Personal Income Tax and Corporation Tax
All companies and other corporate bodies (except cooperative societies) are chargeable with
Corporation Tax. Corporations which are registered in the state as «Local Companies» are
chargeable with 10% tax on chargeable income.
Corporations which are «Foreign Companies» are also chargeable at the rate 10% on chargeable
income only derived from trade or other income in TRNC.
A corporation is «Locally Registered Company», where the central management and control of its
business is in TRNC. For tax purposes, all profits of such companies, including profits from
other countries are liable to Corporation Tax. For the avoidance of double taxation, a set off
for similar tax paid abroad is allowed. Corporation tax is paid in 2 instalments – May and
October of each year.
The corporations which are specified under the Corporation Tax Law have to withhold income tax
at source at a standard rate of 15% on the net chargeable income after corporation tax is
deducted. Companies (registered in the State) engaged in education and health facilities and
engaged in industrial activities in the regions approved by the council of Ministes, withhold
income tax according to the Undistributed Profit/ Paid Up Capital ratio. ( The ratio must not
exceed the standard rate).
Foreigners operating in the field of transportation, including corporations, shall not be
subject to withholding tax on taxable income to be ascertained under the provisions of the
Corporation Tax Law and the Income Tax Law.
The net amount of earnings and revenues obtained from all sources within the borders of the TRNC in a calendar year depends on the Income Tax.
For permanent residents income arising within or outside the TRNC is subject to income tax, but
for the avoidance of double taxation a set off for income tax paid abroad is allowed.
Individuals are liable to income tax under a progressive tax system. The personal income tax is
levied at the statutory rates ranging from 10% to 37%.
Value Added Tax
Value Added Tax was introduced in 1996 as a Consumption Tax. Five VAT rates are applied in
accordance with VAT rates regulation. Applied VAT rates are: 0%, 5%, 10%, 16% and 20%.
