1. Income Tax
a. Income Tax Annual Bands and Rates Rate Band (TL) Cumulative Band (TL) Taxation on the Band (TL) Cumulative Tax (TL) 10 3.000 3.000 300 300 20 3.000 6.000 600 900 25 7.600 13.600 1.900 2.800 30 10.050 23.650 3.015 5.815 37 23.651 + b. Withholding Taxes Rate % (Other/TR) From salaries P.A.Y.E. As per tax computation From payments to foreign persons or legal entities re services rendered 20/5 From patent rights payments made to foreigners 10 From payments made to foreign artists 10 From payments for goodwill 20 From payments made to producers regarding crops – Dry farming 1 – Animal husbandry 2 – Irrigation farming 3 From those trading in immovable property, on 20% of market value or sale price whichever is higher 20 From bank interest obtained by legal persons 12 From bank interest obtained by real persons 10 From dividends 15 From profits retained by legal entities, including foreign legal entities 15 From rents 10 From interest paid by those other than banks or cooperatives 20/10
Note: Withholding taxes can be offset against income tax of real persons and against corporation tax of legal entities.
- On rent received by real persons
- Of legal entities with no other income then rent
- On bank deposit interest of real persons
- On dividends paid by public companies and all taxes withheld from non-residents form their final tax liability and no offset is possible.
Withholding taxes on sale of immovable property and rent income are paid by the person receiving the
income. In other cases withholding tax is withheld by the person making the payment and paid to the tax office.
For each of those whose status at thebeginning of the tax year is:
c. Income Tax Allowances Rate 2017 (TL) 2018 (TL) Personal allowance 18,300.00 21,750.00 For wife %8 1,464.00 1,750.00 – Child younger than age 16 and not going to school %6 1,098.00 1,305.00 -Child going to the elementary school %6 1,098.00 1,305.00 -Unmarried daughter with no income %6 1,098.00 1,305.00 -Child serving military service %8 1,464.00 1,740.00 -Handicapped child %8 1,464.00 1,740.00 -Child under 20 and undergoing secondary education %8 1,464.00 1,740.00 -Child under 18 and undergoing education outside TRNC %8 1,464.00 1,740.00 -Child between the ages of 18 and 27 and undergoing higher education %11 2,013.00 2,392.00 Persons over the age of 65 and not handicapped %5 915 1,087.00 Payments made to divorced wife %4 732 870.00 %50 handicapped persons allowance %15 2,745.00 3,262.00 %100 handicapped persons allowance %30 5,490.00 6,525.00 Special allowance on earned net income – Salaries PAYE: %17 %17 – Others: %10 %10 Reduction on tax payable for those with 3 or more children: – For the 3rd child %15 %15 – For every other child over third child %5 %5 Municipality occupation tax paid in the tax year Life Assurance Premium paid in the tax year.Premium cannot exceed
monthly social security contributions
Deductible social security contributions are limited to 13% of Gross Income.
Note:In case of both spouses having taxable income, child allowances are apportioned equally.
d. Profit on sale of immovable property
- Profit made by those engaged in the sale of immovable property is arrived at by applying the rate of 20% to the higher of sale price or market value. 20% of this profit is paid as withholding tax and 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 tax and 20% tax is payable on the amount of profit after this exemption. This tax forms the final liability.
Land Registry Transfer Fees: Rate Limited company %6 Real person – First time %3 – Subsequent %6
Expenditure incurred wholly and exclusive for the production of income, can be deducted subject to the limitations below.
50% of total saloon car expenses for saloon cars above 1600 cc are allowable.
e. Allowable Expenses Travelling expenses Travel Allowance * Daily allowance fixed by the Ministry of Finance – Companies engaged in either export or manufacturingcan claim up to 70 days allowance. – Other companies can claim up to 50 days allowance. * Airplane Tickets No limit Advertising Local no limitation; overseas limited to %10 of gross profit Entertaining Manufacturing and export companies limited to 4% of gross profit.Other companies limited to 2% of gross profit Donations Limited to 10% of net profit Sponsorship agreements No limit f. Capital and Investment Allowances Depreciation % Investment Allowances % Industrial, agricultural and touristic buildings 4 – 5 50 Non-industrial commercial buildings 3.03 – 10 50 Tools and equipment 33.33 50 Fixtures, fittings and equipment 10 50 Mobile phones 25 50 Medical equipment and tools 20 – 10 50 Electrical equipment 10 50 Computer hardware and operating systems 25 50 Computer software 33.33 50 Motor vehicles – Salon cars 15 – – Van, buses, taxi, trucks, rental cars 25 50 Yachts, boats 5 50 Land – – Goodwill 20 –
Note: The above rates do not cover all fixed assets.
Fixed Assets possessed by rent are amortised over the rental period in equal instalments.
