Contract Flipping is a situation where a person enters into a contract to purchase a new property off plan but only pays 30% as a deposit before he/she sells it on for a profit. Essentially the speculator is able to leverage the potential price increase in property over the one or two years it takes to complete the property.

In fast moving markets the opportunity for flipping is excellent but in stable or even falling price periods the speculator could get stuck having to come up with the remaining 70% and take ownership. And if he wants to sell he could take a loss on in the less popular re-sale markets.

The potential contract flipper must also make sure that he has excellent legal advice just like any other property purchaser - obvious really but many just think they are buying and selling contracts but if the ultimate buyer cannot get ownership then no sale will be made by the flipper.

When buying property abroad for contract flipping the same rules apply as when buying property back home -location, location, location - and value for money.

With VAT coming onto land sales in Cyprus in 2008 anyone who buys property now can look to a 7% margin built in and until the title deeds are transferred into the names of the buyer the land transfer tax at about 2% of the property value does not have to be paid out.

But the savvy flipper needs to look at for cancellation fees payable to the developer when he comes to sell, hopefully well before he has to shell out the 70%. Property developers do not usually mention contract cancellation fees on re-sale before title deeds are issued and if it is not mentioned tend to charge a fee of around 2% of the purchase price. So the savvy flipper caps this in the contract at CYP500 and makes sure that there is an explicit right to sell. Surprising this last point but it is sometimes forgotten.

In addition the savvy flipper will make sure that he doesn't pay a share of the developer's liability for Immovable Property Tax on his whole portfolio by making a provision in the contract too.

The savvy flipper can only use the personal CGT allowances in Cyprus once. So the contract flipper may need a corporate vehicle for his business. Yes, it is a business !!

Setting up a company in Cyprus through your lawyer in Cyprus will cost about CYP1500 but it can be very tax efficient from a CGT and company tax point of view.

If you are a multiple contract flipper then the savings could be significant. Cypriot companies attract a corporation income tax rate of 10% on rental income and a Capital Gains Tax of 10%.

Unlike personal taxation,you will not have any additional tax to pay in the UK unless you draw the income or capital gain from the Cypriot company. If you retire to Cyprus you can draw the money at personal Cypriot rates of tax and if you are an investor you can reinvest the profits into further real estate with no additional UK tax due.

The next big event in Cyprus is membership of the Euro-zone in May 2007 and the adoption of the Euro as the country