Cyprus has a record of successful economic performance, reflected in rapid growth, full employment conditions, external and internal stability, almost throughout the post-independence period.
The economy has been transformed into not only a major tourist destination but also into a modern economy offering dynamic services with advanced physical and social infrastructure. Specifically, industrial, agricultural as well as banking and shipping sectors have been rapidly developed.
In terms of per capita income, estimated at around €20,000, Cyprus is classified by the World Bank among the high-income countries. The average annual rate of growth in the past five years was about 3,6%, while averaging inflation rate stood at 2,9% and average unemployment at 3,4% over that period.
In addition, Cyprus was ranked 25th in the United Nations 2003 Index of Human development. Considering other socio-economic indicators such as the excellent housing conditions, pollution free environment, and low crime rate, one may conclude that the quality of life, standard of living and economic performance, position Cyprus favorably among the rest of the European Union member states.
The success of Cyprus in the economic sphere is attributed, among other factors, to the adoption of a market-oriented economic system, the pursuance of sound macroeconomic policies by the government, as well as the existence of a dynamic and flexible entrepreneurial community and a highly educated labor force. Moreover, the economy has benefited from the close cooperation between the public sector and the social partners.
The basic characteristics of the Cyprus economy are the dominant role of the private sector in production, the small size of the domestic market, the small size of most business units, as well as its open character. Cyprus’s major imports are raw materials, consumer and capital goods, transport equipment and fuel, while major exports are pharmaceutical products, clothing, cement, cigarettes, paper products, plastic products, potatoes, citrus fruit, wines and furniture.
The tertiary sector of services is considered as the backbone of the Cyprus economy (accounting for about 76.3% of GDP); reflecting the gradual evolution of the economy from an exporter of minerals (mainly copper and asbestos) and agricultural products (citrus) during 1963-73, an exporter of manufacturing products (mainly clothing) at the end of the 1970’s, to an international business and service centre in the 1980’s – today.
Currently, approximately 30 foreign banks have established presence and over 1,200 International Business Corporations currently maintain fully fledged offices in Cyprus. Moreover, Cyprus ranks as the sixth leading maritime nation in the world with a merchant fleet exceeding 26 million gross tonnages.
The services sector is comprised mainly of tourism, finance, insurance and business services, trade, restaurants and hotels, transport and communication, manufacturing, accounting, social and governmental services, real estate, education, and shipping.
Cyprus’s competitive advantages derive from its strategic geographical location, the favorable business climate and fiscal regime, stable macroeconomic environment, the high educational level of the labor force, in conjunction with the comparatively low level of graduates’ remuneration, the excellent infrastructural facilities, the advanced telecommunications’ network, and the widespread knowledge of English.
Finally, Cyprus’ economic prospects mark favorably in light of its accession to the European Union in 2004.
Economic reasons for investing in Cyprus
  • One of the fastest growing property markets in Europe
  • Full European Union member
  • Property prices increasing at a stable rate
  • A recent report from the International Chamber of Commerce has shown that property prices in Cyprus have not been affected by the downturn of the world economy
  • Booming holiday rental market with huge increase in tourism
  • Low property taxes
  • Highly developed infrastructure, excellent telecommunications and transport
  • Very strong, growing tourist industry
  • Legal system according to UK standards
  • Lower priced properties compared to the markets of Portugal, Spain and France
  • Stable Economy
  • Low cost of living
  • Free market Economy
  • Low legal fees
Cyprus has long been considered an investment haven for individuals and corporations due to the strong property capital growth, tax benefits, buy to let potential, stress free lifestyle, year round sunny climate and beautiful beaches.
Since joining the European Union in 2004, Cyprus has enjoyed an even better capital growth of around 30-40%, while property prices are still lower than Spain, France and other EU countries. Property purchase restrictions have been lifted and low deposits, multicurrency mortgages with competitive rates are now available.
In addition, new developments all over the island have already started being built such as, new airports, golf courses, universities, hospitals, shopping malls, marinas etc.
Why Property in Cyprus is a Solid Investment:
  • Property prices are lower than other European countries
  • Property prices are increasing at a steady rate
  • New infrastructure developments
  • Great telecommunication and transport system
  • Strong buy to let potential
  • Low cost of living
  • One of the lowest crime rates in Europe
  • 340 days of sunshine and stress free lifestyle
  • Friendly and English speaking people
  • Excellent healthcare facilities, education and business services
  • British based legal system and UK trained lawyers
  • Corporation tax at 10%
  • 5% income tax for permanent residents
  • High standard of living
  • Full European member
  • Very strong, growing tourism industry
Investing in Cyprus makes sound Business sense.
