Northern Cyprus welcomes all investments in the production of goods and services. The Turkish Republic of Northern Cyprus(TRNC) attaches importance and priority to all investments that increase production, employment, exports, and the use of new technology in her economy. Recently, sectors that have significant growth potential in the country and can attract the attention of investors have been unearthed. Foreign investors can now identify opportunities that are suitable for them.
Company Types in Northern Cyprus
Regulated by Companies Act. Cap 113, which is based on the UK Companies Act 1949, forming the local company allows investors to conduct businesses both within the local market and between TRNC and other countries. The corporate governance structure of local TRNC companies is very similar to those in the UK. If the target consumers of the company’s goods and services are TRNC residents, and at least one shareholder is a TRNC citizen, then this company structure will be the best option. Local company structures are prominent within the real estate sector as this is a growing industry in the TRNC.
Formation Requirements of the local company;
- Limited Liability Company Articles of Association and Memorandum of Association need to be prepared.
- Payment of stamp duty and relevant fees
- Proof of ID and address document.
- Certification for Non-Citizen directors from TRNC tax office.
- Company shares capital amount deposit to the bank account (for non-citizens min. amount is $100.000).
Foreign Branch Company
Cap 113 – Companies Law permits foreign investors to set up branch companies in TRNC. Foreign companies can conduct their operations freely. One of such example is the multinational banks in Northern Cyprus. Procedures are very similar to the Local company foundation.
Free Trade Zone Company
With the law named Free Trade Port Law 26-1983, companies can set up in Northern Cyprus. Free trade zones offer very good tax advantages. Same requirements for local company setup also needs to be fulfilled in the free trade zone company. Free trade zone companies are exempt from corporation tax and value-added tax(VAT). Also, there are no restrictions on the movement of capital. Operations can be conducted with no taxes. Since the popularity of the free trade zone companies increased, the North Cyprus free trade zone allows companies to operate without a physical place at the port. Consulting, Advisory, IT, Financing, and Insurance companies are the most popular sectors operating this method. More than 500 companies are operating in the North Cyprus free trade zone. There are only two fees for setting up a company;
- Application fee (about 200$-1000$)
- Initial free trade zone licence fee (2,500$)
The offshore company structure is based on the law of “38/2005 International Business Company (Offshore),” which was prepared by the European Union. This company type only services to foreign countries and foreign customers. Offshore companies are exempt from value-added tax, but a corporation tax rate of %1 of taxable income applies. There is no withholding tax, and company capital movements are free, without any restrictions.
Annual renewal of international business license (€5000 per year) needs to be paid. This company type allows for proxy shareholders and directors. Personal information can remain hidden. Company requirements need to be fulfilled in Cap 113 – Companies Law. Min. paid-up share capital of €20.000; also, there is an application fee of about €500. 3 – 4 weeks later, the company incorporation can be done. Finance, travel agency, consulting, IT, online services, telecommunication, and aviation services sectors hold a special attraction for the offshore companies in TRNC.
North Cyprus Government-Implemented Incentive Policies
There are seven types of government investment incentives issued in the Northern Cyprus Constitution;
The investment allowance rate for the investments to be made in priority development regions is to be determined by the state planning organization, within the framework of development plans and/or annual programs is 200% over the cost of ownership. In other regions, the investment discount rate is 100% on the cost of ownership.
Customs Tax and Fund Exemption
The machinery and equipment related to the investment to be imported within the scope of the Incentive Certificate are exempt from all kinds of customs duties and funds.
Value-added Tax Application in Machinery and Equipment Procurement
0% Value-added tax is applied to imported and domestic machinery and pieces of equipment within the scope of the incentive certificate.
Land and Building Supply
In the case of investments with incentive certificates, if the investors request immovable property, these requests are evaluated by the legislation in force and by the possibilities and given to these persons by leasing method.
Exemption Of taxes, duties, fees, and all kinds of contributions related to a construction permit
The investments made within the scope of the incentive certificate are exempted from the duties, fees, and all kinds of contributions related to the building construction license.
Stamp Tax Reduction Regarding Capital Increases
For the investments to be made within the scope of the incentive certificate, a reduction in stamp tax to be collected during capital increase shall be provided by the regulation.