Allowances are given for capital expenditure incurred on the acquisition of plant and machinery, fixtures and fittings owned and used by a person or corporate body in trade or business or scientific research.
These capital allowances are:
Initial (Investment) Allowances
Annual (Wear and Tear) Allowances
Allowances are also given on existing buildings or on the construction, extension or adaptation of buildings owned and used by a person or corporate body. In total, tax allowance is given equal to the cost of an asset plus the investment allowance.
- Initial (Investment) Allowance rate is 50%.
Investment allowance rate can be increased up to 100% or new rate, which is not less than legal rate, can be determined by the Council of Ministers with the recommendation of Ministry of Finance for the investments in Priority Development Regions and in sectors with special importance specified under the Incentive Law and the Tourism Industry Incentive Law.
If there are regulations concerning investment allowances under special Incentive Laws, the rates and principles are applied in accordance with Incentive Law concerned instead of applying the allowance rates in accordance with Income Tax Law.
- Annual (Wear and Tear) Allowances:
Machinery and Equipment :10%
Saloon type motor vehicles and motorcycles : 15%
Motor vehicle with “T” licence : 25%
Other motor vehicles (trucks, buses, vans etc.) : 25%
Industrial Buildings and Hotels : 4%
Shops and Residences : 3%
Furniture and Fixtures : 10%
Initial allowances and annual depreciation allowances are deducted before setting net chargeable incomes.
Expenditures on company formation are amortized in five years.
Expenditure on patent and patent rights.
The purchased tools and fixtures which have the 5 values not exceeding the monthly gross minimum wage at the beginning of the year, may not be subject to depreciation and the payments for these tools and fixtures may be immediately recorded as expense.
- Twenty percent of earnings of corporate bodies from exports of goods and services is exempt from corporation tax. But the exempted amount can not exceed the amount equal to 80% of net income which is obtained from exports.
- The exports of all goods and services are exempt from VAT. According to the legislation the exporters can claim credits or refunds for the VAT paid on their inputs.
- Air, land and sea transportation services, from the TRNC to foreign country, from foreign country to the TRNC or from foreign country to foreign country via the TRNC, except passenger transportation services which are provided by transportation corporations in the TRNC, are exempt from VAT. According to the legislation carrier can claim credits or refunds for the VAT paid on their inputs.
- Services provided in ports or airports for the sea or air transportation vehicles used in the production of income are exempt from VAT.