Northern Cyprus has experienced significant economic expansion, bouncing back after the impacts of COVID-19. Growth indicators include a burgeoning real estate sector, increasing tourist arrivals, and a thriving educational environment. The government of the Turkish Republic of Northern Cyprus (TRNC) is actively encouraging foreign investment. Thus, it creates a favorable business climate that continues to attract a diverse range of new market players. Establishing a company in the Famagusta Free Zone offers the dual benefits of tax optimization and the opportunity to expand your business reach.
Understanding Free Zones
A Free Economic Zone (FEZ) is an area within a country’s borders, clearly defined and regulated by its own legal system. Within this zone, registered companies are considered FEZ residents.
The Famagusta Free Zone hosts enterprises known as Free Zone Companies (FZCs), which must comply with the Law on Free Ports and Zones No. 26/1983 (as revised) and Chapter 113 of the Companies Law.
The TRNC Assembly sanctioned the creation of a free port and zone on March 24, 1983, which was formalized as Law No. 26/1983 on April 5, 1983. Initially applied to the designated area of the Famagusta port, this law is now operational within the Free Port and Zone system, specifically termed a Closed Free Zone.
The establishment of the above Free Zone is driven by several key objectives:
- Attracting foreign investment to bolster economic growth.
- Integrating the local economy with the global marketplace.
- Providing a strategic location that appeals to international investors.
- Meeting the economic needs of targeted areas.
The Famagusta Free Port and its region offer several primary incentives to businesses registered therein:
- Tax Benefits: Companies enjoy an exemption from income and corporate taxes on profits earned within the Free Zone, provided they do not export to the domestic market of the TRNC.
- Customs Duties: A complete waiver on customs duties is in effect.
- Regulatory Freedom: There is no valid legislation governing currency exchange and foreign trade within the Free Zone.
- Duty Exemptions: Goods and services produced in or imported into the Free Zone for transit export are exempt from customs duties and other indirect taxes. However, if they are intended for the TRNC’s local market, the applicable customs duties and taxes, including VAT, must be paid.
- Profit Repatriation: Profits made by Free Zone Companies (FZCs) can be exported freely without any restrictions, and are not subject to profit tax by the TRNC.
- Employment of Foreign Personnel: Foreign experts, engineers, and technical staff may be hired within the Free Zone with the necessary approvals from the Ministry and/or the free zone operator.
As mandated by the law in question, payments for goods, services, wages, benefits, rent, taxes, fees, fines, and other similar obligations must be made in foreign currency. Nonetheless, TRY transactions are acceptable on the condition that they are converted through banks in the TRNC.
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Famagusta Free Zone: company registration perks
In Famagusta, Free Zone Companies benefit from a complete exemption on corporate tax, customs duties, and VAT, enjoying a profit tax rate of 0%.
Besides, company registration in the Free Zone provides numerous other benefits:
- Financial Ease: Smooth transactions for both deposits and withdrawals in corporate accounts.
- Global Market Access: Unhindered entry into international markets.
- Banking Services: Availability of services from local banks (UBAN) and Turkish bank branches (SWIFT, IBAN).
- Tax Advantages: No tax on dividends.
- Profit Distribution: The liberty to allocate profits internationally.
- Postal Services: The option to obtain a postal box (PO box) or a legal address for correspondence.
To establish a Free Zone Company, you’ll have to submit these documents:
- Certificate of No Criminal Record: Mandatory for those who are neither EU nor Turkish citizens.
- Identification Documentation: Copies of ID cards or passports of all shareholders, directors, and the company secretary.
- Residency Proof: Verification of residency within the TRNC.
- Bank Confirmation Letter: A bank-issued letter verifying the reservation of funds for the company’s share capital.
Additionally, the company director is required to provide a bank guarantee letter. This letter should specify an amount equal to ten times the Minimum Monthly Wage (MMW) and remain valid for a period of 24 months.
Key features of a Free Zone company’s Articles of Association
The Articles of Association for the company are crafted under the TRNC Companies Law, adhering to the following stipulations:
- Share Allocation: Founders’ shares are apportioned within a certain range, from a maximum of 90% to a minimum of 10%.
- Business Activities: The draft of the Articles of Association explicitly lists all proposed business operations
- Amendments: Changes to the Articles of Association are subject to judicial approval.
- International Operations: The company is authorized to operate in the global market.
For a Free Zone Company to purchase or lease property in the Free Zone, it must have a resident member (who is a TRNC citizen) who owns at least 51% of the company shares. The company’s Master Agreement should clearly define the upper limit of directors allowed and stipulate the minimum vote percentage required from shareholders to enact a change in directorship.
For your convenience, all company formation stages are listed below:
- Name Verification: Confirm the availability of the company name and secure the necessary approval.
- Document Preparation: Draft the foundational corporate documents, including the Articles of Association and the Master Agreement.
- Bank References: Obtain the necessary reference letters from banks
- Document Submission: Prepare and file the full set of documents with the TRNC’s registration authorities.
- Fee Payment: Remit the required fees.
- Incorporation Documents: Collect the official incorporation documents.
- Tax Registration: Register the company with the TRNC’s tax authority.
- Bank Account: Initiate the opening of a corporate bank account.
- Business Permits/Licenses: Secure the necessary permits or licenses for business operations.
- Municipal Registration: Register your company with the local municipal authority.
- Social Compliance: Register the company with the Pension Fund and Ministry of Labor.
The fee to establish a Free Zone Company is currently set at 33000 EUR.
Business expenses in Famagusta Free Zone
| Monthly expenses | Annual expenses |
| Accounting services, nominee founder | Annual fee of USD 500 |
| Payroll taxes (social security contributions and pension fund) | Employee work visas |
| Extension of permit documents (licenses) | |
| Business visas for directors and shareholders | |
| Approval from local authorities for office rental and signage |
Additional company support services
At Q Wealth, we offer comprehensive assistance throughout the registration process of your company in the Famagusta Free Zone, and further provide professional support services:
- Accounting: Monthly financial reporting by a contracted accountant.
- Tax Advisory: Comprehensive tax consulting services.
- Business Consultancy: Consultations on business operations and licensing.
- Document Services: Printing of official invoices and receipts.
- Permit Assistance: Aid in obtaining company signage permits.
- Visa Facilitation: Support with the acquisition of business and work visas.
Free Zone Company (FZC): general information
| Entity type | LTD (Limited Liability Company) |
| Minimum number of co-owners required | 2 |
| Mandatory staff positions | Director and secretary |
| Authorized capital requirements | Amount: EUR 25,000. Condition: The full amount is to be deposited in a bank for the duration of the company establishment period, i.e., 2 to 4 weeks. |
| Incorporation location | Famagusta Free Zone |
| Company’s scope of activities | Goods transit Import and export Production and packaging IT services Consultancy Tourism Online education Online trading Advertising, and more. |
Famagusta Free Zone: quick-start company registration
Starting a business in the Famagusta Free Economic Zone is a big step, and our team at Q Wealth is here to guide you every step of the way. With a keen eye, we’ll evaluate your business plan, meticulously prepare all the necessary documents for a smooth registration and licensing process, and ensure you receive top-notch professional support. Feel free to reach out to us via any communication channels mentioned on our website. We are here to make your business aspirations a reality!
