Setting Up a Company in Northern Cyprus

Establishing a business in the Turkish Republic of Northern Cyprus (TRNC) can be rewarding for foreign investors. Here’s a comprehensive guide to help you navigate the company types, associated costs, procedural steps, timelines, and tax obligations in Northern Cyprus.

Setting Up a Company in Northern Cyprus

Company Types Available to Foreigners:

• Local Limited Company (LTD): Allows local and foreign investors; foreigners can hold up to 100% ownership, except in restricted sectors like real estate, which requires a 51% local partner. Minimum capital requirement: €25,000.
• Foreign Company Branch: Full ownership by the parent company; no specific capital requirement, but a bank guarantee may be needed.
• Free Trade Zone (FTZ) Company: Operates within free trade zones with tax exemptions, foreigners can own up to 100% of the shares. Minimum capital requirement: €50,000.
• International Business Company (IBC): Exclusively for activities outside TRNC, requiring non-resident ownership. Minimum capital requirement: €20,000.

Associated Costs:

• Registration Fees: Around €5,000 for Free Trade Zone (FTZ) companies.
• Bank Guarantee: Approximately 140,000 TL for Local Limited Company (LTD – based on British LTD regulation) subject to change is required.
• Professional Fees: Monthly fees range from 50 to 250 GBP for legal and accounting services, depending on the company and work load.

Procedural Steps:

1. Name Reservation: Submit proposed names for approval.
2. Preparation of Memorandum and Articles of Association: Draft and notarize Memorandum and Articles of Association.
3. Submission of Incorporation Documents: Provide necessary forms (e.g., MŞ1, MŞ2, MŞ3) detailing company structure and operations.
4. Capital Deposit: Deposit required capital in a TRNC bank account.
5. Obtain Necessary Certificates: Secure Tax Security Certificates and other relevant documents.
6. Completion of Registration: Obtain official Certificate of Incorporation.

Timelines: Local Limited Company (LTD) and Foreign Company Branch: 4-6 weeks; Free Trade Zone (FTZ) Company and International Business Company (IBC): 3-4 weeks.

Tax Obligations:

Corporate Tax:
Standard rate of 10% on net profits. Free Trade Zone companies operating entirely outside the Turkish Republic of Northern Cyprus (TRNC) are exempt from corporate tax.

Income Tax:
An additional 15% on profits after corporate tax, making the total tax burden 23.5%.

Value Added Tax (VAT):
Standard rate of 16%. Free Trade Zone and International Business Company companies are generally exempt from VAT.

Other Taxes:
Withholding tax on dividends and interest may apply, depending on specific circumstances.