21 May 2025

Tax Advantages in the TRNC: Rates, Incentives, and Financial Gains

A comprehensive guide detailing tax rates, government incentives, and example calculations regarding tax advantages in the Turkish Republic of Northern Cyprus.

The Turkish Republic of Northern Cyprus (TRNC) has become an attractive center for entrepreneurs looking to avoid high tax rates and manage their operations in a more transparent financial system. With low corporate tax rates, flexible income tax brackets, and various government incentives, the TRNC is an advantageous option for both individual investors and international companies.

Corporate and Income Tax Rates

In Northern Cyprus, the annual net profit of companies is subject to a corporate tax rate of 10%. This rate is quite competitive compared to many countries in Turkey and Europe. Individual income tax is calculated progressively according to the following brackets:

First 30,000 TL: 10%
Next 30,000 TL: 20%
Subsequent 60,000 TL: 25%
Remaining amount: 30%

This structure significantly reduces the tax burden for small and medium-sized enterprises.

VAT Rates and Exemptions

Value Added Tax (VAT) is applied at different rates in Northern Cyprus based on the type of goods and services:

0%: Basic food and medicines
5%: Education, health, tourism
10%: Construction and clothing
16%: Standard VAT rate
20%: Tobacco, alcohol, luxury goods

This system allows for significant tax advantages in certain services.

Government Incentives and Investment Supports

Northern Cyprus aims to revitalize the economy by offering investors various incentives in different areas. The main supports are as follows:

Customs Exemption: Full exemption on machinery and equipment subject to incentives.
VAT Exemption: 0% VAT on investment goods.
Provision of Land: Long-term allocation by the government.
Exemption from Construction Fees: Building permits, stamp tax, etc.

These incentives provide significant cost savings when the right investment planning is made.

Sample Tax Calculations

Let's assume a company's annual net profit is 1,000,000 TL:

Corporate Tax (10%): 100,000 TL
Net Profit After Tax: 900,000 TL
Distribution of Income to Partners: If 15% withholding tax is applied, 135,000 TL
Total Tax: 235,000 TL

Total tax burden is at the level of 23.5%. This is well below the European average.

Tax Consultancy with ORTAC

As ORTAC, we offer comprehensive tax planning and declaration support to entrepreneurs and investors wanting to establish a company in Northern Cyprus. We are here with the following services: