H&A
HASİPOĞLU AKBİLEN & PARTNERS
PARTNERS
GUIDE TO
TRNC FOREIGN INVESTMENT LEGAL
SYSTEM
Hasipoglu Akbilen & Partners Law Office
…
The Guide is prepared to give general information on Turkish Republic of Northern Cyprus Legal
System and practice by Hasipoglu Akbilen & Partners Law Office and it does not constitute legal
advice or a legal opinion.
17 Namık Kemal Str., Kyreni a, Mersin 10, Turkey Tel: 0392-444-84-85 Fax: 0392 -815–72-56
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GUIDE TO TURKISH REPUBLIC OF NORTHERN CYPRUS LEGAL SYSTEM
HASIPOGLU AKBILEN & PARTNERS LAW OFFICE, ATTORNEYS AT LAW
INSIDE THE GUIDE
1. Introduction …………………………………………………………...
2. Guide to Property Law ………………………………………………..
3. Guide to Corporate Law ………………………………………………
4. Guide to International Business Corporations Law …………………..
5. Guide to Incentives Law ……………………………………………...
6. Guide to Banking Law ………………………………………………..
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GUIDE TO TURKISH REPUBLIC OF NORTHERN CYPRUS LEGAL SYSTEM
HASIPOGLU AKBILEN & PARTNERS LAW OFFICE, ATTORNEYS AT LAW
Section 1: INTRODUCTION
Although not utterly recognized by international community, Turkish Republic of Northern
Cyprus (“TRNC”) attracted numerous foreign legal and individual investors after so called
“Annan Plan”.
The Guide, under Section 2, is intended to provide brief information to foreign investors on
Property Law issues as the number of investments in TRNC on property have increased more
than 100% after 2003.
Besides investments made by the individual foreign buyers, the international companies are
also interested in purchasing and developing real estates in TRNC. Section 3 of the Guide is
therefore aim to give information on establishing foreign corporate entities to acquire real
estate in TRNC.
Tax benefits have been created as a new tool to attract foreign investments by International
Business Corporations. Section 4 is aimed to guide the foreign investors who wish to establish
international business corporations and benefit from the tax incentives.
Being an island in the Mediterranean Sea, TRNC is also seen as a striking place for the
tourists and is attracting more and more visitors each day. The Guide, under Section 5, intends
to present legal framework for tourism investments and incentives granted by the government
to such projects.
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GUIDE TO TURKISH REPUBLIC OF NORTHERN CYPRUS LEGAL SYSTEM
HASIPOGLU AKBILEN & PARTNERS LAW OFFICE, ATTORNEYS AT LAW
Section 2: GUIDE TO PROPERTY LAW
Purchasing land or residence or investing on property by way of development or in other ways
are important decisions and require understanding of legal system applicable in TRNC. One
should seek legal advice before making any investment on property in TRNC. Property is a
significant asset for the investors all around the world and TRNC with comparably cheaper
prices and continuous gains during the last 3 years from the property business TRNC has
attracted numerous foreign investors of all kinds.
The Law No. 109 regulates the principles with respect to purchase of property by foreigners
(i.e. non-TRNC citizens) in TRNC. This Law also regulates the purchase of property in TRNC
by “foreign controlled companies”. Section 3 summarizes the procedures in relation to
purchase of property by foreign controlled companies.
There are certain restrictions and conditions for foreigners wishing to acquire property in
TRNC. The foreigners can only purchase one property (i.e. up to 5 donums of land (donum is a
measure of land equivalent to 1600 square yards, 1,338 sq. meters or 14,400 sq. ft., 0.336 acre)
or a villa or an apartment. The foreigners must obtain Council of Ministers resolution in order to
acquire freehold ownership of a property.
The documents below are required in order to make this application to the Ministry of Interior in
order to obtain permission;
 Copy of the passport of the purchaser(s);
 Permission Information Form;
 Criminal Record Certificate(s) to be obtained from the police department where the
purchaser(s) is/are resident.
This procedure currently takes between 9 to 18 months as a result of the work load of the
Ministry of Interior and increase in the number of the applications made. The transfer of
freehold ownership can only be completed once the permission is obtained, however, the
possession of the property can be immediately transferred to the foreign purchasers once
completed.
TRNC has created its own rules and different legal system has been constituted after division of
the island, in 1974. In relation to purchase of a land or house, the first issue which has to be
clarified is the “kind of the title deed”. Although all title deeds are seen as “TRNC Title”, the
market differentiates the title deeds and prices wary depending on the type of the title deed. The
property alternatives with different deed types are as follows:
a) Foreign or Turkish Cypriot owned properties pre-1974: These types of title deeds are
considered as wholly safe.
b) Greek Cypriot owned pre-1974: Given to Turkish Cypriot citizens in exchange for their
properties that they left in South Cyprus or awarded to TRNC citizens by TRNC
government.
c) Grant Title Deeds: Granted mainly to Turkish citizens immigrated to TRNC after 1974.
