Due to North Cyprus' unrecognized status, there is almost certainly no tax treaty between the TRNC and your country of citizenship, making the situation a bit more complicated. Despite this, there are certain advantages to being a tax resident in North Cyprus.
In this guide:
- North Cyprus tax residency: how to qualify.
- Personal taxation: types and rates.
- Corporate taxes for various types of companies.
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Tax residency in North Cyprus
If you live in North Cyprus for more than six months a year, you are considered a tax resident.
- Residing in North Cyprus for over six months, whether continuously or intermittently, makes you a tax resident.
- Foreigners with temporary or specific assignments in North Cyprus, even if over six months, aren't tax residents.
- Non-tax residents and foreign nationals are only taxed on their income within North Cyprus.
- North Cyprus has not established any tax information exchange treaties with any country worldwide. Consequently, your tax information remains confidential and is not disclosed to any other jurisdiction.
How is my pension taxed in North Cyprus?
The government of North Cyprus does not tax foreign pensions.
If you are a foreign citizen, you should inform your pension provider before leaving your country of citizenship and then register in North Cyprus for tax purposes.
The pension you receive in your North Cyprus bank account won't be taxed in the TRNC.
Another advantage is that the TRNC has not signed up to the European Savings Tax Directive. This means you can legally keep your money in offshore accounts and bring in only what you need.
Income tax in North Cyprus
As a tax resident of North Cyprus, you must pay income tax on all the income that derives from your North Cyprus activities and on all the money you bring into North Cyprus from abroad. There might be some exceptions, so it's highly advisable to talk to a tax specialist in North Cyprus.
Any earnings made in the TRNC, such as income from property letting or bank interest, are taxable.
It’s a tiered system with tax rates from 10 to 37 percent, depending on your income.
Property taxes
When you buy property in North Cyprus, you'll encounter several taxes at different stages:
During purchase:
- Stamp Duty: It's a 0.5% fee on the property's value in the contract, paid when you sign the sales contract.
- VAT: This is 5% of the property's contract value, paid within three months before receiving the keys.
- Transformer Charge: It's approximately £3,000 and covers utilities like electricity, water, and telephone lines. It is payable within three months after receiving the keys.
- Transfer Fee: This is 12% of the property's value and is calculated based on an estimate. For foreign buyers, it's divided into two payments: 6% during property registration and the remaining 6% when transferring ownership.
After purchase:
- Annual Property Tax: Calculated at a rate of 1.25TL per square meter of covered property area, excluding open terraces, and paid annually to your local municipality.
- Annual Tax on Cleanliness: A fixed fee of 100TL, regardless of property type.
Additional taxes:
- Income Tax on rented properties: If you rent your property, you'll owe 10% of the rental income as tax.
- Capital Gains Tax: This applies when selling property. For professionals, it's 6.25% of the property value. Individuals can have their first sale tax-free sale if the land is to 1 donum (about 14,400 sq. feet). Beyond that, it's 3.5% tax.
VAT
There are seven different VAT rates applied in compliance with VAT rate regulations. These rates are as follows: 0%, 1%, 5%, 8%, 10%, 16%, and 20%.
Wills and inheritance
It is also important to have two wills in place: one in your country of citizenship and the other in the TRNC to cover your TRNC property and bank account.
According to North Cyprus laws, if one of the partners in a marriage or relationship dies intestate (i.e., without leaving a will), the remaining spouse will not automatically inherit the estate if there are surviving children. I.e., the succession laws might differ from those in your country of citizenship.
To cover your assets and property in North Cyprus, you need to prepare and sign your will with a lawyer in the TRNC.
Corporation tax
- In North Cyprus, the Corporation Tax rate for all companies is 10%.
- Companies in North Cyprus are also subject to a 15% Income Tax and Corporation Tax.
- Income Tax is calculated by applying a 15% rate to the profit remaining after the deduction of Corporation Tax.
Free Zone Companies
- Free Zone Companies do not pay Corporation Tax if their operations are entirely conducted outside North Cyprus.
- If these companies engage in trade with North Cyprus individuals or companies, taxes are applied to the profits generated from these activities.
- Transactions involving Free Zone Companies are not subject to VAT.
International Business Companies
International Business Companies can only carry out transactions outside the TRNC.
International Business Companies are subject to a 1% corporation tax on their net taxable profits.
International Business Companies are not subject to VAT on their sales.
- International Business Companies are limited to conducting transactions exclusively outside of North Cyprus.
- These companies are liable for a 1% Corporation Tax based on their net taxable profits.
- Sales made by International Business Companies are exempt from VAT.
You might find useful:
- Living In North Cyprus: a detailed manual to moving to North Cyprus, including residency, cost of living, healthcare, etc.
- The Best Places To Live In North Cyprus (TRNC) - most favorite expat locations in North Cyprus
- All About Retiring To North Cyprus
- The Expat Guide to UK Pensions Abroad – detailed information about your state, workplace, and private pensions when you retire abroad; your options and tax implications
- Didn’t find what you were looking for or need further advice? Comment with your question below, and we will do our best to help.
Helpful external links:
- An in-depth overview of the TRNC taxation system - Cambridge Resources International.
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International Citizens Insurance provide free, no-obligation quotes from the leading international health insurance providers with plans tailored to meet your needs. Trusted by thousands of expats worldwide.