Doing Business in Cyprus
Cyprus has long established itself as a thriving business hub, with a vast array of investment opportunities in key growth sectors of the economy. The island’s ideal strategic location, advanced infrastructure and high quality of life do not only represent key reasons to relocate and live on the island, but are also at the heart of an investor’s choice to invest in Cyprus.
The island is an ideal investment gateway to the European Union, as well as a portal for investment outside the EU, particularly into the Middle East, India and China. As a member of the wider EU and Eurozone community, Cyprus ensures safety and stability for investors, while also offering them market access to more than 500 million EU citizens.
The local infrastructure is ideally suited for business people who need to get things done. Thanks to its modern road network, extensive port facilities and two new international airports, travel and transport in and beyond Cyprus is fast, efficient and cost-effective.
Human talent constitutes Cyprus’ most compelling advantage, complemented by a broad range of high quality professional services. As a dynamic business centre, Cyprus offers an abundance of highly educated and skilled individuals, multilingual in their majority, ready to serve the needs of any business.
Cyprus, indeed, has all the right ingredients to maintain a strong and resilient economy, due to its small size, productive labor force, business friendly and flexible government.
Our country’s competitive advantages are significantly enriched by a robust and transparent legal and regulatory framework and an attractive tax regime, which offers a wide range of incentives and advantages both for legal and natural persons.
Cyprus’ legal system, based on English Common Law principles, is widely recognised as a business-friendly and effective system that ensures transparency and reliability in business practices. Offering foreign businesses a familiar and reliable framework within which to operate, Cyprus’ legal system is also fully compliant with the EU, the Financial Action Task Force on Money Laundering (FATF), OECD, FATCA, the Financial Stability Forum laws and regulations and EU AML directives.
Moreover, Cyprus offers an attractive and transparent tax regime, fully compliant with EU, OECD and international laws and regulations. Providing access to an extensive network of more than 60 Double Tax Treaties, and maintaining a corporate tax rate of 12.5%, one of the lowest in the EU, Cyprus offers international investors and domestic businesses confidence to invest, grow and prosper.
Attractive Tax System
Cyprus has a simple and transparent tax system with one of the lowest corporate tax rates in the EU and multiple exemptions for both corporates and individuals.
The main characteristics of the Cyprus tax system are outlined below:
- Low corporate income tax rate of 12.5%
- EU & OECD Compliant
- Access to EU directives (e.g. Parent-Subsidiary)
- Extensive double tax treaty network with over 60 countries
- Dividend participation exemption (subject to conditions)
- Exemption from tax on gains from the disposal of securities (e.g. shares, bonds)
- Notional interest deduction on equity applies to all taxpayers and all business activities
- No withholding taxes on interest and dividends
- No taxation of capital gains (except for disposal of real estate in Cyprus or shares of company holding real estate in Cyprus)
- No succession taxes
- No Controlled Foreign Company (CFC) rules
- Tax neutrality on foreign exchange differences unless they arise from trading in currencies or currency derivatives
- Foreign tax relief on income subject to both Cypriot and overseas tax
- Exemption on profits of foreign permanent establishments (subject toc conditions)
- Company reorganisation rules based on the EU Mergers Directive allow for tax-neutral group restructuring
- Attractive Intellectual Property regime in line with “modified nexus approach” (OECD Action 5)
- No exit tax rules
- 50% exemption on employment income exceeding €100,000 per annum for non-residents taking up employment in Cyprus
- No tax on dividends, interest and rental income of non-domiciled individuals
Naturalisation of Investors in Cyprus by Exception
The Council of Ministers introduced in 2013 a scheme pursuant to which Investors may acquire citizenship through naturalization by exception by satisfying certain investment/economic criteria, which was recently amended by the Council of Ministers on 18/08/2020.
