This month on Lincguide Naomi answers some important questions on amongst others, income while living in Northern Cyprus, dealing with contract disputes, and purchase tax discounts in Northern Cyprus. Scroll down to read the answers or click the link to go directly to the question below.

1 Paying tax in Northern Cyprus on income from elsewhere >
2 Verbal agreements with builders in Northern Cyprus >
3 Northern Cyprus builder owes me £20,000 >
4 Without electric for four years >
5 Extension to purchase tax discount >


1 Paying tax in Northern Cyprus on income from elsewhere.
We are considering moving to North Cyprus. Once we get our residency, what will the income tax be on our non-North Cyprus income- both  earned income and investment income such as interest and capital gains?

“We are not tax specialists so I would advise you to speak to a financial adviser/accountant in Cyprus who is experienced in advising ex-pats on their tax and income in the TRNC. However, as far as I am aware, although there is no official double-taxation treaty between the TRNC and the UK, I believe that there is a tacit agreement that income received from the UK will not be taxed here in the TRNC.

In terms of savings, if you have a savings account here and earn interest on those savings, you will pay tax on the interest earned locally and this will be deducted at source by the bank so that you will receive the net interest into your account.”
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2 Verbal agreements with builders in Northern Cyprus
When we bought our villa off plan we agreed some extras with the builder which were noted as an add on to the contract and signed by both parties, we subsequently introduced a friend to the builder and they bought a property so the builder said he would upgrade our floors in the villa from tiles to marble at no extra cost to us, this was not noted anywhere, but he is now insisting on charging us for this.

“Generally, a Contract made in writing can only be amended in writing signed by the parties.
Therefore, if the upgrade to the floors was not noted in writing, it could be difficult to argue that the Contract had been amended to include this additional term and the vendor could argue that under the terms of the Contract which was signed, he is only obliged to install the standard floor as stated in the Contract.

Therefore, if the builder has not already installed the upgraded flooring, it would be difficult for you to argue that he is under an obligation to do so as this is not specifically stated in your Contract of Sale.

On the other hand, if the flooring has already been installed, as your email suggests, in order for the builder to try to argue that you owe him additional money for the flooring, he has to show that you agreed to the installation and the extra price for it, which will be difficult for him to do as he has no agreement in writing from you. You could therefore try to argue that you did not agree to any extras. If you argue this, however, the builder might try to counter this argument by saying that since you didn’t agree to any extras, he will remove the upgraded floor and replace it with the standard flooring. This may not be an argument which he would want to make lightly as this would cost him a significant amount of money.Further, if the matter goes to court, the court may take the view that if you try to argue that you didn’t agree to any extras being installed, you should have pointed this out when the upgraded flooring was being installed.

Alternatively, you could try to argue that the agreement to upgrade the floor was a separate Contract, rather than an amendment to the existing Contract of Sale, by arguing that it was a ‘Commission Agreement’ for the introduction of your friend to the builder, completely separate to the Contract of Sale and that the consideration for the introduction was flooring to be installed into your house. Although such a verbal agreement could be valid and binding, the difficulty with the fact that it was made in writing is proving its existence. If you do not have any proof that this agreement was made verbally between you, in the form of something in writing or other witness evidence, proving the matter in court could be difficult.

You may wish to ask your advocate, initially, to send the builder a legal notice or to hold a meeting with the builder to see whether this situation can be resolved through mediation. If this is unsuccessful, then your only options would be either to pay for the flooring in order to obtain title or to take legal action against the builder for breach of the verbal commission agreement, bearing in mind the difficulties pointed out above.

If the vendor refuses to transfer title, you should have a clause in your Contract of Sale putting an obligation on the vendor to transfer title within a certain period of time. If he fails to do so, you can take litigation for breach of Contract. He will probably claim, in his defence, that you still owe him money for the upgraded floor, which would then allow you to bring up the arguments above within this case.”
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3 Northern Cyprus builder owes me £20,000
I am owed 20k by a builder, I have signed a repayment contract in which they have agreed to repay me 1k per month, have only had 1 month payment and they are already 3 months in arrears. If i take them to court and get a judgement in my favour will i get paid in full plus costs?

“If you have a valid and signed Contract under which the builder has agreed to pay you this money, but fails to do so, you could take the builder to court for breach of Contract. Often, where payments are made in instalments, failing to make payments on time will often cause the whole debt to become due. The difficulties with litigation are, however, as follows:

The builder would probably not make any payments while the litigation was continuing which would mean that you probably wouldn’t receive any payments during this time.