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GUIDE TO TURKISH REPUBLIC OF NORTHERN CYPRUS LEGAL SYSTEM
HASIPOGLU AKBILEN & PARTNERS LAW OFFICE, ATTORNEYS AT LAW
d) Leasehold: Properties owned by TRNC and leased to individuals and/or legal entities with
long term leases for 49 years.
Prior purchasing real estate, ALWAYS:

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
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Obtain Legal Advice in relation to the property to be purchased from an independent
solicitor (preferably from a solicitor who is not advised by the Vendor and/or the
estate agent);
Ask a copy of the title deed and official site plan;
Check the sheet plan – plot references and the site plan;
Look at the site plan and ascertain from its boundaries its shape and boundaries or
obtain assistance from professionals on the place of the property;
Check the construction availability (from State Planning Office);
Make a land search to understand who the owner is and whether there is any
encumbrance on it or not (from Land Registry);
Ask copies of the specifications and plans;
Understand the rules with respect to the maintenance of the site and the building that
you are purchasing; and
Always make a contract before making any payment.
Once a property has been decided upon, ALWAYS:
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Enter into a binding contract with the Vendor;
Make all the payments under the terms of the contract which will regulate the
principles on the payment terms once the stages of the construction have been
completed (in case the project is an off-plan project);
Appoint a project manager to monitor the completion of the stages and check
whether the stages have been completed accurately or not;
Obtain receipts from the Vendor for all your payments including the deposit
payment;
Before making the last payment (i.e. on date of transfer of possession or freehold
ownership) always investigate whether the property is completed in accordance with
the contract, technical specifications and plans;
Obtain a release letter from the Vendor once you make the last payment and transfer
the possession.
Once the permission is obtained from the Council of Ministers, the freehold ownership
can be transferred in the purchaser’s name. At the time of transfer of freehold ownership,
Purchase Tax should be paid to the District Land Office (6% over the valuation to be
made by the District Land Office, however, this rate can be reduced to 3% if exemption
right is used). In addition 1% charge of the 6% is also applicable which should be paid to
the municipality where the property is located. VAT @ 5% may also be applicable if the
Vendor is a professional (i.e. a construction company) and VAT is to be paid in
accordance with the contract between the Vendor and the Purchaser. The capital gains
tax (6.25% over the valuation of the District Land Office) is paid by the Vendor to the
Tax Office at the time of the transfer of freehold ownership of the Property purchased.
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GUIDE TO TURKISH REPUBLIC OF NORTHERN CYPRUS LEGAL SYSTEM
HASIPOGLU AKBILEN & PARTNERS LAW OFFICE, ATTORNEYS AT LAW
GUIDE TO CORPORATE LAW
1. Company Incorporation process in Northern Cyprus:
The legal form widely used for business undertakings in the TRNC both by foreign investors
and by the local businessmen, is the private limited company. The provisions concerning the
limited companies are set out in the Companies Law, Cap. 113.
In relation to setting up company, TRNC laws allow %100 foreign partnership. However, if
the field of activity is property development, the majority shares (i.e. 51%) should be hold
by TRNC citizens. For such incorporation, 100.000 USD should be deposited as capital
contribution of the company. This money is regarded as capital of the company, and the
blockage on this amount is lifted once the incorporation is completed.
The incorporation process is as follow:
a)
b)
c)
d)
Company Name Search;
Ministry of Economy Affairs Approval;
Companies Registry Approval;
Registry to Tax Office.
2. The documents required for the company incorporation are:
a)
b)
c)
d)
e)
f)
g)
h)
Articles of Association and by- Laws (to be prepared according to TRNC Law);
M.S. 1, 2, 3 Forms (application forms prepared in accordance with TRNC Law);
Letter of Intent (letter explaining the business intention of the company);
Good character (criminal record) certificate obtained from the investor’s local
“Security (Police or Court) Office” for ONLY foreign directors;
Tax-Payment guarantee certificate for foreign director(s), obtained from the
TRNC local Revenue and Tax Office;
Approved photocopy of passport or identity card of the shareholders;
Certificate of the deposit of the foreign capital share at a local bank for the
minimum required capital on establishment of any company with foreign
participation of US$ 100,000; and
Power of Attorney (to be issued to your solicitor to follow the formalities).
