Taxation in Northern Cyprus
In the tax system of Northern Cyprus, tax obligations for individuals are determined by their status as tax residents. A tax resident is considered to be a person who stays in the Turkish Republic of Northern Cyprus (TRNC) for more than 183 days in a year. Criteria for being recognized as a tax resident include official employment or holding a managerial position in local companies, owning residential property in the republic, and not paying taxes in other countries.
Investment Advantages in Northern Cyprus
Northern Cyprus is attractive for investors and business due to its beneficial tax policies, which offer advantages for both corporations and individuals.
For businesses:
Low corporate tax: Businesses pay just 1% tax on commercial property income, significantly reducing the tax burden.
Financial privileges: Companies are exempt from paying taxes on dividends, VAT, and customs duties, making Northern Cyprus particularly attractive for international enterprises.
Data confidentiality: TRNC does not participate in international exchange of financial account information, ensuring confidentiality of investments and capital.
Accessibility for small and medium-sized businesses: With a low entry threshold of €20,000, Northern Cyprus is open to businesses of various scales.
Freedom of financial operations: Due to the absence of participation in European tax directives, foreign citizens can freely manage their funds.
For Private Investors:
Real Estate Investment Benefits: Property investment in Northern Cyprus can increase the value of invested funds.
Passive Income: Earning rental income from property.
Personal Use and Relocation: Properties can be used for vacations or as a permanent residence.
One-time Taxes on Property Purchase
When purchasing property in Northern Cyprus, investors encounter several types of taxes. First, when signing a sales contract, the buyer pays a stamp duty of 0.5% of the transaction value. This fee is necessary for the official registration of the contract and must be paid within 21 days after signing.
Additionally, when purchasing a new build, VAT of 5% is levied, while for secondary market properties, VAT may not be charged. There is also a transfer fee, which varies depending on the nationality of the buyer: 6% for citizens of Northern Cyprus and Turkey (3% for the first purchase) and 12% for foreign citizens.
Property sellers must pay a capital gains tax of 4% for commercial entities and 2.8% for individuals. Also, a transformer fee for new build utility connections ranges from £1,500 to £2,500, depending on property type and utilities.
Annual Taxes
Property owners in Northern Cyprus must pay an annual tax based on property size – 3 Turkish lira per square meter. For commercial property owners, the tax is 1% of corporate income.
Tax Exemptions
TRNC individuals can be exempt from capital gains tax once when selling a house and land plot up to 1,000 m², provided there are no olive or carob trees. For larger plots, the 2.8% tax applies only to the exceeding area.
Northern Cyprus also provides tax benefits for foreign investors, including exemptions from dividend tax, VAT, and customs duties for international company shareholders, and business operations through offshore companies with minimal restrictions and costs.
