Financial Transactions Tax Law 62/2026: What Changes in North Cyprus on 1 October 2026

The Financial Transactions Tax Law was published in the Official Gazette of North Cyprus on 13 July 2026 and takes effect on 1 October 2026, repealing the Banking and Insurance Transactions Tax Law 21/1992 in full. It reaches ten categories of financial institution, including crypto asset service providers, payment institutions, factoring and financing companies.

What Changed Compared With the 1992 Law?

Three rates were carried over unchanged: 0.1% on foreign exchange, 5% on insurance and 3% on other transactions (Article 10(1)). The one new rate is 1% on domestic interbank deposits; three rate items were dropped and the filing calendar did not change.

What changed:

• Scope. Law 21/1992 taxed banks, insurance companies, bank card companies, money lenders (bankerler), credit companies and authorised foreign exchange institutions (21/1992, Article 4). Law 62/2026 attaches the tax to the ten types of financial institution defined in Article 2; the concepts of "banker", "credit company" and "authorised institution" were removed from the statute.
• New rate. 1% on domestic interbank deposit transactions (Article 10(1)(C)) — an item that did not exist in Law 21/1992.
• Removed rates. 2% on rediscount transactions between the Central Bank and banks, 0.1% on amounts held with banks abroad and in foreign securities portfolios, 0.05% on the Central Bank's foreign exchange and banknote market (21/1992, Article 12(1)(C), (D) and (E)).
• The 55% placement rule. The mechanism taxing the foreign assets of banks that placed 55% or less of collected deposits inside North Cyprus (21/1992, Articles 4(5) and 9(3)) does not appear in the new Law.
• Taxable event. Under Law 21/1992 the tax arose when the transaction was carried out, when the consideration was received in cash, or when it was recorded in the accounts, and an invoice issued for advance consideration also triggered it (21/1992, Article 8). Under Law 62/2026 the only trigger is the moment money is received in cash or credited in the accounts (Article 8).
• Collection from the customer. Institutions must claim and collect the tax amount separately from their customers at the time of the transaction (Article 7). Law 21/1992 contained no express rule to this effect.
• Leveraged trading. The definition of "foreign exchange transaction" expressly excludes leveraged buy-sell transactions (Article 2).
• Insurance tax base. The base is the premium stated in the policy, and commissions paid to insurance intermediaries may not be deducted in calculating that premium (Article 9(3)). Law 21/1992 had no such rule.
• Cancellation relief. Law 21/1992 allowed insurers to deduct amounts relating to cancelled insurance transactions (21/1992, Article 9(5)). Law 62/2026 limits the deduction to the portion relating to the period after cancellation and extends it to cancelled interest, commission and fee amounts; the deduction is conditional on supplying the information and documents requested by the Income and Tax Office (Article 9(4)).
• Responsible person. Law 21/1992 allowed the Income and Tax Office to hold parties to a transaction responsible for payment (21/1992, Articles 7 and 18(2)). Law 62/2026 contains no such mechanism.
• Deemed value. The rule setting the base by reference to a deemed value or deemed fee where consideration is absent or unknown (21/1992, Article 10) does not appear in the new Law.
• Foreign currency and Tax Office powers. The rule applying the exchange rates of the transaction date to foreign currency transactions (21/1992, Article 11) and the rule setting out the Income and Tax Office's powers to collect understated tax and to disregard artificial transactions (21/1992, Article 22) do not appear in the new Law, which instead refers the operation of its provisions to the Tax Procedure Law (Article 20).
• Exemptions. The exemption list grew from ten items to fifteen: five exemptions are new and two were redrawn (Article 6(1)).

What did not change:

• The 0.1% foreign exchange rate, the 5% insurance rate and the 3% rate on other transactions (Article 10(1); 21/1992, Article 12(1)).
• The taxable period remains one calendar month (Article 11).
• Returns are filed with the Income and Tax Office by the end of the 15th day of the month following the period, and the tax is paid within the same period (Articles 13 and 17(1)).
• Institutions with no taxable transactions in a period must still file a nil return (Article 12(2)).
• An annual statement summarising the previous year's tax must be filed during February at the latest (Article 13).
• The Council of Ministers may halve the rates and differentiate them by transaction type (Article 10(2)).
• The tax is deductible against the income or corporation tax base, and is not deductible if it is not shown on the transaction document (Article 19(1)).
• Exemptions granted by other laws remain ineffective for this tax, with international treaty rules reserved (Article 6(2)).
• Late payment is collected with default interest under the Public Receivables Collection Procedure Law (Article 17(2)).

