Tax laws Northern Cyprus
Northern Cyprus, officially known as the Turkish Republic of Northern Cyprus (TRNC), maintains a distinct taxation system that differs from that of the Republic of Cyprus. The TRNC's tax laws are primarily based on the Anglo-Saxon system, with notable differences from the tax structure of Turkey.
1. Personal Income Tax:
Tax Residency: Individuals residing in Northern Cyprus are subject to income tax on earnings derived from activities within the TRNC and on funds brought into the region.
Progressive Tax Rates: The TRNC employs a progressive tax system with rates ranging from 10% to 37%, depending on the level of income.
2. Corporate Tax:
Corporation Tax Rate: All companies in the TRNC are subject to a corporation tax rate of 10% on their net taxable profits.
Additional Income Tax: Beyond the corporation tax, companies are also liable for a 15% income tax, calculated on the profit remaining after the deduction of corporation tax.
International Business Companies (IBCs): IBCs, which are restricted to conducting transactions outside the TRNC, benefit from a reduced corporation tax rate of 1% on net taxable profits. These companies are also exempt from VAT on their sales.
3. Value-Added Tax (VAT):
- VAT on Property Transactions: A 5% VAT is applicable to property purchases in Northern Cyprus. This payment is due three months prior to the handover of the property keys.
4. Transfer Tax:
- Property Transfer Tax: As of January 27, 2023, the TRNC Legislative Assembly increased the transfer tax to 12% for foreigners (excluding Turkish citizens) acquiring property. This tax is applicable regardless of whether it is the first purchase.
5. Social Security Contributions:
- Employee and Employer Contributions: Both employees and employers are required to contribute to social security, covering pensions, health insurance, and unemployment benefits. Specific rates and ceilings may apply.
6. Double Taxation Agreements:
- Applicability to Northern Cyprus: The applicability of the Double Taxation Agreement (DTA) between Cyprus and other countries to Northern Cyprus is subject to interpretation. The Republic of Cyprus cannot currently exercise tax sovereignty over the northern part of its territory, leading to debates about the DTA's applicability. However, investors may still benefit from certain tax advantages offered by the TRNC government, such as exemptions on corporate profits for the first ten years and tax-free capital gains on property sales.
7. Recent Developments:
- Transfer Tax Increase: In January 2023, the TRNC increased the transfer tax to 12% for foreign property buyers, aiming to adjust fiscal policies and generate revenue.
Note: Tax laws and regulations in Northern Cyprus are subject to change. For the most current and personalized information, it is advisable to consult the TRNC's Ministry of Finance or a professional tax advisor.
RELATED Blog
0 comments