There has never been a better time to invest and also set up a business in Cyprus than right now:
  • Member of the European Union
  • Strategic location at the crossroads of tree continents,serving as Europe’s Middle Eastern outpost
  • Liberal foreign Direct Investment regime
  • Simplified administrative procedures for acquiring necessary permits
  • Bilateral investment agreements with 17 counties
  • Low set up and operating costs
  • Highly qualified, well educated and multilingual labour force
  • Double tax treaties with 40 countries
  • Freedom of movement of foreign currency
  • Availability of Free zones Bonded areas
  • Efficient legal, accounting and banking services
  • European standard of living
  • Pleasant climate and agreeable topography
  • Excellent telecommunications
  • Democratic country with a free market economy
  • Political stability
  • Low crime rate; one of the lowest in Europe
In order to attract foreign investments and enhance economic prosperity in Cyprus, the government has liberalized the foreign direct investment policy for both EU and non-EU nationals. Administrative procedures have been simplified and no limitations apply in most sectors of the economy, as per the minimum level of investment and the foreigners’ participation percentage. Moreover, bureaucratic intervention has been reduced, fostering investment opportunities by non-residents.
Consequently foreign companies now have the opportunity of investing and establishing business in Cyprus on equal terms with local investors; no distinction is made between foreign and Cypriot companies.
Direct investment
Foreign investors have the opportunity of participating in most sectors of the economy, with equity participation up to 100% in any Cypriot enterprise, without a minimum level of capital investment. Foreigners considering of registering companies, acquiring shares of existing companies, or setting-up business activities in Cyprus, no longer need approval from the Central Bank of Cyprus.
As from 1st of October 2004, foreign investors can register a company directly with the registrar of companies, and obtain any license, if needed, from the appropriate authority according to the nature of the investment.
Acquisition of Real Estate
According to the “Acquisition of Real Estate (Amendment) Law” of 2003, which is in force as from 1st of May 2004?
  • No restrictions are imposed on EU nationals and EU registered companies for the acquisition of real estate linked to primary residence and Foreign Direct Investment, or the acquisition of real estate agents and land developers.
  • The acquisition of residence for secondary use is prohibited without prior authorization by the council of ministers, for a period of five years following Cyprus’ accession to EU (2004), to EU nationals not permanently residing in Cyprus and EU registered companies not having their registered office, central administration or principal place of business in Cyprus.
  • As regards non-EU nationals, legal entities registered in non-EU countries, and legal entities registered in Cyprus with share capital controlled by non-EU nationals, real estate may be acquired subject to the approval of the council of ministers. In case the real estate concerned exceeds 2 donums, approval may be granted only for the purposes of primary or secondary residence not exceeding the area of 3 donums, professional or commercial premises, and industrial sectors deemed beneficial for the Cypriot economy.
Tax advantages for International Businesses
Cyprus maintains its competitiveness as an international business centre and enhances its attractiveness as a suitable jurisdiction for holding companies by introducing the following tax system and advantages:
  • The uniform corporate tax is 10% which is the lowest in the EU
  • Cyprus tax-resident companies are exempt in respect of dividends received from other Cyprus resident companies.
  • Interest income is taxed at the corporate tax rate of 10% arising from, or closely connected to, the ordinary activities of the company.
  • Tax losses can be carried forward and set off against future profits indefinitely; applicable for losses incurred in 1997 and thereafter.
  • Profits of permanent establishments abroad are not subject to income tax in Cyprus, given that less than 50% of their activities result in investment income and that the foreign tax suffered is not significantly lower than the tax payable in Cyprus
  • Cyprus has over 32 double tax treaties, covering 40 countries.
  • Profits gained from the sale of securities are exempt from tax for all companies.
  • Transfers of assets and liabilities between companies in the course of reorganization, such as mergers, demergers, transfer of activities or exchange of shares, are not subject to tax.
  • Tax relief of foreign tax paid is granted in Cyprus even in the absence of a double tax treaty, provided sufficient evidence is submitted that foreign tax was indeed paid. Hence Cyprus turns into a lucrative hub for establishing holding companies.
  • Individual tax resident is an individual who stays in the Republic for 183 days in the year of assessment. Cyprus tax residents are taxed on income earned both in Cyprus and abroad. On the contrary, non-tax residents are taxed on income earned only from Cyprus sources.
  • VAT is imposed on the supplies of goods and services, as well as on imports to Cyprus. The standard rate has been set to 15%; the lowest rate permitted in the EU.
  • Cyprus is also considered to be among the most competitive shipping centers in the world in terms of registration fees and taxes.
  • Income and gains of a Cyprus International Trust, derived from sources outside Cyprus are exempt from any tax imposed in Cyprus with certain conditions.
 

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