Who Counts as a Financial Institution?

Under Law 62/2026 the taxpayers are financial institutions (Article 7), and the Law covers those institutions together with their customers (Article 4). Article 2 sets out a closed list of ten categories: banks, insurance and reinsurance companies, factoring companies, financing companies, forex institutions, crypto asset service providers, payment institutions, electronic money institutions, securities intermediary institutions and foreign exchange offices. Eight of these ten become expressly liable for the first time; only banks and insurers were clearly inside the 1992 law. Banks include deposit-taking and lending cooperatives, the TRNC Development Bank and the TRNC Central Bank, and insurance companies include the North Cyprus branches of foreign insurers and reinsurers. A receipt does not need to arise from a financial transaction to be taxable (Article 5(1)).

• Banks — institutions licensed under the TRNC Banking Law, deposit-taking and lending cooperatives established under the Cooperative Companies Law, the TRNC Development Bank and the TRNC Central Bank (Article 2).
• Insurance and reinsurance companies — companies established in North Cyprus and the TRNC branches of foreign insurers and reinsurers (Article 2).
• Factoring companies — companies established under that name by the Law on Financial Leasing, Factoring and Financing Companies and the Prevention of Usury (Article 2).
• Financing companies — companies established under that name by the same Law (Article 2).
• Forex institutions — persons enabling leveraged buying and selling of currencies, precious metals and other assets against posted collateral on an electronic platform (Article 2).
• Crypto asset service providers — persons intermediating the purchase, sale or transfer of crypto assets, holding them in custody and/or issuing them (Article 2).
• Payment institutions — persons engaged in money transfer and bill payment services, together with bank card companies (Article 2).
• Electronic money institutions — persons issuing instruments used to execute payment transactions against funds accepted (Article 2).
• Securities intermediary institutions — persons intermediating the purchase and sale of securities (Article 2).
• Foreign exchange offices — legal persons dealing exclusively in the purchase and sale of foreign currency and holding a "Foreign Exchange Office Licence" under the Money and Foreign Exchange Law (Article 2).

What Are the Rates?

The Council of Ministers may reduce these rates by up to half and differentiate them by transaction type (Article 10(2)); the Law grants no power to increase them.

When Does the Tax Arise?

Money received by a financial institution in its own favour, under any name, from inside or outside North Cyprus, in cash or credited in the accounts, is subject to the tax, and the receipt does not need to arise from a financial transaction (Article 5(1)). The taxable event occurs at the moment the money is received (Article 8). In practice this means the tax follows collection alone: performing the service or issuing an invoice does not by itself create a liability, which narrows the 1992 position. Where an amount credited in the accounts has already been taxed, its later payment in cash is not taxed again (Article 5(2)). For foreign exchange transactions the base is the sale amount of currency and banknotes, whether or not the sale price exceeds the purchase price and whether or not any margin remains (Article 9(2)). No deduction for expenses or taxes may be made from the base (Article 9(5)).

Which Transactions Are Exempt?

Article 6(1) lists fifteen exempt items. Five of them — (D), (E), (J), (K) and (L) — are new compared with Law 21/1992:

• (A) Amounts accruing from transactions between a bank headquartered in North Cyprus and its own TRNC branches, and between those branches.
• (B) Amounts accruing from transactions between the TRNC branches of a bank headquartered outside North Cyprus.
• (C) Interest on Government Domestic Borrowing Bonds and on TRNC Development Bank bonds.
• (Ç) Profits of financial institutions in whose capital a financial institution participates, arising from transactions taxable under this Law.
• (D) Amounts banks receive for services procured from other persons or institutions in the name and account of their customers and pay on identically to those persons or institutions.
• (E) Foreign exchange transactions between banks and foreign exchange offices, or among themselves.
• (F) Premiums, commissions and other amounts received from reinsurance transactions, retrocession transactions and life insurance transactions.
• (G) Dividends received from industrial undertakings in whose capital a financial institution participates.
• (Ğ) Amounts received from the insurance of unharvested or ungathered agricultural produce and of farm animals.
• (H) Interest and other amounts accrued by the Cooperative Central Bank in favour of cooperatives holding credit company status that are exempt from corporation tax under the Corporation Tax Law.
• (I) Amounts accruing from banks' transactions with the TRNC Central Bank.
• (İ) Amounts received from the insurance of movable or immovable property of the Treasury.
• (J) Arbitrage transactions.
• (K) Foreign exchange transactions of banks and foreign exchange offices with the Treasury and with banks established abroad.
• (L) Interest paid by the Ministry responsible for Finance on loans extended by banks under State guarantee.

