Incentive Schemes of North Cyprus

Published On - May 22, 2021

Fulden Yesiltepe

General Information

• Equal treatment of all domestic and foreign investors,

• There is no limit for the transfer of earnings,

• Key personnel can be brought from abroad,

• Possibility to acquire real estate and protection of property rights,

• Existence of government policies to support investments.

Investment Incentives Applied Under the Incentive Law

The following investment incentives are applied to entrepreneurs who want to invest in the TRNC, regardless of whether they are domestic or foreign investors, by issuing an Incentive Certificate.

Natural or legal investors who want to benefit from incentive measures for their investments in the TRNC apply to the State Planning Organization together with the Project Feasibility Form, which contains details about the project and investment nature. Applications are finalized within 3 months at the latest after receiving the opinions of the relevant institutions.

Investment Allowances

Investment discount rate for investments to be made in Priority Development Regions and Sectors with Special Importance to be determined by the State Planning Organization within the framework of development plans and / or annual programs is 200% over the prime cost.

In investments to be made in other sectors and regions, the investment discount rate is 100% over the prime cost. Güzelyurt, Lefke, İskele and Geçitkale have been determined as Priority Regions for Development by the Council of Ministers.

Customs and Fund Exemption

The machinery and equipment belonging to the investment to be imported within the scope of the Incentive Certificate are exempt from all kinds of customs tax and funds.

The VAT on Machinery and Equipment Purchases

Zero rate VAT is applied for both the imported and locally purchased machinery and equipment in accordance with the Incentive Certificate.

State owned Land and Building Lease

State owned land and building lease is possible for the investments that are granted Incentive Certificate in accordance with the regulations in force.

Exemption from Construction Licence Fee

Investment that are granted Incentive Certificates are exempt from all kinds of taxes and fees related with construction licence.

Reduction of Stamp Duty for Capital Increase

Reduction of stamp duty concerning capital increase is provided for the investments that are granted Incentive Certificate.

Reduction of Fee on Mortgage Procedures

Reduction of stamp and registration fees is applied on mortgage procedures necessary when using bank credit for the investments that are granted Incentive Certificate.

Incentives Applied Under Tax Legislation

Allowances are given for capital expenditure incurred on the acquisition of plant and machinery, fixtures and fittings owned and used by a person or corporate body in trade or business or scientific research (excluded private saloon type vehicle).

Allowances are also given on existing buildings or on the construction, extension, or adaptation of buildings owned and used by a person or corporate body. In total, tax allowance is given equally to the cost of an asset plus the investment allowance.

However, investment allowance is not applied for those with the cost of depreciable assets less than twenty times the annual minimum wage at the beginning of the relevant year.

The initial Investment Allowance rate is %20.

Investment allowance rate can be increased up to 100% or new rate, which is not less than legal rate, can be determined by the Council of Ministers with the recommendation of Ministry of Finance for the investments in Priority Development Regions and in sectors with special importance specified under the Incentive Law and the Tourism Industry Incentive Law.

If the assets subject to investment allowance are used for purposes other than the intended purpose of the investment, or if any of the conditions written in this article are not complied with, the total discount will be added to the income of the year in which this right was revoked and 50% (fifty percent) will be charged as a penalty.

If there are regulations concerning investment allowances under special Incentive Laws, the rates and principles are applied in accordance with Incentive Law concerned instead of applying the allowance rates in accordance with Income Tax Law.

Annual (Wear and Tear) Allowances:

  • Machinery and Installation: 10%
  • Saloon Type Motor Vehicles and Motorcycles: 15%
  • “T” Licensed Motor Vehicles: 25%
  • Other Motor Vehicles (Trucks, Buses, Vans, Freight Cars etc.): 25%
  • Industrial Buildings and Hotels: 4%
  • Shop and Residence: 3%
  • Flooring and Fixtures: 10%

Initial allowances and annual depreciation allowances are deducted before setting net chargeable incomes.

Other Allowances:

 – Expenditures on company formation are amortized in five years.

 – Expenditure on patent and patent rights.

 – The purchased tools and fixtures which have the values not exceeding the monthly gross minimum wage at the beginning of the year, may not be subject to depreciation and the payments for these tools and fixtures may be immediately recorded as expense

  • 20% of the revenues of those who export goods and services from the Turkish Republic of Northern Cyprus to foreign countries are exempt from Corporate Tax. However, the 20% exception amount to be calculated cannot exceed the amount equal to 80% of the net income obtained from exports.
  • Exports of all kinds of goods and services are exempt from VAT. According to the legislation the exporters can claim credits or refunds for the VAT paid on their inputs.
  • Air, land and sea transportation services, from TRNC to foreign country, from foreign country to TRNC or from foreign country to foreign country via the TRNC, except passenger transportation services which are provided by transportation corporations in the TRNC, are exempt from VAT. According to the legislation carrier can claim credits or refunds for the VAT paid on their inputs.
  • Services provided from ports and airports to sea and air vehicles used by the obliged parties exclusively to generate income are exempt from Value Added Tax.

Incentive Law No. 47/2000 is available on the www.devplan.org website.