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Successfully investing in Cyprus


last updated on 19 May 2021 | reading time approx. 6 minutes




How do you assess the current economic situation in Cyprus?

Cyprus has con­tin­ued to grow and it is lis­ted as one of the fast­est grow­ing eco­nom­ies in the EU. The coun­try sur­passed in­ter­na­tion­al ex­pect­a­tions as its eco­nomy re­versed with­in just three years fol­low­ing the dev­ast­at­ing fin­an­cial crisis in 2013; one year earli­er than ini­tially pre­dicted.

Cyprus re­gained its in­vest­ment-grade status in 2018, both Stand­ard & Poor’s and Fitch Rat­ings as­sign­ing a BBB- cred­it rat­ing to long-term sov­er­eign debt. It has been re­cog­nised that Cyprus ac­com­plished to sta­bil­ise its bank­ing sys­tem and re­cord a ro­bust growth.

The ac­tu­al GDP has de­creased by around 5.11 per cent re­por­ted for the year 2020 due to the Cov­id-19 crisis. Cov­id-19 is a glob­al is­sue af­fect­ing all eco­nom­ies. As per the In­ter­na­tion­al Mon­et­ary Fund (IMF) the GDP is pro­jec­ted to in­crease to 3.6 per cent as a res­ult of the on­go­ing vac­cin­a­tions pro­gram in Cyprus and world­wide to con­tain the Cov­id-19 pan­dem­ic.

Tour­ism the main in­dustry of Cyprus’ eco­nomy has been severely af­fected by the pan­dem­ic and it is ex­pec­ted to re­cov­er in the second half of 2021, and es­pe­cially in the sum­mer, which is the peak tour­ism sea­son.

The eco­nom­ic situ­ation was greatly af­fected, al­though it is ex­pec­ted that in the second half of 2021 the GDP will grow stead­ily as it is ex­pec­ted for our lives to “come back to nor­mal”.


How would you describe the investment climate in Cyprus? Which sectors offer the largest potential?

Since 2015, there has been a pos­it­ive in­vest­ment cli­mate. This was driv­en by the fisc­al meas­ures and in­cent­ives, in­clud­ing:

  • Fa­vour­ing the in­tro­duc­tion of new equity as an al­tern­at­ive to ex­cess­ive lever­age;
  • In­cent­ives for do­ing busi­ness through at­tract­ive in­come be­ne­fits for in­di­vidu­als (Such in­cent­ives in­clude the cit­izen­ship by in­vest­ment pro­gram which has at­trac­ted high net in­di­vidu­als and the un­der­tak­ing of sev­er­al projects, es­pe­cially in real es­tate);
  • In­tro­duc­tion of tax in­cent­ives for in­tel­lec­tu­al prop­erty, in­nov­at­ive small and me­di­um-sized en­ter­prises (SMEs) and start-ups.

High po­ten­tial in­dus­tries that have proven to be re­si­li­ent and have grown since 2015 in­clude:

