Offshore Business Entities in North Cyprus
	The term offshore entity refers to a company, partnership or branch, incorporated or registered in North Cyprus and in which all shareholders or partners are non-residents; and all income is derived from activities carried outside North Cyprus. The Ministry of Finance, in issuing permits for the registration of offshore entities under the Exchange Control Law, may impose additional conditions depending on the type of offshore activities. The minimum conditions are: the offshore company will not engage in any form of trading activity within North Cyprus; finance from local sources is prohibited; all local expenses must be met from funds imported from external sources; audited financial statements must be submitted to the Ministry of Finance; the shares of the company will at all times be held beneficially by non-residents.
	Offshore Activities
	North Cyprus offshore entities are free to perform a wide range of activities, subject to the provisions of their Memorandum of Association and the conditions set out in their Exchange Control permit.
	Forms of Business Organisation
	The laws and regulations for setting up and administering offshore entities are the same as they are for local organisations. Foreign investors, however, are required to obtain the approval of the Ministry of Finance under the Exchange Control Law.
	Companies
	A company is a distinct -legal person- created in order to separate legal responsibility for the affairs of a business (or any other activity) from the personal affairs of the individuals who own or operate the business. The Companies Law of North Cyprus, which closely resembles the United Kingdom's Companies Act 1948, provides for private companies, exempt private companies and public companies. All companies are required to register with the Registrar of Companies. Private companies need two or more founding members, are limited to fifty shareholders (except for employees or ex-employees), cannot offer shares for public subscription and impose restrictions on the transfer of shares. Exempt private companies are subject to the same regulations as other private companies except that they are not required to file financial statements with the Registrar of Companies. Shares in exempt private companies may not be held by a foreign registered company or a corporate body. Only registered holders of shares can have any interest in the securities of the company. Public companies need 7 or more founding members, can seek public subscription of shares, and do not restrict share transfers. In all cases, shares must be registered (not bearer shares permitted). Shares may be ordinary or preferred with differing voting rights and can be paid in cash or other consideration. Final responsibility for conduct of a company's business rests with the board of directors, elected by shareholders, though the actual conduct of the business generally is in the hands of executive directors / managers. A general meeting of shareholders must be held once a year (the annual general meeting), although special meetings of shareholders can be called. The following information is required for the registration of a company: Name of the company, approved by the Registrar of Companies; Memorandum and Articles of Association, in Turkish. The Memorandum describes the scope of the intended corporate activities and the Articles contain the rights of members, the rules governing the internal management of the company, the duties of directors, etc. Names and addresses of subscribers (first shareholders); Address of Registered office; Names and addresses of the Company secretary and directors. Under the Offshore Entities Law, the Ministry of Finance requires the minimum paid up capital of offshore companies is US$ 5,000. There are also minimum share capital requirements for locally incorporated Offshore Banking Units which is US$ 500,000. The minimum number of shareholders required for Offshore Banking Units is 10. Directors of offshore banking units cannot be less than two. As stated above, the Companies Law stipulates a minimum of two shareholders. In case one member desires to hold 100% of a company, or desire the company is to be a wholly owned subsidiary of another, a local or foreign nominee may be used as the second member, usually holding one share. Nominees or trust companies may also be used when anonymity is required. However, in all cases, full disclosure of all beneficial owners of the share should be made to Ministry of Finance. Such information remains strictly confidential. A private company must have at least one director, whereas a public company must have at least two directors. There are no requirements as to nationality or residency.
	Branch Operations
	A company incorporated outside North Cyprus may establish a branch in North Cyprus. Within a month of establishing a branch, the Company must file with the Registrar of Companies the following documents: Its Charter of Memorandum and Articles of Association; Names, addresses, nationality and occupation of its directors; Particulars of its representatives in North Cyprus.
	Partnerships
	Partnerships can be either general or limited. In a general partnership every partner is liable jointly and severally with the other partners for all the debts and obligations of the firm. In a limited partnership there is at least one general partner with un-limited liability and one or more limited partners who are not liable beyond the amount of capital they have agreed to contribute. The number of partners cannot exceed twenty. A company may be a general or limited partner in a partnership. The relations of partners between themselves may be regulated by a partnership agreement. Such an agreement need not be registered.
	Advantages of North Cyprus
	1. GOVERNMENT POLICY Government actively promoted the further development of North Cyprus as an international financial and commercial centre. Government's declared intention is to interpret existing legislation liberally and to introduce legislation so that offshore businesses may operate efficiently within a favourable environment compatible with sound principles. At the same time, new measures are being adopted for the improvement of the infrastructure and the quality of services to offshore entities. There is practically no red tape. Residence and work permits for expatriate personnel are issued as a matter of course. 2. CONFIDENTIALITY The anonymity of the beneficial owners of offshore entities is assured through the use of nominees. Any information disclosed to the Ministry of Finance, including the names of beneficial owners and financial or other information about the Company and its owners, remains strictly confidential. 3. EXEMPTION FROM EXCHANGE CONTROLS Offshore entities and their expatriate personnel are exempted from exchange control restrictions in their dealings with non-residents, and are permitted to maintain freely transferable bank accounts in any currency in North Cyprus and abroad. 4. DUTY FREE GOODS Offshore entities which have established as office in North Cyprus and their ex-patriate personnel living in North Cyprus may import or purchase locally, office and household equipment and cars free from custom duties. Furniture is excluded from the concessions. 5. GEOGRAPHICAL LOCATION The geographical location of North Cyprus at the crossroads of Europe, Asia, and Africa is an ideal location, not only for regional but also for international operations. The position of North Cyprus in the time zones permits the completion of business between the Far East, Europe and America on the same day. 6. TAX INCENTIVES: a. CORPORATION TAX: The net profits from the offshore operations, after deduction of business expenses and capital allowances on fixed assets, are subject to a reduced rate of tax or are completely exempt from tax. The net profits of offshore companies incorporated in North Cyprus are exempts from tax. Companies managed and controlled from North Cyprus pay US$ 5,000 per annum. These companies pay only the fixed amounts stated above with no other Corporation Tax liabilities. Offshore Banks pay 2% of their net profits as Corporation Tax. The normal tax rates applicable to local companies are 25% Corporation Tax, and 15% Income Tax. b. DIVIDENDS: Dividends paid by offshore companies are not subject to withholding or other taxes. Dividends paid by local companies are subject to withholding taxes. c. INTEREST: There are no withholding or other taxes on interest paid by offshore companies and on interest earned on foreign funds deposited with a local bank. d. OTHER TAXES: Offshore entities are exempted from social insurance contributions on the emoluments of foreign employees; also from tax on capital gains arising on disposal of assets outside North Cyprus. Further- more, shares held in an offshore company are exempt from estate duty. e. EXPATRIATE EMPLOYEES: Expatriate employees of offshore entities, are liable to tax at reduced rates, which is 50% of the normal tax payable.
	References
	North Cyprus Business Guide, 1994; Published by D.K. Deniz & Co. Chartered Accountants, 15 Memduh Asaf St., Nicosia - North Cyprus, via Mersin 10, Turkey Tel. 00-90-392-228 6708 Fax: 00-90-392-228 6709