As per the criteria of this investment scheme, the requisite investments should have been made by the applicant three (3) years preceding the date of the application and the applicant is required to retain the said investment for a period of at least five years from the date of naturalization. It is accepted, for the applicant to replace his investment with an equal investment, during the 5 years period, provided that a prior approval has been secured by the Ministry of Finance.
A non – Cypriot citizen may apply for the acquisition of the Cypriot citizenship through naturalization by exception if he/she meets the following economic criteria and terms and conditions:
A. A Donation to a State Fund:
1. Investors will be required to donate to one of the four below mentioned special government funds the amount of €100,000:
- Research & Innovation Foundation or
- Industry and Technology Service or
- Renewable Energy Fund and Energy Conservation Fund or
- Solidarity fund
2. Investors will be required to make a donation to the “Cyprus Land Development Corporation” for the amount of €100,000.
The donation of the overall amount of €200.000 to the above-mentioned funds should be made in the period between the acceptance of the application for the citizenship by exception and immediately before the issuance of the naturalization certificate.
B. Apart from the one-off donation of €200,000, investments of at least €2,0 million (excluding VAT) shall be made in one of the following ways provided in 1 to 4 below:
1. Investment on several sectors in the Republic of Cyprus
- In the primary sector of the economy or in the fields of research and technology, education, health, or renewable energy, or
- In the creation of developments, such as residential or commercial developments, developments in the tourism sector or other infrastructure projects. If the applicant has invested in housing unit/units on the basis of this section, then the purchase of another permanent residence in Cyprus will not be required, if at least one of the housing units is worth at least €500.000 (excl. VAT) or
- For the purchase or construction of real estate, including investment in building land, provided that the application includes an investment plan for their development
The investor is prohibited from setting up a land development company for the purpose of conducting the investment.
2. Purchasing or Incorporating a Cypriot Company
Purchase, incorporation or participation in Cypriot businesses or companies established and operating in the Republic of Cyprus. These businesses or companies should have a tangible presence and substantial activity in the Republic of Cyprus. Also, they need to employ at least nine (9) Cypriot citizens or citizens of the European Union.
3. Investment in Alternative Investment Funds (AIFs) or Cyprus Registered Alternative Investment Funds (RAIF)
An investment of at least €2,0 million (excl. VAT) shall be made to AIF established in the Republic and is licensed, registered and supervised by the Cyprus Securities and Exchange Commission (CySec) or to Cyprus Registered Alternative Investment Funds(RAIF) established in the Republic and is licensed and regulated by the Cyprus Securities and Exchange Commission (CySec). The institutions mentioned above can invest in the stock values of shares of the first issue of the Cyprus Stock Exchange, of the value up to two hundred thousand euros (€ 200,000).
4. Combination of Investments
The above investments can be combined, with a total investment amount of at least €2.0 million (excl. VAT).
5. Terms and Conditions
- The applicant must have a clear criminal record and not be included in the sanctions list.
- Own a permanent privately-owned residence in Cyprus of a market value of at least €500.000 (excl. VAT) that must be retained for a lifetime. If members of the same family apply separately as investors, they can collectively acquire a residence provided that its total value covers the amount of €500.000 (excl. VAT) per applicant.
- The Scheme does not impose a requirement to reside in Cyprus after obtaining the Cyprus passport.
- All the investments provided in paragraph A and B above, as well as the purchase of permanent residence shall be made with funds coming from the account of the investor abroad or a foreign company of the investor and all the payments for investments in the Republic shall be made and transferred in Cypriot credit institutions or payment institutions, which are licensed and supervised by the Central Bank of Cyprus.
- The applicant has not applied for citizenship in any other Member State which has been rejected.
- The applicant must hold a residence permit in Cyprus for a period of at least six (6) months before his naturalization as a citizen of the Republic.
- Schengen Visa (applicable from 15/05/19 onwards). The applicant must be a holder of a valid Schengen visa unless such visa is not required to enter into a Member State or when the applicant is a national of an EU state.