Business Briefing

Cyprus is a beautiful country to invest in for anyone who is seeking excellent tax optimization and wanting to run away from bureaucracy and invasive statist policies. Investment funds in Cyprus are incredibly cost-efficient and easy to set-up; the regulatory framework is robust and business-friendly. Even better: there are incredible opportunities for tax optimizations as most income sources from tax residents are tax-exempt. The country has enticing tax incentives and double tax treaties with more than 60 countries, including most Western countries, and little to no restrictions regarding the type of investments.

Cyprus offers foreigners a wide array of income tax exemptions. There are specific requirements, such as the relocation of the tax residency to Cyprus and applying for the non-dom status (more on that further down).

Relocating personal and tax residency is not costly nor bureaucratic, especially for EU citizens. The benefits that can be obtained by relocating in Cyprus and acquiring a non-dom status are unique and unparalleled across Europe. For example, people with non-dom are not subject to taxes over their company’s dividends. It doesn’t matter if the company is registered in Cyprus, if it is an offshore company or if it operates in other countries. The interests and results of any investment are entirely tax-free, even if the capital is earned in Cyprus.

An individual with a non-dom status in Cyprus has the legal right to do business through an offshore company. This gives individuals who want tax-optimized companies and tax exemptions for all their earnings generated from their overseas activities them a ton of flexibility.

Effective management and control of companies is the determinant factor for Cyprus tax residency. The corporate tax rate is one of the lowest of the EU, at 12.5 %, with exemptions from dividend participation, capital gains (under certain conditions), and on profits from disposal of securities. Even better: the country doesn’t have withholding taxes and has plenty of tax credits and deductions for new residents and non-dom.

The country doesn’t have restrictions over foreign investments. Both EU and non-EU investors can invest in Cypriot companies or create one, even owning 100 % of them.

What’s better: as Cyprus has a privileged location in the Mediterranean and is a member of the EU, it’s a wonderful platform for investments in other EU countries, the Middle East, North Africa, and Eastern Europe.

Most territories that are attractive for offshore investment tend to have an underdeveloped business infrastructure. Cyprus isn’t the case. The country has an excellent business infrastructure, with an educated population, and good telecommunications. Similarly, businesspeople and the general public generally speak English, and the legal system is based on English law.

All this makes Cyprus a fantastic investment opportunity. This brought tons of FDI into the island, which continue to fuel the country´s growth. In fact, according to Global Finance, Cyprus has the 8th best FDI performance in the world.

What about particular investment opportunities? The first one is clear: tourism. The country enjoys 340 days of sunshine per year, has some of the best beaches in the Mediterranean Sea, and some famous archaeological sites such as the Paphos mosaics. Tourism makes up to more than 15 % of the country’s GDP and has the potential to grow in order to contribute around 25 % to the Cypriot economy. The country receives approximately 4 million tourists a year and will continue growing as the country has promoted itself as a top beach destination and an all-year hot spot. Seventy airlines fly from Cyprus to forty different countries. The government is offering incentives to airlines to operate more flights into the countries, and an increase in competition will help reduce fares and attract more tourists.

Another exciting investment opportunity is the shipping industry. The country has the third-largest merchant fleet in Europe and the eleventh largest in the world. Cyprus is the biggest ship management center in Europe, and it’s among the top five of the world. Shipping companies based in Cyprus move one-fifth of the world’s third-party managed fleet. The industry employs 3 % of the country’s workforce. Brexit has had a good impact on the industry as many shipping companies want a new safe harbor on the EU. The shipping sector is the most significant generator of FDI in Cyprus, and it contributes more than $1 billion to the economy per year.

The country offers a tax-efficient, friendly environment for shipping companies and a unique, EU-approved, tonnage tax system. Its main benefit is that it gives company certainty over the amount they’ll pay per year, which allows them to plan with much more stability. Non-Cypriots can freely register to the regime. Some territories may have less tonnage tax, but Cyprus incorporates the three types of maritime activities into a single TT program (ship owning, management, and chartering). This led to a 65 % increase in the past six years of the registered companies in the TT system.

The country also has a booming real estate market. That’s a top industry for people seeking safe investments as the market is growing and is diversified. You have holiday home-seekers, expats working in the country, and EU retirees wanting to spend the last years of their life in paradise on earth. Plus, you also have touristic real estate. Foreigners purchase almost half of the properties in Cyprus, and high-end residential property is a fifth of the real estate market in the country.

Building permits are not difficult to obtain, housing prices are rising, and there’s a ton of demand for business, residential, and touristic real estate. More companies establishing their operations in Cyprus mean more foreigners living in Cyprus and a greater need for offices and business spaces. Likewise, an expansion of tourism on the island means there’s a need for more resorts, hotels, and other touristic venues. Also, there’s been significant growth in the market because owning a permanent residence worth at least €500,000 in Cyprus is a requirement for applying for the citizenship scheme. The government has answered accordingly, establishing property tax incentives and is planning to provide similar incentives to investors and developers.

What you need to know about Cyprus:

Population (July 2020 est.)

1.266.676

Total area

9.251 sq km

GDP (2019)                                                      

$35.97 billion

GDP Growth (2020)

2.90%

GDP per capita (2020)

$41.57k

Moody´s Credit Rating

Ba2

Inflation (2020)

1.6%

Active population (2017)

426.6k

Unemployment (2020)

6%

Gini Coefficient (2017)

31.4

VAT

5%, 9%, 19%

Corporate tax

12.5%

Income tax

0-35%

Minimum wage

€870

Ranking Doing Business (2020)

54

Economic Freedom Index

70.1 (37th)

Company Registration

6 days

* Extracted from IMF, Moody’s, World Bank, Heritage Foundation, DoingBusiness.org 

 


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