  • The ship man­age­ment in­dustry is be­ing boos­ted by new ship re­gis­tra­tions and the re­lo­ca­tion of ship­ping and oth­er ser­vices to Cyprus. In the past six years the num­ber of ship­ping com­pan­ies re­gis­ter­ing in Cyprus has in­creased by 65 per cent boost­ing the sec­tor’s rev­en­ue by 25 per cent.
  • The con­struc­tion in­dustry with a large amount of both com­mer­cial and res­id­en­tial projects be­ing un­der­taken in all ma­jor cit­ies of Cyprus. Li­mas­sol, a busi­ness hub and a centre of the leis­ure and tour­ism in­dustry has seen ex­cep­tion­al growth with the high-end res­id­en­tial prop­erty seg­ment ac­counts for 19 per cent of the total trans­ac­tion value of real es­tate in Cyprus in 2018. Half of the prop­er­ties were sold to for­eign­ers and only 33 per cent to EU buy­ers.
  • Cyprus’ eco­nomy is 80 per cent based on the pro­fes­sion­al ser­vices sec­tor, which is the es­sence of its eco­nomy. Sup­por­ted by highly skilled pro­fes­sion­als throughout the coun­try, this sec­tor costs lower than oth­er European coun­tries, but the qual­ity is in­dis­tin­guish­able.
  • The en­ergy sec­tor with the dis­cov­ery of a large quant­ity of hy­dro­car­bons in Cyprus’ Ex­clus­ive Eco­nom­ic Zone (EEZ) has at­trac­ted glob­al in­terest from in­ter­na­tion­al en­ergy gi­ants. This has cre­ated new and ex­cit­ing pro­spects for Cyprus be­com­ing a re­gion­al en­ergy hub with em­phas­is on mul­ti­lat­er­al co­oper­a­tion agree­ments with neigh­bour­ing coun­tries and ex­pec­ted lib­er­al­isa­tion of the elec­tri­city mar­ket by 2021.
  • The re­new­able en­ergy sec­tor has gained mo­mentum in Cyprus, es­pe­cially with the im­mense po­ten­tial of sources such as sol­ar en­ergy (Cyprus re­ceives an av­er­age of 2,700 to 3,500 hours of sun­shine per year among the highest in the EU).
  • Tour­ism has been one of the biggest driv­ing forces of the eco­nomy in Cyprus. At­trac­tion from for­eign in­vest­ment has been no­tice­able as di­ver­si­fic­a­tion offered by the is­land de­vel­op­ing naut­ic­al, golf and well­ness tour­ism res­ul­ted in ex­tend­ing the tour­ist sea­son throughout the year. The con­struc­tion and in­vest­ment of mul­tipur­pose projects for in­stance lux­ury mar­i­nas, golf courses and lux­ury casino re­sorts are all part of the is­land’s strategy to up­grade and di­ver­si­fy the in­dustry of tour­ism.
  • Film­ing in Cyprus was ini­ti­ated as a prom­ising sec­tor. The Cyp­ri­ot gov­ern­ment in­tro­duced a pack­age of in­cent­ives en­cour­aging in­ter­na­tion­al pro­du­cers to choose Cyprus as their next film des­tin­a­tion. In spe­cif­ic, pro­duc­tion com­pan­ies that opt to film in Cyprus will be able to choose between cash re­bate or tax cred­it and can also be­ne­fit from tax dis­counts on in­vest­ments made on equip­ment and in­fra­struc­ture, and VAT re­turns on ex­pendit­ure in scope.
  • An­oth­er sec­tor, which is boom­ing the last couple of years is edu­ca­tion. Cyprus is a world-class edu­ca­tion­al and re­search centre of ex­cel­lence with high qual­ity aca­dem­ic in­sti­tu­tions, of­fer­ing a large vari­ety of ad­vanced and fully ac­cred­ited un­der­gradu­ate and post­gradu­ate pro­grammes, at af­ford­able cost. Edu­ca­tion­al sec­tor com­prises of 3 pub­lic and 5 private uni­versit­ies and more than 40 pub­lic and private high­er edu­ca­tion in­sti­tu­tions en­joy­ing in­ter­na­tion­al aca­dem­ic and sci­entif­ic re­cog­ni­tion, the is­land at­tracts thou­sands in­ter­na­tion­al stu­dents every year.


What challenges do German companies face during their business ventures into Cyprus?

All chal­lenges can be over­come with the right sup­port and guid­ance from con­sult­ants. It is cru­cial for suc­cess that an en­tre­pren­eur sur­rounds him­self with ex­pert ad­visers who have the know­ledge and com­pet­ence to as­sist and guide him through the plan­ning stages, and who also takes on the on­go­ing ad­vice.

In­vest­ing in Cyprus has many ad­vant­ages:

  • The coun­try is stra­tegic­ally loc­ated in the east­ern Medi­ter­ranean and has been an EU Mem­ber since 2004 and Euro­zone mem­ber since 2008.
  • It is a ro­bust and mod­ern­ised busi­ness hub: It has ac­cess to more than 500 mil­lion EU cit­izens, the single mar­ket and trade agree­ments. As a re­li­able EU busi­ness part­ner, it can of­fer com­pet­it­ive be­ne­fits and sold busi­ness solu­tions.
  • Cyprus can be used as a hub for in­vest­ment in the Middle East. It has con­cluded agree­ments with many of these states to avoid double tax­a­tion (the coun­try has more than 60 double tax treat­ies).
  • Cyprus's simple tax and reg­u­lat­ory le­gis­la­tion makes the coun­try a gate­way to and from East­ern Europe, the Middle East, Africa, the In­di­an sub­con­tin­ent, and the Far East.
  • Most of the pop­u­la­tion speaks Eng­lish. There should be no chal­lenges in com­mu­nic­a­tion. In ad­di­tion, the coun­try has highly skilled, mul­ti­lin­gual pro­fes­sion­als and the young­est work­force in the EU many of which are in­ter­na­tion­ally edu­cated (UK, USA and Europe).
  • Mod­ern in­fra­struc­ture and an ad­vanced and ef­fi­cient bank­ing sys­tem. The leg­al sys­tem is closely aligned to Eng­lish Com­mon law with flex­ib­il­ity and con­stant up­dat­ing to meet in­vestors chan­ging needs.
  • Those in­vest­ing in Cyprus will be able to use tax in­cent­ives for first em­ploy­ment which provide for ex­emp­tion from in­come tax for part of their ba­sic salary of between 20 and 50 per cent; It will also be­ne­fit from the ex­emp­tion from with­hold­ing tax on di­vidend dis­tri­bu­tion and in­terest in­come, as well as the low in­come tax rate: the max­im­um rate is 35 per cent. An im­port­ant re­cent de­vel­op­ment is the in­tro­duc­tion of the “60 day rule” by the Cyprus Par­lia­ment, which loosens the re­stric­tions for prov­ing tax res­id­ency in Cyprus from 183 to 60 days of phys­ic­al pres­ence on the is­land.
  • Since join­ing the European Uni­on, Cyprus has be­come a mul­ti­cul­tur­al, cos­mo­pol­it­an so­ci­ety. Many work­ing pro­fes­sion­als move to Cyprus be­cause of the high qual­ity of life, es­pe­cially to Li­mas­sol. Cyprus has a very low crime rate, prac­tic­ally without sig­ni­fic­ant vi­ol­ent crimes; Chil­dren can walk and play safely on the streets and there are sev­er­al very good schools to teach in Eng­lish, from pre-school to high school.
  • The weath­er is of course also a mag­net. The win­ters are short and the sum­mers long. A chal­lenge is de­cid­ing how to spend your free time – hik­ing or ski­ing in the moun­tains or swim­ming in the sea. Or everything on the same day.


