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Establishing a Company

Many ideas of entrepreneurship are conceived by those who come to Northern Cyprus for the first time or have a seasonal holiday in Cyprus.

They sometimes observe gaps in services or maybe cannot find a particular item they are looking for and have an idea of turning this into a business.

Sometimes there are those who already live and work in the TRNC and believe that the time has come to start their own business.

Naturally the first thing to do is to investigate about how to establish a company in Northern Cyprus. At first glance it looks like a simple procedure that can be done similarly anywhere in the world after paying fees for the establishment procedures.  However, establishing a company in Northern Cyprus is something that needs a lot of consideration and should be taken quite seriously.

It is extremely important to get the support of an expert who really knows about everything in that particular business and the market before thinking about the establishment of a company.

Establishment of companies in the TRNC is carried out by   financial consultancy offices.  Financial advisors are often auditors in Northern Cyprus.

The institution that oversees the establishment of companies is the TRNC Registration of Companies offices.

Let’s get some clarification here.

What would be your motivation to establish a company in North Cyprus?

– To have a job

– To avoid high tax rates or even pay no tax in your home country

– To expand your brand and experience into a new market

Usually those already living in the TRNC prefer the first option and set up a company to have a business.

Company owners in Turkey particularly elaborate options of setting up companies in the Free Trade zone for tax reasons.

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What are TRNC Company Types

This is a type of company whereby the sole proprietorship is established by individuals registering their name, wanting to operate in any given field of business in Northern Cyprus.

This is the fastest way to establish a company in the TRNC and has the lowest cost.

But there is a crucial detail! Only TRNC citizens can establish a TRNC sole proprietorship type of company.

If you are not a TRNC citizen, you cannot own a private company.

Within this type of company, also known as Cyprus sole proprietorship company, all responsibility lies with a single person, namely the creator of the business.

After the approval process of the Registrar of Companies, the only addressee of the TRNC Ministry of Finance and the TRNC Revenue and Tax Office is the owner of the business personally, not the business as a legal entity.

For example, while the tax debt is owed by the company in limited companies, the business owner himself is the sole responsible here. In other words, you cannot just close down a private company without clearing the debt as it will always show up at the tax office files, whereas people owning a limited company are able to establish a new one without doing so. 

The only document requested to set up a private company is the ID card. 

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This is the most preferred type of company in Northern Cyprus by both TRNC citizens and foreign investors.

A limited company is based on a partnership structure. It needs to be established with at least two partners. Should the shareholders of the company be TRNC citizens, there is no obligation of proving capital. For citizens of Turkey or other countries, a letter of Bank Guarantee for 50 thousand Euros is requested for the completion of the  company registration. This amount was 100 thousand previously and has been reduced to 50 thousand. You will be able to use this blocked amount once the setting up of the company has been completed.

 

In a limited liability company structure, you need to appoint one director and one secretary. The Director is the responsible manager. He has all the authority to sign on behalf of the company, not the shareholders. If the director is not a TRNC citizen, 10 thousand dollars for 18 months have to be deposited by bank guarantee to fulfill the request of tax security.   

There are two types of establishing a branch company in the TRNC.

– Branches of Foreign Companies in the TRNC

– Branches of Local Companies

The agency that manages the process for foreign companies is the Ministry of Economy.

The establishment is finalized by bringing the amount of capital determined by the Ministry to the country.

A Free Trade Zone Company, is the type of company located in the  Famagusta Free Trade  Zone.

The most important feature that distinguishes Free Trade Zone companies from limited companies is that they are not subject to Corporate Tax, Income Tax and VAT.

Of course, the precondition is that companies should carry out their activities abroad or within the free-trade zone of the TRNC.

Otherwise, it will not be possible to operate this type of company. Usually, international shipping companies and IT companies prefer this type of company set up.

Many famous server providers and domain names in Turkey have contact details of the Free Trade Zone in Famagusta TRNC. They established a free-trade zone company in TRNC for tax advantages.

Entrepreneurs are quite fond of this type of company, also known as a North Cyprus tax-free company.

