Establishing A Business | Licenses / Permissions / Eligibilities / Certificates | Employing Workers |Protecting Investors | Tax System |
Costs Of Operating A Company |
Establishing A Business
In Northern Cyprus, both local and foreigners can set up a local business under equal circumstances and treatment with the
same procedures. Only foreign branches are subject to the approval by the Council of Ministers. There are no restrictions on
free movement of capital and almost all sectors are open to foreign capital. When the foreign investments in construction and
travel agency sectors are concerned, there are certain rules requiring a Turkish Cypriot citizen’s taking part in the capital
ownership or management of a company; in this case company may be established with 51% local participation.
The provisions are set out in the Companies Law, Cap.113. The establishment procedures started by applying Company
Registry Office fr approval of the Company name.
The following documents are required to be submitted to the Registry Office
• Company name registration form/petition
• Company Articles of Association, and Memorandum
• M.S 1,2 and 3 Forms filled
• Character Certificate for directors and/or shareholders
• Tax Certificate and VAT number that obtained from Revenue and Tax Office
• Signature declarations and passport copies of the persons authorized to represent and bind the company (copies of the
identity and residence certificates for Turkish citizens)
• Photos and passport copies of the real person shareholders
• The main form of business establishments in Northern Cyprus is “Private Limited” companies.
Licenses / Permissions / Eligibilities / Certificates
Licences are required depending on each investment’s general and specific nature.
City Planning Permission
This permission is one of the essential permission that the investor needs to obtain in order to pursue with the project. The
process itself control if the intended development by the investor is suitable for the specific area and complies with grand
scheme of city planning on various respects.
Incentive Certificate
This Certificate provides mainly exemption from customs duties, VAT exemption, tax exemption. In order to qualify these
incentives, an investor should obtain incentive certificate from the State Planning organization.
Building Permission
Investor should obtain a building permission from the related Municipality or District office in order to be able to start the
construction.
Environmental Impact Assessment Eligibility
EIA is the process of analysis and assessment which includes the potential permanent and temporary environmental impacts of
the proposed projects or the progress and social results and the alternative solutions of these impacts. Related parties
contribute in the process with their technical knowledge and opinions in order to carry out the process in the most optimal way.
Export/Import Licenses
The real persons and the legal entities who would like to engage in import and export activities must first get registered in
Turkish Cypriot Chamber of Commerce or Cyprus Turkish Chamber of Industry. The subsequent step is to obtain the related
export/import permits/licenses from Northern Cyprus Trade Department. For exporting arrangement, the certificate of origin
should also be obtained from Turkish Cypriot Chamber of Commerce or Cyprus Turkish Chamber of Industry.
According to the study conducted by Oxford Investment Research using the World Bank Doing Business Index methodology
(Trading Across Borders):
“…The economy scores around average among economies of the world. Some other improvements are possible in terms of the
number of documents processed, but in general, northern Cyprus is in an acceptable position”
Employing Workers
There is a moderate degree of availability for labor, where 7 different universities with 40,000 enrolled students supply several
graduates from various disciplines for the existing and priority sectors. Moreover, measures and improvements for creating a
better suited education and training for the priority sectors have been under way with the purpose of serving better to the
needs of the investors engaged in the priority sectors.
The employee or company representative should complete the related registrations in Department of Labor, Social Security
Office and Provident Fund. From this point on, the employer is expected to pay the social security and the provident fund
contributions monthly for every employee employed, which are 8% and 5% respectively. The minimum monthly wage is 1190 TL
which approximately equivalent to $740, while the average labour cost in manufacturing is approximately $6.
According to the study conducted by Oxford Investment Research using the World Bank Doing Business Index methodology
(Employing Workers):
Northern Cyprus scores 17.11 on the Rigidity of Employment index, charges employers 29% in non-wage cost, and causes costs
corresponding to 12 weeks of wages for companies terminating one redundant worker. Northern Cyprus would score in the
23d percentile – a good ranking, mostly due to the lack of burdening employment regulation and the limited cost of hiring and
firing. It is relatively easy to hire and fire in northern Cyprus, and few regulations constrain employers in terms of working hours.
Protecting Investors
According to the study conducted by Oxford Investment Research using the World Bank Doing Business Index methodology
(Protecting Investors):
The score of the Turkish Cypriot economy puts it in the 68th percentile. The major reason for this poor performance is the
complete lack of protection for minority shareholders, unnecessarily increasing the risk of minority shareholders in Turkish
Cypriot enterprises. Another issue is the lack of director liability for decisions made; this may create perverse incentives in the
management of companies, especially in cases of blatant conflict of interest.
Tax System
Northern Cyprus has one of the most competitive tax rates on corporate gains among the EU countries. The basic corporate
income tax rate is 10% for all companies. Additionally, 15% withholding tax on net chargeable income is levied after corporation
tax for each company. So all together any company operates in Northern Cyprus is liable to pay 23.5% for their respective
income.
All residents in Northern Cyprus are subject to pay Personal Income tax. The Personal income tax varies from 10% to 40%. The
lowest personnel income tax levied in Northern Cyprus is 10%. In Northern Cyprus, supply of goods and services, demand of
goods and services and imports are subjected to Value Added Tax(VAT): There are six VAT rates in Northern Cyprus. The VAT
rates are: 0%, 3%, 5%, 10%, 15% and 20% respectively.
Interest earned from the bank deposits is subjected to 8% interest for real persons, while it is subjected to 2% for legal entities.
Rental income is subject to 10%. The property tax is based on the meter square of the premises and it is 1 TL for each meter
square
Costs Of Operating A Company
Major average operating costs and rates
•Cost for fixed line telephone - Monthly connection fee and 15 minutes peak-time and 15 minutes off-peak calls (2007 or latest
available) is approximately $5.35
•Electricity prices (USD per kWh, domestic consumption, 2007 data) is approximately $0.22
•Office space cost (USD per square meter per annum, 2007 or latest available) is approximately $120
•Industrial rents (USD per square meter; 2007 data) is approximately $50
•Standard rate of corporation tax (in percent, 2006 fiscal year) is 10%
•VAT rates on standard goods and services (in percent, 2006 fiscal year) is 16%
•Social Security Contribution as % of monthly salary is 5% both employer and employee.
•Provident Fund Contribution as % of monthly salary is 8% for employer and 10% employee.
Northern Cyprus offers a business-friendly environment with its considerably low tax rate on corporate income of 23.5% for
companies; one of the lowest among the countries in Europe. Additionally, low property cost and rent costs combined with high
availability provides the basis for your investment in Northern Cyprus. Moreover, your investment will benefit from the low
communication costs. Additionally, you will take advantage of Ease of enforcing contracts and employing workers
Plenty of tourism establishments are developed in the region which can serve your business trips. Currently, there are 119
licensed tourism establishments operating, > 12 of them being 5-star hotels and the majority of the rest being small and
medium sized establishments.
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