The Turkish Republic of Northern Cyprus (TRNC) has been offering new opportunities for investors within its constantly developing economic envionment.The major goal of the local and foreign investors is to estabish a corporate body in the TRNC.The industry in which the intended company will operate determines under which law the company will be established.The fundamental law for the formation of companies in the TRNC is Companies Law Cap 113.Companies Law determines the formation and operations of the companies as well as their organs and their authorities and responsibilities.
Companies which are established in the TRNC are subject to different tax treatment based on their nature of activities.The rules for the establishment and operation of companies which are subject to different tax treatment are stated in the laws which are in force in addition to Companies Law.
One of the major decisions to be taken by the investors is to get reliable professional sevices.Investors should not look into establishment of a company as a sole legal issue.In addition to establishing a company by registration, investors has to know the tax implications that companies may face.Getting tax advice at an early stage ensures the success of a profitable investment.
D.K.Deniz & Co. has great knowledge of the Companies Law Cap 113 and has developed enermous experience in the establisment of companies.We have been providing consultancy to many local and international companies on the matters involving Companies Law and Tax Laws for many years.Many internationally well known companies have been our clients receiving reliable and professional advice on accounting , tax and legal issues.
Our firm’s staff are specialists of Companies Law as well as tax and accounting issues tackling the big challenges they face and drawing our experiences across the goverment , multinational companies, local companies and privately owned businesses and enterprises.
Real and corporate bodies can establish businesses in their name as a legal corporate body in the Turkish Republic of Northern Cyprus (TRNC).Legal status of enterprises are determined by the laws in the TRNC.
There are different laws in the TRNC which regulate the legal structure and activities of the enterprises.The fundamental law is the companies Law Cap 113.
The following are the laws which regulate the legal structure and activities of the enterprises.
- TRNC Companies Law Cap 113
- Partnership and Trade Names Law
- Foreign Investment Law
- TRNC Banking Law
- International Banking Units Law
- Freezone Law
- International Business Companies Law
- Insurance Sevices Law
In addition to the fundamental law,which is Companies Law Cap 113, there are laws which regulate the establishment and functioning of enterprises operating in different industries.Although the establishment of banking and ınsurance companies are performed under Companies Act, the licences and functions of these type of companies are regulated by Banking Law and Insurance Services Law.
In addition to different laws for different industries , there are laws which provide preferential tax treatment to companies and establish the rules for their formation and operations.Companies which operate in the Free Zone and the Companies whose activities are wholly outside the TRNC, are incorporated under Free Zone Law and International Business Companies Law.The licences and functions of these companies are governed by these laws.
Enterprises which can be established in the TRNC are the following:
1. Sole Traders
2. Partnerships
3. Local Limited Liability Companies
4. Branches of Foreign Limited Companies
5. Free Zone Companies
6. International Business Companies
Amongst the Local Limited Liability Companies the following are incorporated under special laws.
a. Banks
b. International Banking Units
c. Insurance Services Companies
Real persons who want to carry on in business in any industry (trade, manufacturing, agriculture, repair and maintenance, service)can establish their businesses by registering these businesses under their name. Registration of sole traders’ busines names are done in the Registrar of Companies.Sole trade (sole proprietorship) and business belongs to one real person and the liabilities and commitments of this business is the liability of that real person (owner).Sole trader is registered with the Inland Revenue and the taxes that arise from the activities of the sole trade (business)are the personal responsibility of the owner.
A partnership is the relationship existing between two or more persons who join to carry on a trade or business.
A partnership prepares its own financial statements.The profit arising from the operations of partnership is not subject to income tax as the profit of partnership.Each partner is independently responsible to pay income tax on his/her share of partnership profit.
Every partner in a partnership is personally responsible for his/her share of any losses the partnership bussines makes and its liabilities.
In limited liability partnerships one or more partners have unlimited liability and other partners have limited liability .A partner who has limited liability cannot take part in the management of the partnership.Profits and losses of a partnership is shared amongst the partners in the ratio of their partnership share.
Partnerships can be registered with a partnership deed singed by partners.If there is no partnership deed signed by partners , they are bound by the rules and regulations of Partnership Law.
Partnership can operate in the TRNC after being registered with the Registrar of Companies.
Local limited liability companies are the companies registered under the Companies Law Cap 113 with limited liabities of its shareholders.Limited liability means that shareholders’ responsibilities for the company’s liabilities are limited to the value of share they own.
Local Limited Liability Companies are:
a) Private Limited Liability Companies and
b) Public Limited Liability Companies.
Shareholders: : In private limited liability companies the minimum number of shareholders are 2 (two).
In public limited liability companies the minimum number of shareholders are 7 (seven).
Directors : In private limited liability companies the minimum number of directors is 1 (one).
In public limited liability companies the minimum number of directors is 2 (two).
Pre- Emption Clause : In private limited companies the existing shareholders cannot transfer their share to any other persons without first offering them to existing shareholders.Pre – emption clause is always included in the articles of a private limited liability company.
Pre- emption clause applies to the issuing of new shares. Newly issued shares are first offered to existing shareholders.
In public limited liability companies, shareholders can freely transfer their shares to somebody who is not a shareholder of the company.
Local limited liability companies are registered with the Registrar of Companies.
A branch of a foreign company can be registered in the TRNC. Although the branches of foreign companies are regarded as foreign, they are subject to the same rules and regulations of the Companies Law Cap 113.
An approval by the TRNC Council of Ministers is require for the establishment of a branch of a foreign company. Also it is a requirment that the paid up share capital of the main foreign company should be a minimum USA $ 100.000 (One Hundered Thousand USA Dollar).
Companies operating in the TRNC Free Zone , are registered with the Free Zone Administration.The principles of registration of Free Zone Companies are stated in the Companies Law Cap 113.The main difference between local limited liability companies and free zone companies is that, free zone companies are not subject to corporation tax and value added tax (VAT).Free Zone companies only pay taxes (PAYE) ,social insurance and provident fund contributions of their employees.Tax advantages are attracting a lot of investors to the TRNC Free Zone.
International Business Companies (IBC) which are registered under International Business Companies Law carry out their activities outside the TRNC.These companies who are registered in the TRNC and carrying on in business outside the TRNC are subject to 1% (one percent) Corporation Tax on their net taxable profits.In addition to this, IBCs are not subject to any other taxes.IBCs only pay income tax (PAYE) ,social insurance and provident fund contribution of their employees.