A Sole Proprietorship of a Limited Liability Company can be registered in Northern Cyprus. Only a native Cypriot can establish a Sole Proprietorship and carry out only one type of business operations. An LLC can be established by a foreigner together with a Cypriot and, unlike a Sole Proprietorship, the company can carry out many different types of business operations. However, these business operations have to be specified in the company By-laws.
Some business areas are accessible to foreigners in Northern Cyprus only if one of the company founders is a native Cypriot. These include pharmaceutical business, real estate management, construction, and car rent. There are some other business areas that require licenses (such as a beauty salon, for example) but a foreigner does not have to collaborate with a Cypriot to do the business.
The corporate documents have to indicate the company directors and secretary. Besides, 50,000 euros have to be ‘frozen’ in the bank if you are to be able to register a company in Northern Cyprus (applicable to foreigners registering companies in the jurisdiction). The best part of the money can be ‘unfrozen’ when the company is established, however, a security deposit of about 8,500 pounds (in Turkish liras) has to remain in the company’s account until the moment when it is liquidated. The amount of the security deposit may vary with time.
Before registering a company in Northern Cyprus, you have to reserve a company name. As the company name has to be unique, you have to suggest several variants. You will have to put the company name on the company sign – it’s obligatory.
Then you have to submit the application documents to register a company. These include your passport, a certificate confirming your place of residence in Northern Cyprus, and a police clearance that has to be translated. In addition, you have to ‘freeze’ the above mentioned sum in your bank account. After that, a lawyer will submit the documents on your behalf. The process of company registration usually takes about 3 weeks in Northern Cyprus. When it’s over, you will be issued the corporate documents and assigned a taxpayer’s number. With the documents and the number, you can ‘unfreeze’ the money in your bank account.
You have to bear an important aspect in mind: when applying for company registration, you can indicate your home address. However, the corporate documents have to show the company office address so you’ll need to rent an office. You could use your home address as your company office address if it is large enough and if it can be legally used as a company office address. You can find a complete guide on registering an international company in Northern Cyprus if you follow the link.
Taxes in Northern Cyprus
As far as taxes are concerned, they are charged on net profits. The VAT of 16% is payable plus a commercial tax of 10% of net yearly profit. In addition, you have to pay a small tax for each person that you hire to work for your company. The highest amount of the tax is 2,500 liras (around 70 pounds) and the exact amount will depend on the worker’s age (the younger he or she is the higher is the tax).
Another opportunity that you can use in Northern Cyprus is registering a company in the Free Zone near Famagusta seaport. This is a tax-free area. Only a professional lawyer is authorized to apply for company formation in the Free Zone and his/ her services will cost you around 10,000 dollars. Such a company can be used for importing goods from Turkey to Northern Cyprus. If this is how you are going to use your offshore company in the jurisdiction, no taxes are payable. If you use the company for some other purposes, you’ll have to pay a 25% VAT but 20% of the tax is returnable. A foreign national does not have to involve a Cypriot into company formation if the company is registered in the Famagusta Free Zone.
A corporate bank account in Northern Cyprus
You have to submit the corporate documents and your taxpayer’s number to open a corporate bank account in Northern Cyprus. There are two types of banks in the jurisdiction: Turkish banks (Garanti Bank, Ziraat Bank, etc.) and local banks wired to international payment systems. The average transaction commission is 0.5%. Accounts can be opened in any currency. Most often, companies open two bank accounts: one in a local bank to work with resident counteragents and one in a Turkish bank to work with partners and clients from outside Northern Cyprus.
Where do foreign entrepreneurs in Northern Cyprus come from?
Northern Cyprus is a highly diverse country as far as the nationalities of its residents are concerned. For years, there have been many British people there. Sometimes, they occupy an entire district where they open restaurants, shops, and real estate agencies. There are lawyers who work with British people exclusively. If a British citizen opens a company together with a Cypriot, the Cypriot will most often have some ties with the UK. He/ she may have studied there or he/ she has relatives in Great Britain.
Citizens of Turkey have privileges in Northern Cyprus and this explains why there are a large number of Turks among company owners in the jurisdiction. Besides, there are quite a few entrepreneurs from India, Arab countries, Germany, Russia, Ukraine, and Kazakhstan.
Purchasing real estate in Northern Cyprus
You need a residential address in Northern Cyprus to be able to register a company there. Renting an apartment is a possible option. However, if you want to buy residential property, we do NOT recommend that you consider ‘second hand’ accommodations. In this way, you will be able to avoid possible problems with the land title, the property title, and the agreements with the utility suppliers.
Better sign a purchase agreement for a piece of property that is still under construction or that has recently been completed and there are vacant apartments there. All you have to do to sign a preliminary agreement is to bring your passport and make a small deposit of 2,000 to 5,000 pounds. Within the next 3 to 4 weeks, a sales contract will be drawn up. It’s going to be in two languages: Turkish (mandatory) and your native language (English by default). If you don’t like some articles in the agreement, you can say so and the developer will be prepared to meet you half-way.
When you sign the (amended) contract, you have to pay 30% to 50% of the property price. Afterwards, you will be paying in installments and the amounts and the periods are negotiable. Please note that even though you don’t need a police clearance to purchase real property in Northern Cyprus, you do need it to register a company there and apply for a residence permit.