How to correctly pay VAT: 5% of the actual property price or 5% of the cadastral value?

In Northern Cyprus, VAT on real estate purchases is calculated as 5% of the tax base, which is confirmed by the transaction documents. In practice, this is usually the amount stated in the sales contract, and in some cases, the assessed (cadastral) value is used if it is accepted as the calculation base. If the contract is already registered in the land registry, the tax base is generally fixed according to the registered contract.

• From which amount is the 5% VAT calculated in Northern Cyprus
• When the cadastral (assessed) value is used
• Why the contract amount is critical
• Risks of addenda and underreporting the amount
• How to proceed
• Glossary
• Frequently Asked Questions
• If you need consultation on VAT and the sales contract

From which amount is the 5% VAT calculated in Northern Cyprus

The key question is which amount will be recognized as the tax base for VAT calculation. In most transactions, the benchmark is the amount stated in the Sales Contract. This amount is most commonly used to calculate the 5% VAT.

When the cadastral (assessed) value is used

In some cases, the owner or buyer relies on an appraisal: an appraiser determines a value that may differ from the market price. If this valuation is accepted for calculation purposes, the 5% VAT may be calculated based on the assessed value rather than the stated market price.

In practice, this is more often discussed in high-value transactions, where 5% of the full amount significantly increases the purchase budget.

Why the contract amount is critical

The amount stated in the sales contract affects not only VAT but also the legal stability of the transaction. If a dispute arises later, courts and government authorities generally refer to properly executed documents that have passed the required formalities.

Risks of addenda and underreporting the amount

Sometimes parties use addenda or split the price across documents. This approach can create legal and financial risks:

• in a dispute, only properly executed documents with mandatory payments may be considered;
• if an addendum is prepared later, fines and additional charges may arise;
• if the contract is already registered in the land registry, the calculation base is usually considered the registered amount;
• underreporting the price increases the risk of claims and complicates protection of the buyer’s interests.

I recommend registering the sales contract because until the purchase permit is issued, the buyer is at risk. If there are no separate property titles yet, it is impossible to submit an application to the Council of Ministers without a registered contract. It is possible via an additional agreement, but in court, the judge usually considers only contracts with VAT marks and stamp duty paid. If several years have passed since signing the addendum, a fine may need to be paid.

How to proceed

1. Check with your lawyer or real estate agent which base will be accepted for VAT calculation in your transaction: the contract amount or the assessed value.
2. Verify whether the sales contract will be registered in the land registry and at what stage.
3. If the property is being appraised, agree on who orders the appraisal and for what purpose the report will be used.
4. If addenda or supplementary agreements are planned, clarify in advance the legal consequences, execution process, and potential fines.
5. Document in writing which documents will be considered primary for the tax base and for protecting your rights in the future.

Glossary

• VAT — value-added tax; in real estate transactions in Northern Cyprus, a 5% rate often applies to certain categories of purchases.
• Sales Contract — the main contract between buyer and seller specifying the property and transaction price.
• Cadastral (assessed) value — the property value according to an appraiser’s report, which may differ from the market price.
• Addendum — an appendix or supplementary agreement to the main contract.
• Land Registry — the authority/system where property transactions and rights are recorded.
• Stamp Duty — a mandatory payment that confirms the execution of a document for certain procedures.
• Council of Ministers Permit — authorization for a foreigner to purchase real estate under Northern Cyprus procedures.

Frequently Asked Questions

Is the 5% VAT in Northern Cyprus calculated from the contract amount or the cadastral value?

Most often, it is calculated from the amount stated in the sales contract. In some cases, the base may rely on the assessed (cadastral) value if it is accepted for calculation.

Can the VAT base be changed if the contract is already registered in the land registry?

If the contract is already registered, the tax base is generally considered the registered contract amount. Changes after registration are usually difficult.

Why is an appraiser involved in the transaction?

The appraisal confirms the property value via an official report. It is sometimes used as a basis for calculations or internal procedures related to the transaction.

Is it risky to prepare additional agreements to the contract?

The risks depend on execution and timing. In disputes, only properly executed documents with mandatory payments and marks are considered.

Why is it recommended to register the sales contract?

Registration reduces certain risks for the buyer, especially if the purchase permit is issued later and the transaction is "in progress."

Who helps properly prepare VAT and contract documents?

Typically, this is a lawyer handling the transaction and a real estate agent experienced in Northern Cyprus deals.

If you need consultation on VAT and the sales contract

You can contact our legal partner — DeJure — for consultation with a licensed Northern Cyprus lawyer.

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