If the shareholder of the company shall be a legal entity the following documents
shall be required:
a) Board of directors resolution with respect to participation of the foreign company
(which shall be the shareholder) in the company to be established;
b) Articles of Association and by-laws of the foreign shareholder (together with the
amendments made in the Articles of Association and by-laws);
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GUIDE TO TURKISH REPUBLIC OF NORTHERN CYPRUS LEGAL SYSTEM
HASIPOGLU AKBILEN & PARTNERS LAW OFFICE, ATTORNEYS AT LAW
c) The updated list of the names, addresses and the nationalities together with
passport and identity card photocopies of the Board members of the foreign
shareholder;
d) Good character (criminal record) certificate obtained from the investor’s local
“Security (Police or Court) Office” of the board members of the foreign
shareholder;
e) The updated list of the shareholders and their addresses together with information
on the type of the shares, nominal values and number of shares they own in the
foreign shareholder company;
f) Updated version of the certificate of activity of the foreign shareholder obtained
from the Trade Registry where the company is established proving that the
company is still active;
Please note that character certificates, passport photocopies, power of attorney and the
documents related to foreign company shareholder should be notarized and approved
by Turkish consulate in your country or alternatively should be approved by the apostle
registry. If the investor is here in TRNC, the power of attorney can be certified here.
3.
Corporate Structure to Secure the Foreign Shareholders’ Interest:
As mentioned above under Section 1, the foreign shareholders can only own 49% in a
company if the Company is actually register the Property in its name and the majority of
the shares in the company (i.e. 51%) should be owned by TRNC citizens in accordance
with the Immovable Property Acquisition (Foreigners) Law (the “Law).
It is not possible to eliminate all the risks attached to the above mentioned rule of law or
under Companies Law, Section 113, however, it is possible to reduce the risks by
creating certain protection mechanisms as explained below.
In order to minimize the risks, besides the below mentioned mechanisms, the
shareholding percentages that the TRNC citizens own can be divided into portions. As
an example, in a property company having 51% TRNC citizen shareholding, a TRNC
citizen nominee may hold less than 51% (i.e. 30%) and another TRNC citizen nominee
may hold 21% so that together the total shares that the TRNC citizens hold in the
company become 51%. In this way, the foreign shareholders shall be in majority with
49%, however, no shareholder in the company shall be able to get a shareholders
resolution by himself.
a) Trust Mechanism:
This mechanism includes a trust deed to be signed by all the TRNC citizen shareholders
(hereinafter referred to as the “nominee shareholders”) and the foreign shareholder(s)
that the nominee shareholders are holding the shares in the company as nominees, all the
rights arising from the shares (including but not limited to voting, dividend, appointment
of the directors and auditor rights etc.) belong to the foreign shareholders, the nominee
shareholders shall transfer the shares to foreign shareholders and/or their nominees
immediately whenever required by the foreign shareholders. We may send you a draft
Trust Deed in due course upon your instructions.
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GUIDE TO TURKISH REPUBLIC OF NORTHERN CYPRUS LEGAL SYSTEM
HASIPOGLU AKBILEN & PARTNERS LAW OFFICE, ATTORNEYS AT LAW
b) Share Transfer Deed Mechanism:
A share transfer deed may also be obtained from the nominee shareholders stating that
they transferred all their shares in the company to another TRNC citizen(s). The date in
the share transfer deed should be left blank as the share transfers should be registered
with the Companies’ Registry within 21 days from signature. This is a secondary
security for the foreign shareholders in case the nominee shareholders refuse not to
transfer the shares when the foreign shareholders require. Obviously, this new nominee
shareholder should again be a Turkish Cypriot citizen.
c) Class of Shares Mechanism:
Class of Shares can also be created with the Articles of Association and the
Memorandum of the Company in order to grant most of the rights to foreign
shareholders and limit the rights of the nominee shareholders. In this way, the foreign
shareholders holding privileged shares shall have certain rights such as receiving the
dividends, decision rights in the shareholders/directors meetings, appointment of the
directors. It is also possible to insert provisions in the Articles of Association and
Memorandum of the Company limitations with respect to the share transfers (i.e. right of
first refusal, approval of the share transfers by all the directors and/or the shareholders,
put option, call option) etc.
Also, in order to limit the control of the nominee shareholders, the Articles of
Association and the Memorandum may foresee aggregated voting quorums in both
directors and shareholders levels so that the nominee shareholders cannot obtain any
decisions in both levels without the approval of the foreign shareholders and/or directors.
