Companies that operate exclusively abroad and derive all of their income from abroad may establish an International Business Company (IBC) by filing an application with the TRNC Ministry of Finance. Recent legislation in the TRNC has introduced a number of tax benefits for IBCs. In particular, IBCs pay a tax rate of 2.5% on taxable income, which is a huge saving compared to the corporate tax rate of 23% for limited liability companies. All income can be transferred overseas without restriction.
In order to make the application on your behalf, we require the following information and documents: – As the first step is to decide on a name for the company, we will need a list of names you wish to give the company so that we can check with the Registrar of Companies to see if any of these names are available and acceptable.
– We will need the full names and occupations of the persons who are to be the shareholders, directors and company secretaries and the number of shares each shareholder is to hold. There should be at least two shareholders, even if one holds only a nominal amount.
– A summary of the activities that the IBC will engage in.
– Details of the country/countries in which you intend to carry on your activities.
– Details of the banks you will be dealing with, including their names, currency, authorised signatories and expected annual turnover.
– Photocopies of the passports of the partners, certified by a Notary Public or Commissioner of Oaths. – Letters of recommendation (original) on the shareholders from a lawyer or agent practicing in the country where they reside and a letter of recommendation (original) from a bank where the shareholders have an account.
– A current utility bill in the name of the shareholders (original).
– A detailed resume from each of the shareholders.
– A statement signed by all parties confirming the full name and address of the person(s) in the TRNC authorised to receive service of documents on behalf of the IBC.
– IBCs must employ at least one employee who is a resident of the TRNC and a citizen of the TRNC. If the IBC employs more than one employee, the number of foreign personnel may not exceed three times the number of TRNC resident and national employees. We can assist you in finding a Turkish Cypriot employee and explain the costs associated with employment.
Once we have all the above information, we will complete the relevant company registration forms MS1, MS2 and MS3 and prepare the Memorandum and Articles of Association to be signed by the shareholders and directors of the company. We also complete the relevant application form and submit it to the Ministry of Finance along with all the above documents for the provisional licence.
The fee payable on submission of the application is €500. This application fee is not refundable to the applicant under any circumstances. This amount may be increased or decreased by 50% by the Council of Ministers.
After the application has been submitted, the Ministry will examine it and issue a provisional licence within 15 days if it is found to be suitable.
After receiving the provisional licence, the applicant must complete the registration process with the Registrar of Companies within two months. Otherwise, the provisional licence will be considered invalid. The minimum paid-up capital for IBCs is €20,000, which must be deposited in a bank account at T.R.N.C. and blocked there until the IBC is incorporated. Once the money is deposited, a certificate is issued by the bank which is filed with the Registrar of Companies in the T.R.N.C. together with the application for registration of the IBC. Once the IBC is incorporated, this amount can be released.
Within one month of the completion of the registration process, the IBC must file the Memorandum and Articles of Association and the opening balance sheet, as well as a set of incorporation documents received from the Registrar of Companies, with the Ministry of Finance in order to obtain an operating licence. This application will be completed within 15 days at the latest.
Within two months of receiving the operating licence from the Ministry, the IBC must declare its place of business and commence operations in accordance with its Articles of Association, failing which the operating licence will be deemed invalid.
There is an annual licence fee for IBCs, which is €2,000 per year for IBCs operating an office in the TRNC or €5,000 per year for IBCs not operating an office in the TRNC. These fees must be paid to the tax office no later than 30 days after the official registration and every year in January.
IBCs in the T.R.N.C. are subject to different requirements for filing accounts. Therefore, the company should always hire an accountant to assist them in this regard.