LETTING A PROPERTY IN NORTHERN CYPRUS

Many people who have acquired, or who intend to acquire, an immovable property in the TRNC may consider earning some additional income from the letting of their property either for short term holiday lets or long term rentals.  Whether the said property is in your name or not it is vitally important that you comply with TRNC tax requirements – if you fail to do so the property may be accruing tax arrears on unpaid rental income and it will be your responsibility to resolve.

In order to avoid such problems our team at Erginel Law has prepared a guidance on letting a property in the TRNC.

A Tenancy Agreement is a legally binding document which gives the tenant the right to live in the rental property, and the landlord the right to receive a rent. In general, the tenancy agreement should include  the following information:

1. Property address;
2. The parties involved;
3. Rent per month/per annum;
4. Currency of payment (note the currency will determine the rate of income tax calculation)
5. Deposit and terms of payment;
6. Terms and condition of the tenancy to clarify the rights and obligations of both parties and notice period;
7. Signed inventory of contents (if furnished)

The tenancy agreement should be prepared in Turkish and English: a well written agreement forms a relationship between landlord and tenant that each party can rely on if a dispute should arise.

The Tenancy Agreement must be signed and witnessed by the named parties themselves.  If this is not possible he/she/they must provide a suitable Power of Attorney to deal with all rental matters on their behalf.

The Tenancy Agreement must be stamped (Stamp Duty payable by the Tenant(s), and registered with the Tax Office within 21 days to avoid penalties for late registration. Without the Tax registration the Tenancy Agreement is null and void and does not create any legal status for both landlord and tenant. Hence, in the event of dispute arising, parties will not be able to make a claim to the Court or any other institutions.

Documents required for registration with the TRNC Tax Office

To register a Tenancy Agreement, the tenant or landlord must visit the TRNC Tax Office with the following documents:

• Tenancy Agreement that has been sign by both parties and two witnesses;
• Tenant(s) copy and original passport;
• Landlord(s) passport copy;
• A copy of title deed or stamped contract of sale.

Letting a property without an Agreement

Letting a property without an Agreement, whether it is short-term or long-term, is not advisable under any circumstances.  The Tax Office are constantly monitoring properties advertised for rental because tax evasion is a huge problem in the TRNC.  Even if you have let your property legitimately in the past it could still cause problems with any other occupancy other than your own.  For example, many landlords have allowed family and/or friends to use their property without charge.  Whilst this should be considered reasonable to most people (providing it’s true), the Tax Office are very likely to view it as tax evasion and you will be responsible for any penalties.

Therefore, you are strongly advised to ensure that you, or the letting agent, ensures that a Tenancy Agreement is always signed and registered and, for short term lets, a Booking Form is completed, even if the occupants are family or friends.  In all instances, rental tax must be paid to the Tax Office.

 If you fail to complete your obligations as the Landlord, the Tax Office will calculate the estimated rental income and tax due using similar properties advertised.  The onus is on the Landlord to provide rental income records to the Tax Office.  Please also note that even if you declare rental income and pay tax in your country of residence this is of no concern to the TRNC authorities.

The associated costs and expenses of disputing TRNC tax demands can be prohibitive and this is why tax evasion is a false economy.  You may think you are getting away with something but do not be fooled.  Your property cannot be sold/transferred if there are outstanding Tax Office debts.

Rental Tax Rates in Northern Cyprus

8%  –    if rental payment (as per Tenancy Agreement) is Turkish Lira;

13% –    if rental payment (as per Tenancy Agreement) is in any other currency GBP, USD, EUR, etc.

Long Term Lets

Income tax is payable by 15^th of the following month or it can be paid in full for the duration of the Tenancy upon registration of the Agreement. Late payments will accrue penalties

Short Term Lets

Submit the Declaration of Rental Income to the Tax Office (V.D. 91).The tax rate will apply as per long term rental.

IMPORTANT – In the event the Tenant has ceased to make payments according to the Rental Agreement, the Agreement should be terminated if alternative payment arrangements cannot be agreed, AND the landlord must notify the TRNC Tax Office of such termination, otherwise the income tax will continue to accrue.

Do not rely on agents and/or third parties to comply with the rules.  When taxes are paid receipts are always issued by the authorities.  It is your right and responsibility to record ALL lettings of your property and to ensure that you have copies of all receipts pertaining rental tax.

It’s your responsibility – be responsible.