Taxation in North Cyprus
	Rate (%) Band (mn TL) Cumulative Taxable Income (mn TL) Taxation on the Band (000 TL) Cumulative Income Tax (000 TL) 25 15 15 3,750 3,750 30 16 31 4,800 8,550 35 25 56 8,750 17,350 40 35 91 14,000 31,300 45 45 136 20,250 51,550 50 Used for all additional income
	Income Tax Allowances
	Income Tax Allowances 1994 (000 TL) 1995 (000 TL) Personal allowance 28,800 13,200 Additional allowances for taxpayer are: For wife 1,728 792 For each of those whose status at the begining of the year are:     - Children younger than the age of 16 and 1,140 660 not going to school 1,140 660 - Child following elementary education 1,140 660 - Unmarried daughter with no income     - Son serving military service 1,728 792 - Handicapped child 1,728 792 - Child under 20 and undergoing secondary education 1,728 792 - For those over the age of 65 1,140 660 - Child under 18 and undergoing education outside TRNC 1,728 792 - Child between the ages of 18 and 27 and undergoing higher education 2,280 1,320 - In case of payments made to divorced wife 1,152 528 Handicapped person's allowance: 100% loss of ability 8,640 3,960 Handicapped person's allowance: 50% loss of ability 4,320 1,980 Special allowance on earned net income: Under PAYE 20% 20% Special allowance on earned net income: Others 10% 10% Following reductions will be made from the tax payable of those persons with three or more children: For the third child 15% 15% Reductions for every additional child 5% 5%
	Corporate Taxation
	The corporate tax rate applicable to both local and foreign companies is 25%. There are the following exemptions: 20% of the turnover obtained from exports is exempt from corporation tax, but this amount cannot exceed 80% of the net profit obtained from such exports. Foreign taxes paid on profits derived abroad can be deducted from corporation tax that is payable on the foreign profits. The profits of foreign transporters are arrived at by applying the following rates to their sales:     - Land and sea transport: 10%      - Air transport: 5%
	Allowable Expenses
	Expenditure incurred wholly and exclusively for obtaining the net profit, except as explained below, can be deducted from income if they are substantiated. Saloon car expenses: An amount at most equal to 50% of total saloon car expenses can be deducted. Travelling expenses, Tickets, Travel allowance: There is no limitation on expenditure. Companies engaged in either export or manufacturing can claim up to 50 days of allowance. Other companies can claim up to 30 days allowance. Advertising: Cannot exceed 5% of gross profit. Entertaining: Cannot exceed 4% of gross profit for either export or manufacturing companies, and 2% of gross profit for all other companies. Donations: Cannot exceed 5% of net profit.
	Capital and Investment Allowances
	Fixed Assets Capital Allowance (%) Investment Allowance (%) Tools: 33 20 Buildings:     - Industrial 4 10 - Residential 3 5 - Hotel 4 10 - Wooden cottage or temporary 10 5 - Heating or air conditioning plant 10 10 - Lift 10 1 0 Furniture and fixtures: 10 10 Plant and machinery: 10 20 Vehicles, motor cars: 15 - - Taxies, lorries etc. 20 20 - "T" licensed 25 20 - Van and freight vehicles 20 20
	Note: Investment allowances are given in addition to capital allowances and the rates can be increased up to three times of those given above by the Council of Ministers. In order to qualify for investment allowance the fixed assets must be used for the first time except in the case of them being imported.
	Profit on Sale of Immovable Property
	Profits made by those engaged in the sale of immovable property is arrived by applying the rate of 25% to the higher of sale price or market value. But in case of actual net profit being more than this amount, profit as per the accounts forms the taxable amount. 25% of the higher of sale price or market is the amount on which withholding tax is calculated. This tax is deducted from the final tax liability for the year. Real persons with sales of over three properties per year and companies are regarded as engaged in the sale of immovable property. Profit made by those not engaged in the sale of immovable property is arrived as above. 30% of this profit is exempt from taxation and 20% is payable on the amount of profit after this exemption on any completion of transaction. This tax forms the final liability.
	Tourism Incentive Law
	1. The incentives apply to local and foreign real or legal entities. 2. Those who want to benefit from any of the incentives must apply to Ministry of Tourism to obtain an Incentive Certificate. 3. Incentives are: The Ministry of Tourism can rent or lease land and buildings that are allocated to it. Materials needed for the touristic buildings can be exempted from Custom Duty with the permit of the Ministry of Tourism. Net income from investments, the projects of which are approved and are built after 30.6.1987, is exempt from income and corporation tax for a period of ten years commencing from the date at which the investment was documented and business commenced. In cases where the bed capacity of the existing buildings are increased, the net profit derived from the additional capacity is also exempt from taxation for ten years. Expenditure to increase the star quality, building of a swimming pool, sports facility or similar buildings can be written off in two years accelerated depreciation starting from the end of such expenditure. Those obtaining tax exemption cannot carry forward any losses accumulated in the exemption period. If a public company registered in TRNC obtains tax exemption, the period of exemption is increased to thirteen (13) years. Operators of such touristic buildings can deduct from their net profits 20% of the Turkish Lira (TL) equivalent of foreign exchange they bring to TRNC and exchange them to Turkish Lira at the official rate of exchange.