Note: Investment allowances are given in addition to capital allowances. In order to qualify for investment allowance the fixed assets must be purchased, manufactured or constructed and used for the first time except in the case of imported fixed assets.
- The corporation tax rate applicable to both local and foreign companies is 10%.
- 20% of the turnover obtained from export 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 from abroad can be deducted from TRNC tax on total profits. The deduction cannot exceed the TRNC corporation tax (10%) that is payable on the foreign profits.
- a. Payments of Tax and Deductions
- Corporation tax is payable in two equal instalments; by the end of May and October.
- Income tax is payable in two equal installment; by the end of July and November.
- Withholding taxes are paid by the 15th of the month following the month of assessment.
- Social security deductions are paid by the 20th and the Provident Fund by the end of the month following the month of deduction.
- Interest on late payments of taxes is 3% for the first month and 1.2% for every proceeding month that the payment is overdue.
- Interest on late payments of social security is %3 for the first month and 1.2% for every proceeding month that the payment is overdue.
- Interest on late payment of Provident Fund for the first month is 1% and %1 for every proceeding month that the payment is overdue.
- Municipality occupation tax is paid by the end of the 10th month following the year.
- b.Declaration Dates
- Personal Tax Return by April following the relevant year.
- Corporation Tax Return by April following the relevant year.
- Annual Payroll Return by February following the relevant year.
- a. Payments of Tax and Deductions
4.Value Added Tax (VAT)
a. Rates Standard Rate %16 Other Rates %0 (generally basic food products) %5 (generally food, medicine, newspaper, tourism and education services) %10 (generally petrol, gas, confection, construction materials, restaurant and contracting services) %20 (generally tobacco, alcoholic drinks, jewellery and GSM services)
Please click here for VAT rates of all goods and services.
- VAT returns are submitted monthly.Companies pay VAT by the 20th and real persons by the 25th of the following month.
- VAT receivable after netting-off is carried forward to future periods.
- Input VAT on some expenditure cannot be deducted. (ie. Saloon car, undeductible expenses). VAT on Fixed Assets is deducted by 3 annual instalments.
5. Stamp Duty
- Agreement stipulating any fixed sum
up to 16,750,000 TL – %0.5
above 16,750,000 TL – %0.1
in which no fixed sum is stipulated – 31,50 TL
- Share Capital Registration – %0.5
- Memorandum and Articles of association upon registration 124,50TL
- Invoice, Receipts, etc. (>81 TL) – 20 Krş.
- Balance Sheet, Profit/Loss – 31,50 TL
- Board of Director Reports and Audit Reports – 13,50 TL
- Stamp duty is paid within 1 month. Payments after 1 month and before 6 months is doubled. Payments after 6 months is tripled.
6. Municipality Occupation TaxRates
- For employees %0.2 of previous year’s wage.
- For companies %0.2 of previous year’s taxable income.
7. Company Charges
- Annual Report – 20 TL
- Certified documents-each – 6 TL
- Certificate of incorporation – 12 TL
- Certified copy of Memorandum and Articles of Association – 12 TL
- -Plus for every page – 1 TL
- Name check – 15 TL
- Each official documents to be filed – 30 TL
- Memorandum of Association during incorporation – 101 TL
- Articles of Association during incorporation – 101 TL
- Partnerships registration – 125 TL
- Trade Name Registration – 108 TL
8. Minimum Wage
MINIMUM WAGE Wages 2016 TL 2017 TL 2016 TL Minimum Monthly Wage 1,730 (since 1/9/2015 2,175 2,365 (Applicable from 1 March 2018)
9. Free PortProfits derived from approved operations by those persons and companies that 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.
10. Social Insurance, Social Security And Provident FundRates and Explanations
- Social Insurance and Social Security.
Lower and upper limits of Premium payments: Monthly-Lower Limit (TL) Monthly-Upper Limit (TL) Social Insurance 2,365 16,555 Social Security 2,365 16,555
Employees and Workers:
Deductions are made within the earning limits stated above.
Deductions from the Insured: TRNC Work Permit Retired Social Insurance %9 %9 %8 Social Security %9 %8.25 %8 Employer’s Contributions: TRNC Work Permit Retired Social Insurance %11 %11 %13 Social Security %11 %10.25 %13
The employer’s contributions stated above are applicable to the insured in the lowest risk group and is increased by %0/5 for every increase in risk group.
Employer’s and self-employed:
The insurance premiums are paid every 3 months on monthly income levels according to age and risk groups which are determined by the Council of Ministers.
The payments to social security funds cannot exceed the following rates for tax purposes.
- For Employer’s contribution %19 of Gross Income.
- Employee Deduction %13 of Gross Income.
Provident Fund: Employees: TRNC Work Permit Deductions from monthly income %4 %0 Employer’s Contribution %4 %5
Employers and self-employed are not required to contribute to Provident Fund.