A good financial advisor is essential to establish a free-trade zone company.  If you are going to operate from abroad and don’t intend to travel to the TRNC frequently, make sure that your accounting is entrusted to safe hands.

About Company Establishment in TRNC Frequently Asked Questions

As everywhere in the world, you first need to have a good business idea, a business plan and a name for your business.

Then, you can start the process by applying to a firm you trust among the TRNC financial advisors.

The establishment of your company is completed after the finalization of documents and investments the ministry and tax office is going to request during the setup of the TRNC company.

If the question is about how many days it takes to establish a company in the TRNC, do not get carried away by promises of a short term. It usually takes an average of 1 month as many operations are still done manually in governmental offices.

The financial advisor in the TRNC with whom you will work closely during this process will guide you in the best possible way.

They usually provide a pre-establishment cost table and a presentation file with the required documents.

Your ID / passport is required to get started first. Secondly, you have to choose a sensible name to be approved because the TRNC Registrar of Companies is a bit fussy in this sense. Even a slight similarity to an existing company name could result in refusal. That’s why a unique name is important. (This is the reason why names and surnames are generally used for registering companies)

If you are a TRNC citizen, there is no such requirement. However, the requirement of capital in Northern Cyprus for foreign investors has been decreased to 50 thousand Euros recently. It was previously 100 thousand dollars. You are requested to deposit 50 thousand Euros to a bank close to the completion of the establishment procedure and get a written letter of guarantee from the bank on behalf of the company you will establish.

 

After the establishment process is completed, you can unblock your money.

If you do not have savings of the amount required, some financial advisory offices or banks will assist in solving the capital procedure for you by charging daily interest rates.

The short answer is, it depends.. This is a constantly updated figure with increased fees.

However, it would be a good estimation for the cost of establishing a TRNC company as approximately 10.000 TL in 2021.

After the establishment of the company, you will have to pay a monthly financial consultancy service fee between 750-1000 TL on average for small-scale companies.

Many financial advisory offices receive payments by credit card.

This is one of the most frequently asked questions.

The tax is calculated based  on earnings that are not distributed after the deduction of corporate tax.
The Northern Cyprus income tax rate is 15 percent.

The TRNC corporate tax rate is 10 percent.

The institutions paying corporate tax in the TRNC are published in newspapers every year. Tax record holders attract great attention.

Value added tax in Northern Cyprus is 16 percent.

However, there is a VAT advantage for some sectors. We highly recommend that you get yourself informed about the current status before the establishment of the company.

This is a type of permit obtained for foreign business owners who are company directors in Northern Cyprus. The business permit is renewed every year.

The process is usually run by the financial advisory office you work with, similar to the flow of working permit.  

Documents required when obtaining a business permit:

2 Copies of Business Establishment Document

“No Debt” papers from the Social Security Department

Provident Fund and Tax Office Approval Documents of the business for the current year (Original)

Passport Copy (Picture Page, Back Page and Pages with Valid Visa)

Photocopy the Company’s Registration Number (Photocopy of the Pink Card)

Certificate of Receipt from the Social Security  Department on behalf of the Employer (SS2)

Company Statutes (Main Contract)

Power of Attorney, in case the Tax Liability Certificate is executed by a power of attorney

This is the type of permit issued for staff of foreign nationality employed or to be employed in the company.There is no need for such a permit for TRNC citizens, who can start working immediately. If you intend to bring staff from abroad, including Turkey you have to obtain a work permit for them as the employer.  (For third country citizens, a deposit in the bank is also required) 

First there is the pre-application process for working permit.

Documents required for pre-application are:

1 Set of Pre-Application Documents indicating that the business owes no debt to the Social Security, Provident Fund and Tax Office

Letter of Bank Guarantee if you are a 3rd country citizen

Passport Copies

Power of Attorney (if carried out on behalf of company)

Approval of Eligibility for Employment from the Labor Office

Work permit is issued for 6-monthly or yearly periods. Same procedures apply for renewals. Should the employee leave the workplace obtaining the permission, the permission must be revoked within 30 days. Otherwise, they might be considered fugitive and deported from the country.

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