The tax system in North Cyprus provides significant advantages for investors and business owners. Under the Corporate Tax Law, companies with their legal or business headquarters in the country are subject to a 10% Corporate Tax on profits earned both domestically and internationally. Foreign companies with both their legal and business headquarters abroad are taxed at 10% only on profits generated within North Cyprus. Corporate income is calculated after deducting all eligible business expenses, and double taxation relief applies to income sourced from foreign countries.

In addition, undistributed corporate profits are subject to a 15% Income Tax, while sole proprietorships are taxed progressively, starting from 10% and reaching up to 37% depending on net income levels. The VAT Law establishes five different rates (0%, 5%, 10%, 16%, 20%) depending on the product or service provided.

Special tax exemptions apply to Free Zone Companies and International Business Companies. For example, profits earned abroad by Free Zone Companies are exempt from Corporate Tax, Income Tax, VAT, and Customs Duties. However, income derived from goods and services exported into the TRNC (other than those re-exported through the Free Port and Zone) falls outside these exemptions.