Renting out property in Northern Cyprus is a profitable activity that requires careful attention to compliance with tax laws. Authorities have stepped up controls to minimize tax evasion and have also introduced new rules that landlords need to take into account.
Taxes when renting real estate
Tax rates depend on the terms of the contract and currency:
• 8% — for contracts in Turkish lira.
• 13% — for contracts in foreign currencies (for example, euros or dollars).
• An additional 1.5% to the earthquake relief fund.
The tax is calculated based on the rental amount specified in the contract. However, the tax service now reserves the right to revise this amount if it considers it to be underestimated.
Long term rental
If you rent out the property for a long term, the tax ranges from 8% (if paying in Turkish Lira) to 13% (if using foreign currency) of the rent specified in the contract.
Registration of the agreement
The agreement must be registered with the tax office of your area. There is a registration fee of 0.5% of the total rental amount .
Example:
If the contract is concluded for a year and the monthly rent is 20,000 liras, the registration tax will be calculated from the amount of 240,000 liras and will amount to 1,200 liras .
Short term rental
For short-term rentals, the tax rate remains the same - 8% or 13% , depending on the currency used.
Payment Features:
• The tax office will need to additionally fill out form VD91 (issued locally).
• It is important for the landlord to note that this type of rental must also be declared.
Documents for registration of the agreement
To rent, you must prepare the following documents:
1. Declaration of rental income.
2. Form VD91 (for short-term rentals).
Tightening control of the tax service
If the tax office discovers that the rental amount in the agreement is underestimated, the lessor faces fines.
Frequently Asked Questions (FQA)
1. Do I need to pay tax if I rent out property to relatives?
Yes, the IRS requires payment of rental tax regardless of who the property is rented to, including relatives. It is important to register the agreement and indicate the actual rental amount.
2. How to confirm payment of rental tax?
After paying the tax, you are given a receipt, which serves as official confirmation. It may be needed for further calculations or during an audit by the tax service.
3. What to do if the tenant refuses to pay?
If the tenant does not fulfill his obligations under the contract, this does not exempt you from paying taxes. In such cases, you can go to court to resolve the conflict, but the tax must be paid on time.
4. Do short-term rental agreements need to be registered?
Short-term rental agreements must also be registered, especially if you rent through booking platforms. This is a mandatory requirement of the tax service.
5. Can I pay my rental tax online?
Some tax services provide the ability to pay online. Check with your local tax office to see if this option is available and prepare the necessary documents for online payment.
6. When do you need to pay rental tax?
Tax payment must be made by the 15th day of the following month after the conclusion of the contract. Or the tax can be paid immediately for the entire rental period during registration of the contract.
7. What to do if the contract is terminated prematurely?
It is necessary to notify the tax service of termination of the contract. If this is not done, the tax will continue to accrue, and fines and penalties will be charged for non-payment.
