1) Guidance on company incorporation.

Condition and documents required from a foreign shareholder to establish a company: Minimum number of shareholders – two.

Minimum share capital of a limited company is 25,000 -EURO. Foreign shareholders’ share participation must be lodged with a TRNC bank (during the incorporation process which is estimated a week to ten days) and verified to the authorities with a letter from a bank confirming such. After completion of incorporation process this funds can be used at the shareholders’ discretion.

Please note that there are certain restrictions for 100% foreign owned and foreign controlled companies in acquiring property and land plots. They need a Council of Ministers approval for any property and land plot acquisition even for 1 donum. Under the new laws of the TRNC non TRNC citizens are entitled to take title to only one property up to maximum 5 donums per houshold providing that the property only consists of one dwelling.

Foreign nationals and/or investors who want to speed up this process or alternatively who want to buy more than 1 donum and/or bypass this requirement have to set up a limited company in which 51% of shares must belong to TRNC citizen. Furthermore TRNC citizens must be majority on the Board of Directors of the company (1 TRNC or 2 TRNC + 1 foreign). This issue is particularly important on the date of the land acquisition (It is advisable that the Board of Directors is established with the TRNC citizens in majority).

In order to protect and alleviate the anxiety of the foreign investor, a Trust Agreement certifying that the shares are held in trust by the TRNC individual on behalf of the foreign investor together and a signed blank Share Transfer Certificate confirming that he undersigns to sell the shares to anonymous person or to the foreign investor himself shall be issued to the foreign investor. However, the foreign investor can not realize and/or register such transfer with the Company Registry as this would mean holding over 49% of the shares, but can transfer to another TRNC individual.

Once a client provides all the required information a company can be registered within a week to ten days. In order to speed up this process we recommend to send us in advance a list of desired company names with 5-6 alternative options arranging them in order of preference, so that we can check the availability of the names submitted.

2) Tax application of real estate companies

Property companies are taxed in a totally different manner than trading companies. These companies are liable to taxation only when they dispose/sell any part of their immovable property.

Unlike trading companies, property companies are liable to taxation even if they make a loss on disposal and/or even if the company has a trading loss. Tax on rental income is 10% on the gross rental income payable on the 15th day of the following months. This forms the final tax liability. Distribution of dividends after this tax of 10% is no liable to any further taxation. Real Estate tax is levied by the municipalities. The amount of tax is generally immaterial (1 TL per sq.meter + 25% (1,25 TL) if there is a pool.