Two items were redrawn:

• Law 21/1992 exempted interest, dividends and bonuses on all notes and bonds exempted from tax by special laws (21/1992, Article 5(1)(C)). The new item (C) limits the exemption to interest on Government Domestic Borrowing Bonds and TRNC Development Bank bonds.
• The old item (H) exempted transactions in markets formed by the Central Bank (21/1992, Article 5(1)(H)). The new item (I) defines the exemption as banks' transactions with the Central Bank.

When Must Returns Be Filed?

Returns are filed with the Income and Tax Office by the end of the 15th day of the following month, with payment due in the same period (Articles 11, 13 and 17(1)). The first taxable period is October 2026, so the first return and payment fall due on 15 November 2026.

• The tax is assessed on the institution's written declaration, by the Income and Tax Office to which it is attached, and in the institution's own name (Articles 12(1), 15 and 16); the Tax Procedure Law applies to the operation of the Law (Article 20).
• Institutions with no taxable transactions in a period must still file a nil return (Article 12(2)).
• An annual statement summarising the previous year's tax is filed during February at the latest (Article 13).
• Collected tax must be shown in the accounting records so that it can be calculated and audited, and shown separately on invoices and similar documents (Article 18).
• Where the customer carries on commercial, industrial, professional or agricultural activity, the related portion of the tax paid is deductible against the income or corporation tax base. However, if the tax is not shown on the transaction document it is not accepted as a deduction (Article 19(1)).
• The tax cannot be offset against any other type of tax, and tax collected cannot be offset against tax paid (Articles 19(2) and 19(3)).

What This Means in Practice

The base is now defined by the moment of collection: any money a financial institution receives in its own favour enters it.

For banks: a new 1% charge applies to domestic interbank deposits, while dropping the 55% placement mechanism and the 0.1% charge on foreign balances lightens the load on banks with placements abroad.

For insurers and reinsurers: the rate stays at 5%, but the base is the premium stated in the policy and intermediary commissions cannot be deducted from it (Article 9(3)).

For crypto asset service providers and payment institutions: both enter the tax for the first time, with commission and fee collections at 3% (Article 10(1)(Ç)).

For factoring and financing companies: interest, commission and fee collections likewise fall under the 3% rate.

For foreign exchange offices and forex institutions: currency dealing stays at 0.1%, but leveraged buy-sell sits outside the "foreign exchange transaction" definition (Article 2) and falls under 3%.

What Is Not Yet Settled

Three points remain open:

• The form and content of returns are set by the Income and Tax Office (Article 14), and the return form for the new Law has not yet been published. Secondary legislation made under the repealed Law remains in force, so far as it is not contrary to the new Law, until replacements are issued (Article 21(2)).
• References to the Banking and Insurance Transactions Tax Law in any other law are deemed to be made to this Law (Article 21(3)). Because the scope now covers ten categories of institution, how that deeming rule works through other tax legislation — in particular for value added tax — has not yet been clarified.
• The position of financial leasing companies is unsettled: the Article 2 definition lists factoring and financing companies but omits leasing companies established under the same statute.

What to Do Before 1 October 2026

1. Confirm whether the business falls within one of the ten categories defined in Article 2.
2. Split collections into interest, commission, fees, premiums and currency sales, and map each to the 0.1%, 1%, 3% or 5% rate.
3. Set up billing and accounting so the tax is collected separately from the customer at the time of the transaction (Article 7) and shown separately on invoices (Article 18).
4. Track transactions matching the fifteen exempt items in Article 6(1) separately.
5. File the first return for October 2026 by 15 November 2026 and pay within the same period.

Two transitional rules also apply:

• Financial institutions that have not met their obligations under the Banking and Insurance Transactions Tax Law before the effective date face retrospective assessments, which the Income and Tax Office is to carry out without delay; the relevant provisions of the repealed Law stay in force for that purpose (Article 21(1)).
• No tax, interest, penalty or ancillary claim for 2016, 2017 and 2018 may be assessed or collected from the Cyprus Turkish Cooperative Central Bank Ltd. in respect of State-guaranteed public loans (Provisional Article 1).

To discuss how this Law affects your business in North Cyprus, please contact N.Akman & Co.