properties that the buyer wishes to acquire the title deed to their name, where investors almost never do, more on this anon. The common practice that foreigners that know their way around here follow, is legally registering the Contract of Sale in their name to the District Land’s Office.

Tips on investing in multiple properties from North Cyprus to diversify your RE portfolio:

If the individual or the couple wish to purchase more than one property, they have a few options that can be discussed, such as

-using a Trustee/ Nominee

-Combining multiple properties in one contract of sale

-registering the title deeds under a company name

-or under a relative’s name,

-using a Government registered Contract o Sale

These options must be discussed with the buyer’s local lawyer to determine the most cost-effective and secure method.

The foreigners can not buy properties that are in close proximity to military bases due to national security reasons. Buyers are advised to double-check with the realtor if this is the case. The buyer also, should always check with the seller or the agent if the title deed is a freehold.

The prices for real estate transactions are quoted in British Pounds so it is best double-checked when entering into a contract the currency of the agreement. This is because the island is a former Crown Colony. The regulatory structure is also closely aligned to the English common law legal system.

 A) Buying on-site:

The airport to use when traveling to North Cyprus is Ercan International Airport in the capital Nicosia.

To board the plane and enter the country, the visitor only needs a valid passport. Upon arrival, the visitor will need to fill up a form which will act as their visa.

Foreigners visiting North Cyprus may be granted a visa up to 90 days, depending on its type, at the designated ports and border crossings, provided that they fulfill the conditions stipulated in the Aliens and Immigration Law and they are not deemed unfit to enter the country.

The length of stay granted at the designated ports and border crossings of North Cyprus cannot exceed 90 days within a period of 180 days. All foreigners who wish to stay in North Cyprus for more than 90 days, are required to obtain a residence permit (addressed below).

Entry to and departure from North Cyprus is possible through designated ports and border crossings with a valid passport or travel document.

Once in the country, if you are enrolled on an inspection trip program, you will be shown the properties of interest by the agency or developer you work with and once the property of interest is identified, the purchasing process begins which is very straightforward. You will need a valid passport to initiate the process.

It is normal to sign a reservation contract with a small fee ranging between $1,000 and $5,000 acting towards the down-payment. Following this, a sales contract is drawn up between the developer and the buyer, where we strongly recommend a local lawyer’s assistance to act in the best interest of the buyer. Once the sides agree, the contract is signed in person.

B) Buying remotely:

If the person finds a property of interest and wants to buy sight unseen they must ensure they understand the details of the deal and make their best offer. Once both of the parties agree on the terms of the deal, the first step of securing the deal is signing a reservation contract with a small fee ranging between $1,000 and $5,000 acting towards the down-payment. The payment can be made through a wire transfer or via credit card using a mail order form. The person would also need to provide a digital copy of a valid passport, and some basic personal information form regarding current address, contact details, etc. must be filled out.

This would be followed by an introduction of a trusted local lawyer. Please consult your agent to get you in touch with a capable lawyer with overseas transaction experience. The lawyer will suggest a few packages of services, from simple sales contract signing to permission to purchase application and even the permanent residency application. It is best to state your full intentions related to your purchase to determine the best package for you. Most lawyers offer similar services, just to give an idea they are likely to do an in-depth search on the property to inform the buyer on any liens, charges, or encumbrances, check building permits and approvals, draft up a sales contract where responsibilities of both parties and default penalties and compensation clauses are clearly stated, handle and/or assist procedures with the local government offices, and the list goes on.

Two of the most common methods used are using a Trust Company in North Cyprus or obtaining a Power of Attorney. With both of these methods, you attain your local lawyer as your nominee to act on your behalf to sign documents legally. The latter will require traveling to the North Cyprus Representative offices of Turkish Embassies in the country of residence of the buyer, which can be a tedious process. However, once either one of these is obtained, the buyer can use the same documents to buy multiple properties later on.

Once either one of the above is obtained, and the sales contract is approved, signed, and stamped.

Registering the Contract of Sale

At the time of the sales contract, the buyer usually pays 30-60% of the sales price as the down payment depending on the stage of construction the property is at. For these payments, the buyer can use the client account of the local lawyer to avoid the need to obtain a local bank account.

Next, the sales contract should be deposited to the District Land’s Office within 21 days of signing. At this stage, the stamp duty of 0.5% is also paid to the Government. Registering the sales contract to the Government Land’s Office secures the property under the buyer’s name and is legally binding. 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.

If the property is complete, the buyer does not need to wait until the purchase permission application is finalized. The buyer can take possession of the property once the sale contracts are exchanged between the partied and registered at the Land Registry, the buyer will acquire beneficial interest and contractual rights of the property.

Should the buyer decides to re-sell the property before obtaining permission to purchase, unless otherwise stated on their contract of sale, they can re-sell with no limitations.  

Following the Sales Contract Registry:

After the sales contract registry and down payment, the remainder is paid according to terms set out in the contract. If buying preconstruction, installments are the typical payment plan. For resales, the buyer will be expected to remit full payment when the title deed is transferred.

Permission to Purchase Application

Non-Cypriot citizens must then request permission to acquire the property. To acquire the immovable property, foreign nationals and companies are required to obtain ‘Permission to Purchase’ which also requires a clean criminal background check from their local Police Department. This step is a formality. You will also be required to submit bank reference letters and several other documents. The buyer’s lawyer can make the application for a purchase permit on their behalf to the Council of Ministers and follow it up until the completion.  It can take up to a year to complete the process, but you can use the property as you wish in the meantime. In the rare event that this request is denied, you can reapply, inheritance rights will not be affected.