The case could take around 1 year to come to full trial.

If you win your case, the builder would be ordered to make payment to you and the judge would order the builder to pay costs in the case. However, you should note that the amount which the court awards for costs may not cover the actual costs of your legal fees as the amount awarded by the court is usually lower than what your actually legal fees are.

Once you have obtained judgment against the builder, if he still fails to make payment, you would then have to consider enforcement proceedings against him. This means that you would have to obtain a compulsory sale over any assets, movable or immovable belonging to the builder.

The builder could be ordered to make payment by instalments which could mean that you will not receive the whole judgment as a lump sum. However, the difference would between the failure of the builder to pay the instalments in those circumstances and the current failure of the builder to pay the instalments would be that failure to pay in those circumstances would then be breach of a Court order with serious consequences, including possible imprisonment, for the builder.”
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4 Without electric for four years in Northern Cyprus
We have been with out electric for four years, our builder is a load of rubbish and we cant get him to do anything.
Electric is next to the house, but kibtec wont connect. What can i do?

“Before I can advise you in any detail on this, we need to discover the reason why the electricity has not been connected.
The fact that you do not even have a temporary supply of electricity to your property (a builder’s supply) suggests that there may be an issue with the building permit for this property. The first step will be to establish whether or not your property has a building permit.

If your property does have a building permit, it may be possible to apply for a temporary supply of electricity and in this case, the reason why the permanent electricity is not or cannot be connected will probably be because the builder has not completed the necessary infrastructure for the electricity in accordance with the requirements of the electricity board.

If your property does not have a building permit, it will not be possible to apply for even a temporary supply of electricity until the building permit has been obtained.

Given the fact that your builder is not being cooperative and given the length of time that this situation has continued, I think that you will have to consider other options.
You do not state in your question whether or not you have the title deeds in your name. If you do not, your first priority will be to secure the title deeds by requesting that your builder transfers the title deeds to you. Once you have taken the title deeds, you can appoint an architect to obtain the building permit, if this has not already been obtained, and appoint a sub-contractor to complete any outstanding work to the property, including the electricity infrastructure. If you have already paid your builder to do this work and your Contract states that the builder was obliged to do this work, you could then consider taking legal action against your builder to recover these additional costs.

If you do not have title and your builder refuses to transfer title to you, your only course of action would be to consider taking litigation against the builder for breach of Contract in order to try to obtain a full refund of all monies paid plus compensation.”
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5 Extension to purchase tax discount in Northern Cyprus
We are purchasing a piece of land and have not received the PTP’s through yet, (April 08) and would like to know if we can pay the purchase tax now while there is still a discount or do we have to have the PTP in our hands?
Also, we understand the purchase tax discount has been extended to the end Sept, has it been extended yet beyond that?

“Currently the Government is offering a 75% reduction to the Land Registry transfer fees payable by purchasers on transfer of title. The usual rate for Land Registry fees is 6%. However, everyone has a once in a lifetime option to reduce this down to 3%. On top of this, there is a 75% discount being offered, brining the actual rate payable down to 0.75% of the sale price. Similar reductions are being applied to the capital gains tax (stopaj) payable by the vendors which has been reduced from 6.25% of the sale price to 4% of the sale price.

Many people are unable to take advantage of these reductions because they have not yet received their permission to purchase or because their vendors are not ready to transfer title as they are still waiting for separate deeds for properties on complexes to be issued by the relevant authorities.

Unfortunately, it is not possible for taxes to be paid until your permission to purchase has been granted and you are ready to transfer title as the full transfer forms have to be completed and submitted to the Land Registry and checked and then the taxes are paid.

I can confirm that the deadline for completing the transfers at the reduced rate of tax has been extended to 31st December 2009.”
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Due to the sheer numbers of legal question asked this month regarding law in Northern Cyprus, we have not been able to answer every question. Many of the questions we receive have already been covered in previous months answers, so make sure you have a good look through the archives below.

Legal questions August 2
Legal questions August 1
Legal questions July
Legal questions 1
Legal questions 2
Legal questions 3
North Cyprus FAQ’s

If you have a question for Naomi click here, please give as much information as possible.>
She can be contacted via email info@nmplegal.com,
Alternatively additional information is on NMP legal’s excellent website www.nmplegal.com