Why com­pan­ies should choose to enter/re­main in the Cyprus mar­ket?

  • Cyprus tax sys­tem of­fers a num­ber of ad­vant­ages to busi­nesses and non-dom­i­ciled share­hold­ers. In ad­di­tion the tax sys­tem evolves and pro­duces new spe­cial­ised pro­grams for a num­ber of dif­fer­ent in­dus­tries as well as tax re­gimes to at­tract dif­fer­ent in­dus­tries and re­lated busi­ness to choose Cyprus.
  • Tax sys­tem is con­sidered busi­ness-friendly, in gen­er­al taxes are con­sidered to be sim­pli­fied and easy to cal­cu­late, as­sess­ing your tax po­s­i­tion at any giv­en time. The key be­ne­fit of a res­id­ent cor­por­a­tion is 12.5 per cent cor­por­a­tion tax rate, which is one of the low­est in Europe, and com­plies fully with the EU le­gis­la­tion.
  • There is 0 per cent tax on di­vidend in­come, and profits from dis­pos­al of shares, bonds, deben­tures or oth­er se­cur­it­ies.
  • Cre­at­ing a lim­ited com­pany is a quick and straight for­ward pro­ced­ure and there is no re­stric­tion in re­la­tion to the res­id­ence and na­tion­al­ity of the own­er of the com­pany and no lim­it ex­ists in the loc­a­tion of the com­pany’s op­er­a­tions.
  • In the last couple of years a num­ber of in­di­vidu­als have de­cided to re­lo­cate to Cyprus to take ad­vant­age of the tax rates as well as the easy ac­cess to the European Uni­on as well as to oth­er coun­tries.
  • Due to the re­lo­ca­tion of a num­ber of com­pan­ies the coun­try and its cit­ies are be­ing de­veloped and con­struc­ted to be a main fin­an­cial ser­vices hub, where­as at­tract­ing for­eign­ers em­ploy­ees to re­lo­cate and live and work in Cyprus.
  • There are nu­mer­ous double tax treat­ies with oth­er coun­tries in which com­pan­ies re­gistered in Cyprus can be­ne­fit from.
  • Cyprus has repu­ta­tion of highly skilled la­bour in the cor­por­ate ser­vices sec­tion offered by pro­fes­sion­als, law­yers and ac­count­ants who are very ex­per­i­enced and provid­ing a high qual­ity ser­vice and ad­vice.


In your opinion, how will Cyprus develop?

With an edu­cated work­force, strong in­vest­ment and sound fisc­al policies Cyprus is set to re­peat an eco­nom­ic mir­acle as the one achieved in the pre­vi­ous years. Fur­ther in­teg­ra­tion with­in the EU with the im­ple­ment­a­tion of policies and ac­cess to the single mar­ket are set to en­hance prosper­ity and peace on the is­land.

Cov­id-19 out­break has de­creased the fin­an­cial de­vel­op­ment of the is­land. The rap­id pro­gram of vac­cin­a­tions de­veloped by the gov­ern­ment is ex­pec­ted to as­sist the eco­nomy to eas­ily re­cov­er fol­low­ing the neg­at­ive res­ults from the Cov­id-19 fin­an­cial crisis.


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