1- Personal Income Tax and Corporation Tax
All companies and other corporate bodies (except cooperative societies) are chargeable with Corporation Tax. Corporations which are registered in the state as Local Companies are chargeable with 10% tax on chargeable income.
Corporations which are Foreign Companies are also chargeable at the rate 10% on chargeable income only derived from trade or other income in TRNC.
A corporation is «Locally Registered Company», where the central management and control of its business is in TRNC. For tax purposes, all profits of such companies, including profits from other countries are liable to Corporation Tax. For the avoidance of double taxation, a set off for similar tax paid abroad is allowed. Corporation tax is paid in 2 instalments – May and October of each year.
The corporations which are specified under the Corporation Tax Law have to withhold income tax at source at a standard rate of 15% on the net chargeable income after corporation tax is deducted. Companies (registered in the State) engaged in education and health facilities and engaged in industrial activities in the regions approved by the council of Ministes, withhold income tax according to the Undistributed Profit/ Paid Up Capital ratio. ( The ratio must not exceed the standard rate).
Foreigners operating in the field of transportation, including corporations, shall not be subject to withholding tax on taxable income to be ascertained under the provisions of the Corporation Tax Law and the Income Tax Law.
The net amount of earnings and revenues obtained from all sources within the borders of the TRNC in a calendar year depends on the Income Tax.
For permanent residents income arising within or outside the TRNC is subject to income tax, but for the avoidance of double taxation a set off for income tax paid abroad is allowed. Individuals are liable to income tax under a progressive tax system. The personal income tax is levied at the statutory rates ranging from 10% to 37%.
2- Value Added Tax
Value Added Tax was introduced in 1996 as a Consumption Tax. Five VAT rates are applied in accordance with VAT rates regulation. Applied VAT rates are: 0%, 5%, 10%, 16% and 20%.
3- International Business Companies (IBC)
The IBC Company is liable to corporate tax only at the rate of 1% of the net profit after deducting depreciation and expenditures.
It is exempt from all kinds of direct tax such as VAT, stoppage tax, immovable property tax.
No inheritance or income tax that can result from transferring shareholding in the IBC.
There is no tax on distribution of dividends. Furthermore, there are no exchange control restrictions on such distributions, subject to such distributions, being affected through official bank channels.
4- Free Zone Companies
All income derived from activities and operations undertaken by producers in the Free Port and Zone are exempt from Corporate and Income Taxes (including all kinds of trade, production and service).
All kinds of operations including sale of goods to foreign countries and Free Port and Zone in North Cyprus as well as buying of goods are exempt from custom duties, VAT and indirect taxes.
All income derived from activities and operations undertaken by investors other than producers are exempt from Corporate and Income Taxes when the goods and services are not directed to the Turkish Republic of Northern Cyprus.
North Cyprus Free Trade Zone company is not subject to any Value Added Tax,
0% Tax on Corporate Profits,
No withholding tax on Dividends paid from the company,
No Income tax for no resident shareholders (Residing in TRNC less than 183 days in calendar year).