We may also consider obtaining other securities with respect to the protection of the
foreign shareholders by obtaining pledge over shares, bank guarantee letter and/or a
charge (mortgage) etc. from the nominee shareholders if you deem necessary.
The authorized governmental institution to issue a residency permit is the Ministry of
Interior. Foreigners can obtain a residency permit if they purchased a property and
registered in their name and/or signed a contract to purchase a property in TRNC.
In addition to this alternative, the foreigners owning a company or being directors in
the company in TRNC are also entitled to have residency and working permit in
TRNC.
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GUIDE TO TURKISH REPUBLIC OF NORTHERN CYPRUS LEGAL SYSTEM
HASIPOGLU AKBILEN & PARTNERS LAW OFFICE, ATTORNEYS AT LAW
GUIDE TO IBC LAW
The International Business Corporations Law with No: 28/2005 published in the Turkish
Republic of Northern Cyprus (“TRNC”) Official Gazette dated 9 August 2005 (“IBCL”) is
aimed to contribute positive reflections to the economy of the TRNC.
1. Entitlement for establishing IBC:
 Foreign real persons – persons who are not TRNC citizens and the persons
who are not permanently resident in TRNC;
 Foreign real entities – legal entities of those who are not registered in the
TRNC and whose at least 51% of shares belong to people residing outside of
the TRNC; and
 TRNC citizens residing abroad.
2. Minimum capital requirement and application fee to establish IBC & Operation fees:
 The paid capital of the IBC cannot be less than EURO 20,000 (Twenty
Thousand Euros).
 EURO 500 (Five Hundred Euros) is charged for the applications of the IBC.
 IBC which shall operate by opening an office should pay Euro 2,000 annual
operation fee and IBC which shall not operate by opening an office should
pay Euro 5,000 annual operation fee within 30 days from the date of
registration and in the following years until the end of January of each
calendar year to the Tax Office.
 Also, IBC should pay half of the capital to the state as a fee for the registration of
the company, capital increase and transfer of shares.
3. Preliminary License & Registration & Permission:
 The applications are examined and evaluated by the Ministry of Economy
(the “Ministry”) within 15 days from the application the latest and those
which are approved are granted licenses by the Ministry.
 Within two months from obtaining the required preliminary license, an
application to the Companies Registry for registration is required.
 IBC, following their registration, should submit a copy of the Articles of
Association, Memorandum, opening financial statement and a set of approval
documents to the Ministry within one month the latest. This application shall
be finalized within fifteen days the latest.
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GUIDE TO TURKISH REPUBLIC OF NORTHERN CYPRUS LEGAL SYSTEM
HASIPOGLU AKBILEN & PARTNERS LAW OFFICE, ATTORNEYS AT LAW
 IBC should notify the location to the Ministry and should initiate commercial
activities within two months from obtaining the license.
4. Fields of Activities of the IBC:
 The IBC should carry out their commercial activities merely in abroad (i.e.
offshore) and the income should be incurred from abroad.
 IBC cannot carry out gambling and betting activities.
 IBC cannot demand credit from TRNC government and/or TRNC citizens
(Off-Shore Banks are exempted from this prohibition).
 IBC cannot derive any financial source from any bank, credit institution
and/or real persons or legal entities within TRNC.
5. Tax & Financial & Customs Duty Benefits:
 Following each financial period, IBC after having their accounts audited by
the competent financial consultant offices registered in the TRNC, should
submit their accounts in Turkish to the Ministry and the Tax Office within
four months the latest.
 The commercial activities carried out by IBC are carried out without being
subject to Income Tax Law, Money and Exchange Law, Corporations Tax
Law.
 IBC are not be subject to the tax and financial regulations in force in TRNC
for the financial transactions carried out in the branches of the International
Banks operating abroad (other than the branches registered in TRNC);
 IBC, notwithstanding the tax rates specified at the Corporations Tax Law and
Income Tax Law, shall be subject to a tax at the rate of %2.5 (two and a half
percent) over the base value to be determined according to the rules of
Corporations Tax Law and Income Tax Law. This tax amount should be paid
to the Tax Office within five months from each financial period.
 IBC can open any kind of account including a deposit account in the banks
operating in the TRNC. Income stoppage tax which shall be incurred from
the interest of the deposits transferred under appropriate conditions to such
accounts of IBC and/or deposits to these accounts, cannot exceed the tax rate
of 2.5% (two and a half percent) imposed on the IBC. The stoppage tax
deducted as such constitutes the absolute tax of interest revenues of IBC and
the deduction and/or return of the said tax is not possible in the event of a
loss or in any other way.
 No tax is imposed on dividend allocation of the IBC.
