Amendments dated May 21, 2024 to the LAW on the purchase of real estate and long-term lease by foreigners made some adjustments to the previously existing procedure.
The main goal of the amendments to the law: payment of taxes by all market participants and closing existing loopholes of non-compliance with laws, ensuring the protection of the rights of buyers from unlawful actions of sellers (developers and owners) and obtaining ownership rights, the formation of a civilized real estate market with transparent and understandable conditions for all its participants, obtaining real and official statistics of housing being built and purchased, minimizing negative consequences and leaving financial assets in the real estate market of Northern Cyprus from the gray zone.
The state is strengthening control over the mandatory registration of all sales contracts and transfers of ownership of purchased real estate, both by Turkish Cypriots and foreign citizens.
Key points:
1. Foreigners (citizens of all countries: Germany, USA, Canada, Poland, England, Ukraine, Russia, Kazakhstan, Belarus , Lithuania and others) except citizens of countries that recognize Northern Cyprus (currently this is only Turkey ) have the right to purchase one of types of real estate: 1 private house or 1 apartment or 1 plot of land measuring 1 denium (1,338 m2) or 1 private house on a plot of up to 3,300 m2. However, 1 property can be registered with shared participation by 3 foreigners.
2. Foreigners - citizens of countries that recognize Northern Cyprus (for now it is Turkey) have the right to purchase 3 apartments (not private houses).
3. Foreigners are prohibited from acquiring ownership of agricultural and forestry lands.
4. Foreigners are prohibited from purchasing lands with shared title.
5. In one project (complex) it is allowed to sell 80% of objects to foreigners and 20% of objects to citizens of Northern Cyprus and countries recognizing it (Turkey). Of these, no more than 50% of the objects must be sold to citizens of the same country or first-degree relatives (father, mother, child)
6. For investment, foreign citizens can purchase real estate in the following sectors: healthcare, industry, education, tourism, agriculture, construction and sales are excluded. At the same time, deposit at least 20 million euros into an account in a local bank, use the capital within 2 years and sell such an investment no earlier than 5 years.
7. Developers are now required at the construction stage to obtain not only a building permit , but also kat irtifak koçan (preliminary division of a house into floors and apartments on a land plot) with payment of a fee to the Builders Association (which was not previously done). This is additional protection for foreign buyers in guaranteed receipt of title (ownership rights) after completion of construction.
8. When submitting an application for a purchase permit to the Council of Ministers, a standard package of documents: a certificate of no criminal record, site plan, title, passports, etc.) will require a purchase and sale agreement and invoices in order to understand the schedule and balance of payments by the time obtaining permission. , kat irtifak koçan or kat mulkiyeti must be attached to the documents for the property
9. All fees and taxes shall be paid by the buyer and seller within 60 days after publication of the permit in the Official Gazette. (Currently, permits for foreigners are processed over 1 year, for Turkish citizens within 3 weeks). If the buyer has not made full payment for the property, then 6 months will be counted after full payment. If the transfer of ownership is not possible due to legal proceedings, it must be carried out within 1 month after the court decision is issued.
10. Attorney trust agreements entered into after 21 May 2024 are void and current trusts must be registered within 75 working days.
Penalties:
For failure to comply with the established rules, a fine ranges from minimum amounts to 500 minimum wages ,
What additional payments do foreign buyers face due to the entry into force of the new law?
Additional payments include a fee for filing an application with the Ministry for permission to purchase real estate by a foreigner. The remaining taxes remain unchanged, that is, 6% registration with TAPU, 0.5% stamp duty with the tax office, and 6% transfer of title. Also, do not forget about the one-time payment by the first buyer of 5% VAT and transformer tax.
How much is the payment for obtaining permission to purchase real estate by a foreigner?
0.5 (half) of the established minimum wage ( 17.035 TL ). If the buyer re-applies for a permit, he pays double the specified payment, that is, one minimum wage ( 34.070 TL ).
What amount of tax must be paid by owners who have registered a purchase and sale agreement in TAPU (land registry) before 2023, paying only 0.5% stamp duty?
The specified category of foreigners will need to pay 12% when transferring the title to their name, as well as 5% VAT if it has not been paid previously.
What amount of tax are required to be paid by owners who registered a purchase and sale agreement in TAPU (land registry) after February 2023 before the new rules come into force, that is, paying 6% in TAPU upon registration and 0.5% stamp duty in tax?
The remaining 6% is due upon title transfer.
What amount of tax must be paid by owners who purchase real estate after 05/21/24 ?
6% upon registration in the land registry (TAPU), 0.5% stamp duty at the tax office, 6% upon transfer of title.
Is it possible to conclude trust agreements for investors who want to purchase 2 or more real estate properties?
New changes to the law prohibit the registration of new trust agreements with lawyers in Northern Cyprus. The legislator also wants lawyers to disclose information about previously concluded trust agreements. As a consequence, buyers may be required to register their real estate in accordance with the previously established requirements: 1 property per individual. Foreigners who have purchased several real estate properties are required to sell or re-register the 2nd and subsequent properties to relatives or other persons in order to complete the registration of contracts or transfer of titles to these properties.
What should foreign buyers who have previously purchased and registered two real estate properties in their name with TAPU do?
As indicated above, foreign buyers who have purchased several properties in their own name are required to sell one of them or register it in the name of relatives or third parties.
If a foreign buyer has two passports from different countries, can he register one piece of real estate for each passport?
It’s better not to do this, because in the moment, even if you manage to do this due to the imperfection of the accounting system in different regions of Northern Cyprus, then in the future, if this fact is revealed, there may be adverse consequences with the obligation to sell or re-register the second property to a third party with possible penalties.
What should those foreigners do who have purchased real estate from a developer and have not registered existing sales contracts?
The legislator provides a period of 6 months from the date of entry into force of the law, during which it is necessary to register the purchase and sale agreement in accordance with the established procedure. If a foreigner has more than 1 purchase and sale agreement, he undertakes to notify the Council of Ministers about this and pay 1% of the sale amount. If he does not make it within this period, then he is given an additional 6 months, but the fee will no longer be 1%, but 3%. Otherwise, you will be subject to a fine. If the foreign buyer is located abroad, then this can be proven through the court and additional time can be obtained to pay taxes and fees.
What if I do not transfer the title within 6 months of receiving the permit?
The previous permit will be canceled and will need to be reapplied at double the application fee. One person cannot apply for permission more than twice.
How will the amount of property tax payable be calculated?
The tax will be calculated on the value specified in the purchase and sale agreement. If the contract indicates a value lower than the cadastral value, which was determined by the land cadastre, then the tax will be calculated based on the cadastral value. For example, the contract indicates the cost of 1+1 as £50,000, and the cadastral value of such objects is £80,000, which means the tax will be calculated from the cadastral.
To briefly summarize, I can say that the rights of foreigners to purchase one piece of real estate remained the same, taxes did not increase, and only a one-time fee was added when submitting an application for purchase. It has become mandatory for a foreigner to obtain ownership rights (transfer of title upon purchase) to a property and to submit a permit to the Ministry of Internal Affairs to obtain a purchase permit. This is a guarantee of the security of a foreigner’s rights to the purchased housing.
At the moment, government agencies (land cadastre) are releasing Instructions for the Application of the LAW (genelge) in order to understand how to register contracts.
The article was prepared with the participation of lawyers from the Northern Cyprus Law Office and is for informational purposes only. If you have questions of a private nature, you should contact practicing lawyers in Northern Cyprus, including partners of our company.
