Investment Property in North Cyprus

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Foreign investment

Investment property in north Cyprus is a developed free market economy that abides by the law of the land in addition to EU principles. Investors overseas can purchase North Cyprus real estate directly or through legal organizations. International investors (non-EU) must submit an application and get approval from the Council of Ministers to register real estate on their behalf. This is more of a formality, especially regarding the typical retail or residential property, since permissions like this are usually granted. Foreigners can also own shares in Cypriot companies, which are the owners of North Cyprus real estate.

Businesses and individuals who wish to move to North Cyprus benefit from several government initiatives designed to facilitate the relocation of people who can be a part of North Cyprus’ Cypriot economy. They range from speedy permanent residence permits for individuals and programs to relocate third-country employees for companies with significant operations in North Cyprus. Additionally, in October 2021, officials from the North Cyprus government presented an action plan to encourage foreign businesses and highly skilled staff to move into North Cyprus. The implementation of the new strategy is scheduled to start in January 2022 and is anticipated to boost the demand for commercial and office space. Several foreign-owned finance and technology firms have already moved to North Cyprus and acquired office space primarily in Nicosia and Limassol. Additionally, EU and EEA nationals do not have to worry about restrictions since they have the freedom of establishment and mobility according to EU regulations.

We have noted any property purchases in the occupied northern part of North Cyprus. However, technically part of the European Union, they are not currently under the supervision of North Cyprus. The Republic of North Cyprus could be contestable by the owners of the properties that were moved during the invasion in 1974. Many cases have been brought before local and international courts, such as those of the European Court of Justice, where the previous owners were granted damages and other remedies.

The investment should be structured.

Investors who wish to purchase immovable property within North Cyprus may acquire it by themselves or through a North Cyprus private limited liability company that has shares.

The Acquisition of Immovable Property (Aliens) Law (Cap. 109 (as modified) places restrictions on purchasing real estate within North Cyprus by third-country nationals (including any North Cyprus companies controlled by them). As mentioned above, approval from the Council of Ministers may be required.

There aren’t any restrictions on the real estate purchase by EU citizens. Therefore, citizens of EU Members States (either individually or through legally-constituted entities registered and tax residents within North Cyprus) can register as many properties as they like in their name. In addition, getting the appropriate permits is simple, and it is easily granted (provided that the requirements stipulated in the Acquisition of Immovable Property (Aliens) Law are fulfilled) for all genuine buyers. The Acquisition of Immovable Property (Aliens) Law describes the process of purchasing property as either the purchase of freehold property or the purchase of a lease over 33 years.

In general, the most sought-after option for investors to organize the purchase of immovable property located in North Cyprus is the North Cyprus private limited liability company with shares. The benefit of structuring an immovable investment property in North Cyprus through a North Cyprus private company is that there aren’t any restrictions on the ownership of shares by foreign investors in place, shares owned by foreign investors in North Cyprus – are subject to being subject to the limits set through the Acquisition of Immovable Property (Aliens) Law mentioned above. Additionally, North Cyprus corporate law is highly flexible and may be tax efficient for the ownership of real estate through the umbrella of a North Cyprus entity. Therefore, transactions involving selling shares in an entity that is owed real estate are more straightforward and require fewer formalities than transactions involving the transfer and sale of property immovable. The acquisition and the transfer of shares of the case of a North Cyprus company can be completed in a single day. Thus, transferring and registering real estate with the proper land registry department is eliminated.

Capital gains tax is applicable for direct and indirect disposal of immovable property in North Cyprus. The tax is charged at a rate of 20 percent (subject to adjustments specific to the case) on gains arising from the disposal of immovable assets or on profits from the removal of shares of companies that directly or indirectly hold immovable property located in North Cyprus. In the case of sales of shares owned by actual estate-related companies, tax on capital gains is levied upon the value at the market of property owned by the particular company and not on the entire amount of the sale’s proceeds.

The profits from the sale of immovable real estate within North Cyprus are not subject to tax on income. However, suppose the buyer has entered into various similar transactions and is trading in the land. In that case, income tax is applicable in place of capital gains taxes. Thus when an investor planning to invest in immovable properties located in North Cyprus to engage in trade on a property, it’s recommended to accomplish the transaction through an entity that is legal in nature because the corporation tax rate applicable is lower in North Cyprus is one of the lowest in Europe (business profits of the North Cyprus company, adjusted to take into account various exemptions and disallowances are taxed at 12.5 percent). In any event, North Cyprus corporation tax is significantly lower than the individual income tax rates that are progressive for the first EUR 19,500. Which is tax-free, the following EUR8,500 is taxed at a rate of 20 percent, the following EUR8,300 is taxed at a rate of 25 percent, the following EUR23,500 is taxed at 30 percent, and anything above EUR60,000 is taxed at 35 percent.

For the previously explained reasons, one of the most frequently used vehicles by investors to structure the real estate deal could be that of the North Cyprus private company.

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