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GUIDE TO TURKISH REPUBLIC OF NORTHERN CYPRUS LEGAL SYSTEM
HASIPOGLU AKBILEN & PARTNERS LAW OFFICE, ATTORNEYS AT LAW
 No stoppage tax, VAT and/or any kind of tax are imposed on copyrights and
any kind of fees and service charges and interests paid by the IBC to real
persons and legal entities operating outside the TRNC.
 IBC are not subject to immovable property tax;
 IBC’s shareholders and/or trustees shall not be subject to inheritance, income
and/or institutions tax concerning the transfer of shares.
 The income obtained by the IBC by purchasing and selling properties outside
the country, is exempted from tax.
 Notwithstanding any provisions stating the contrary in any other Law, IBC
do not pay customs duty except for the contributions to Institution of Support
to the Security Forces for:
(i)
(ii)
(iii)
(iv)
Motor vehicles (other than buses, motorcycles, minibuses and caravans);
Office vehicles (other than air-conditions and consumer goods);
Household goods (Furniture and air-conditions are not included); and
Yachts and similar marine vehicles.
6. Currency in Accounting & Freedom and Transfer:
 IBC should keep their accounts in New Turkish Lira and/or with convertible
currency by the Central Bank.
 The capital of Euro 20,000 and the taxes, charges and the fees mentioned
under the IBCL must be paid in convertible currency and not with New
Turkish Lira.
 The money and profit acquired and transferred from abroad by IBC may be
transferred to abroad freely.
7. Employment:
 IBC which shall operate by opening an office should employ personnel at
least one TRNC citizen. If the IBC shall employ more than one employee,
then the number of the foreign personnel cannot exceed three times the
number of the TRNC employees.
 IBC should appoint a trustee in case no office will be opened.
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HASIPOGLU AKBILEN & PARTNERS LAW OFFICE, ATTORNEYS AT LAW
8. Trustees:
 The shareholders who do not wish their shares to be registered under their own
names may deposit their shares to trustees. Trustees keep those shares on behalf of
their original owners. However, the person who keeps the shares and the financial
advisor who keeps the books of the corporation and /or submits them to the relevant
Ministry cannot be the same person.
 It is obligatory for the person who will act as a trustee to have a License from the
Ministry. The trustee must be TRNC citizen, should be resident in TRNC for the last
five years and not be convicted of an infamous crime. The trustee should pay Euros
250 (two hundred and fifty euros) license fee for every year before the end of
January.
 The persons with the status of a trustee should keep the share they are in charge of in
a separate fund account and they cannot keep it together with any of his/her personal
accounts.
 The share registered in trustee may be registered under the name of the trustee or a
third party authorized by the trustee.
 The trustee is entitled to manage or sell the shares deposited to him/her based on the
duties and liabilities granted to him/her by the special authority of the shareholder
and also, depending on the authority granted to him/her by the Law. This
authorization should be on a voluntary basis and must be prepared in writing.
 The legal power of Attorney which specifies the agreed amount and the terms and
handed in to the trustee on demand is safe kept in the Ministry in line with the
principle of confidentiality.
9. Cancellation of the Licenses, Inspection & Sanctions:
 The provisions of the Law concerning the Collection Method of the Debts Owed to
the State shall apply to the liabilities of those IBC that failed to pay the due and tax
imposed on them in accordance with Article 13, 18 and 21 of this Law and their
operation shall be terminated following the cancellation of their operation license by
the Ministry.
 The Ministry is entitled to carry out any kind of inspection concerning the IBC
within the framework of the Laws currently in force.
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GUIDE TO TURKISH REPUBLIC OF NORTHERN CYPRUS LEGAL SYSTEM
HASIPOGLU AKBILEN & PARTNERS LAW OFFICE, ATTORNEYS AT LAW
HASIPOGLU AKBILEN & PARTNERS LAW OFFICE CONTACT DETAILS
Hasipoglu Akbilen & Partners Law Office
Hasipoglu & Akbilen Law Office
Kyrenia Office
17 Namik Kemal Street
Kyrenia
North Cyprus
Telephone No.: + 90 392 444 84 85
Fax No.: + 90 392 815 72 56
Nicosia Office
19 Mahmutpasha Street
Nicosia
North Cyprus
Telephone No.: + 90 392 227 26 20
Fax No.: + 90 392 228 5771
Mustafa Akbilen (Partner)
E-mail: makbilen@lawyercyprus.com
Oguzhan Hasipoglu (Partner)
E-mail: oguzhan@lawyercyprus.com
Irem Mustafa Soker (Partner)
E-mail: msoker@lawyercyprus.com
Web: www.lawyercyprus.com
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