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 the buyer will be unable to take possession of the property once sale contracts have been exchanged.

The buyer can also sell the property with a sales contract even if the titling is not yet transferred to their name. The title can be transferred directly to the next buyer’s name hence the first buyer can avoid paying the Title deed transfer fee which is 3% on the buyers first purchase (have been reduced to 1% to attract investment during the Pandemic) and 6% on the second or more purchases. For details please see the taxation section below.

Key-Handover (KHO)

Some vendors may offer the buyers longer payment plans than the completion period. In this type of scenario, the buyer can receive the keys of the property, move-in for personal use, or start generating returns through rentals without the need of paying the full price off if agreed as such in the contract of sale. The buyer can also obtain a residency permit before they finalize their payments and the title deed transfer. At this stage, further taxes and infrastructure contribution fees must be paid (please refer to the costs section below). If the buyer is strictly interested in investment gains, a period for furnishing should be accounted for before the property can generate returns.

Title Deed Transfer

Under the laws of North Cyprus, non-citizens are entitled to only one property at any one time providing that the property only consists of one dwelling and the property is completed at the time of transfer.

Separation of title deeds for individual properties when an off-plan unit is bought can take up to 2 years after the date of completion. Following this, it is a very simple procedure to transfer the Title Deed, usually, the buyer’s lawyer can assist them on the day of the application, and it is usually completed on the day of application. The fee of 3% for the first-time buyers (reduced to 1% due to the Pandemic) is payable to the Government. Please see taxes and other fees below for more details.

The buyer receives ownership rights when the contract of sale is registered to the Government. This costs around 0.5% in stamp duty. Usually investors, who intend to obtain passive income as rent for a relatively short period of time and re-sell the property within 5-10 years; hold the rights to the property with the contract of sale and avoid going through the title deed transferring process which would incur further 3-6% of the sale price in transfer tax/ fees . When doing the contract of sale, if the buyer ensures that the developer allows this to happen and does not state a deadline for the title-deed transfer, the investor can increase their Return on Investment by reducing the initial expenses incurred. This transfer fee is then passed onto the next buyer when the property is sold. This also allows the buyer to obtain multiple properties as an investment or primary residency. This does not affect the ownership, inheritance, or residency rights of the buyer and is a secure and common business practice that benefits the investors.

Taxes payable by the purchaser

Stamp Duty: 0.5% of the purchase price due payable at the time of registry of the Contract of Sale (one-time payment, applies to resales)

VAT: 5% of the sale price is due payable at the time of Key-handover to the first owner of the property (one-time payment, only applies to the first buyer)

Title deed transfer fee: 3% of the purchase price (reduced to 1% due to the Pandemic) payable at the time of Title deed transfer for the first purchase of the buyer. When a buyer purchases for second or more properties this value is 6%. Some investors do not pay this if they are planning to exit the investment at some point, and then this fee passes onto the next buyer (one-time payment, applies to resales)

Infrastructure contribution and utility connections fee: ranges between 1000 STG and 3000 STG (only the first owner of the property pays this fee, and in some cases, if stated by the contract the vendor covers these costs)

Home Ownership Tax is currently 3 Turkish Liras per sqm (recurring payment)

If the owner receives rental yields from their property, they should pay a capital gains tax of 10% of their revenues. The buyer should check with their local tax authorities if they will be subject to double-taxation in their country of residence. (recurring payment)

PS: Capital Gains Tax (Stopaj) is payable to the Tax Office by the Vendor although this can always be varied by the parties by an express clause in the Contract of Sale.

Other closing costs

The two other main costs are the legal fees which can range between 1000 STG and 5000 STG depending on the services chosen by the buyer.

The other is the furnishing. Most vendors offer furniture packages. Even when the property is advertised as unfurnished; it usually comes with fitted tiles, kitchen cabinets, fitted sink, toilet and bathroom, AC infrastructure. However, the buyer must always double-check what is included in their purchase price with the vendor and have it in the written form attached to the sales contract.

The buyer might also get into a maintenance agreement for the common areas of the complex the property might be sharing, and these maintenance fees are payable monthly or annually. An agreed amount of deposit per the agreement might be paid at the time of entering into this contract usually at the time of Key-Handover. Full recurring costs should be discussed with the developer and/or their representatives.

Inheritance

In the event that the owner passes away, probate would need to be set up and the beneficiaries of the probate would then receive the assets. The beneficiaries are best identified in a will and a copy of the will better be registered to the local Courts.

• The value of the assets would need to surpass approximately 600,000 British Pounds in order for inheritance tax to be payable.
• In the event that one of the directors passes away, and the directors, shareholders, and the secretary are the same but under different company name then only one company (with this exact set-up) can be used. Therefore, if the person has several companies with the same Directors, shareholders and the secretary, only one of those companies can be used to take the title deed.

Different taxes are applicable where the transfer is made by way of a donation (gift);

To a child from parents with 0.2%

To spouse with 0.4%

To a grandchild with 0.4%

Plus withholding tax is payable to the Finance Department.

Selling your property

First-time sellers can exert their right to not pay any Capital Gains Tax. From the second sale onward by the same person is subject to Capital Gains Tax of around 3% of the valuation of the property.

If the person chooses to work with an agent the commission is payable by the seller.

Soylem Coli

Overseas Sales Assistant, Avertiss Real Estate

For further questions:

soylem@avertiss.com +905338641652 (WhatsApp and regular)