	Free Port and Zone
	Profits derived from approved operations by those persons and companies who have obtained Operating Licences are exempt from income and corporation tax. But profits derived from the export of goods and services to TRNC other than those produced in the Free Port and Zone are not within the scope of this exemption.
	Withholding Taxes
	Salaries P.A.Y.E. Rate, % As per tax Computation - From payments to foreign persons or legal entities. Re. services rendered 15 - From payments made to foreign building contractors 5 - From patent right payments made to foreigners 10 - From payments made to foreign artists 10 - From payments for goodwill 20 - From payments made to growers regarding crops (In case of annual payment being greater than 1 million TL):   - Dry Farming: 1/2 - Animal Husbandry: 1 - Irrigation Farming: 1 1/2 - From those trading in immovabke property (On 25% of the higher amount of market value or sale price) 25 - From bank interest obtained by legal persons 10 - From interest paid by those other than banks or cooperatives 20 - From dividens 15 - From undistributed net income of corporations, including foreign companies 15 - From rents 15 - From casinos (20% of gross takings) 50 - From payments to foreign carriers or transporters depending on the income liable to corporation tax 36 - From retained earnings of all companies 15
	Withholding taxes can be offset against income tax by real and against corporation tax by legal entities. Taxes withheld for those not resident in TRNC from their final liability and no offset is possible. Except for withholding taxes on rent and sale of immovable property, the tax is withheld and deposited to the Tax Office by those who make the above named payments. Withholding taxes paid by casinos from their final tax liability.
	Payment of Tax and Deductions
	Corporation tax is payable in two equal installments; by the end of May and October. Income tax is paid by the end of the month following the month of withholding. Withholding taxes are paid by the 15th of the month following the month of withholding. Interest on late payment is 10% for the first month and 6% for taxes, 5% for social security and 15% for provident fund, for every proceeding month that the payment is overdue.
	Social Security and Provident Fund Premiums
	Social Security
	Minimum and maximum amounts on which premiums are based are: Period Minimum (TL) Maximum (TL) Daily 165,000 600,000 Monthly 4,950,000 18,000,000
	Employees
	Premium payments are made on amounts that are within the above earning limits at the following rates: Employees' contribution: 8% Employers' contribution: 10% The employers' contribution given above is for those insured that are in the first danger category. For each increase in the danger level the employers' contribution increases by an additional 1/2%.
	Self-Employed and Employers
	The insured pay premiums at rates, depending on danger category, on monthly income levels determined by the Council of Ministers at three monthly intervals. The contribution rate of those at the first danger level is 15% and this rate increases by 1/2% for every increase in danger level. Any payments made to social security funds cannot exceed the below limits for income tax purposes. Paid by Employer: Cannot exceed 19% of gross salary. Self Employed: Cannot exceed 13% of gross fee.
	Provident Fund
	Employees:  Rates at which monthly contributions are made from salaries are:
	Employee 5%, and  Employer 5%.  Self employed and employers are not required to contribute.
	Estate Duty
	From the assesed value of the estate of a deceased person, the following deductions will be made:
	Deductions Amount (000 TL)
	General allowance 247,140 Allowance for living spouse 24,714 For each unmarried child who at date of death are below the age of 18 24,214 For each unmarried daughter over 18 with no income 24,714 For each child between the ages of 18 and 27 undergoing higher education 24,714 For each child not falling into any of the above categories 16,476 In the case of the death of both parents, for each unmarried child who is under the age of 18 on the death of the latter parent 49,428 For each child who have died before the deceased if the child has living children 16,476     The above allowances are based on the minimum wage and hence will change as the wage changes.
	Estate Duty Table
	After All Deductions Being Made the Rate of Duty is: From 1 to 10,000,000 5 From 10,000,001 to 20,000,000 10 From 20,000,001 to 35,000,000 15 From 35,000,001 to 50,000,000 20 From 50,000,001 to 75,000,000 25 From amounts greater than 75,000,000 .. .. 30
	Note: Whilst every care has been taken in the preparation of this guide, no responsibility can be accepted for inaccuracies. At the same time it must be remembered that law and practice may also change. Accordingly, competent professional advice should be obtained before acting on the basis of information included in this guide.
	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