Cyprus: Cyprus, A Lucrative Investment Destination

"Building on decades of steady development, underpinned by a formidable reservoir of professional and administrative talent and blessed by one of the sunniest climates in the world, the Republic of Cyprus is becoming known as a place where money works and where things get done."

Forbes, 2005

Cyprus’s strategic location at the crossroads of three continents has been a major factor in shaping its history throughout the centuries and its development into an international business centre during the recent years. Upon membership into the European Union, Cyprus is being transformed into a key outpost in the Eastern Mediterranean, facilitating partnerships and serving as the springboard for investments among Europe, Africa, and Asia.

Highly qualified labour at comparatively low cost

Cyprus ranks among the first countries in the world in terms of university degree holders in relation to the population. Based on Eurostat statistics, the percentage of people between the ages of 25-29 that possess tertiary education qualifications in Cyprus (44%) is substantially higher to that of the EU 25 average. Overall, Cyprus offers a well-educated, skilled, and multilingual labour–force, whereas labour costs in Cyprus are significantly lower compared to the EU average (Eurostat 2006).

Cyprus has a record of successful economic performance, reflected in rapid growth, full employment conditions, external and internal stability. The annual rate of growth in 2005 reached 3.8 percent, while inflation (2%) and unemployment rate (5.3%) were maintained at lower levels than that of the average inflation rate of EU25, EU15, as well as that of Eurozone. In terms of per capita income, estimated at CY£9.834 in 2005 (EUR 17.048), Cyprus is classified by the World Bank among the high-income economies. The tertiary sector of services is considered as the backbone of the Cyprus economy, accounting for about 76.7% of GDP.

While Cyprus tax system has been reformed to comply with the EU Acquis Communautaire, the appropriate actions have taken place to maintain Cyprus’ competitiveness as an international business centre and enhance its attractiveness as a suitable jurisdiction for holding companies.

Cyprus-based enterprises can benefit from the favorable tax regime and enjoy the lowest corporate tax rate in the EU (10%). Moreover, various tax exemptions apply for both corporate and personal tax; such as, exemptions in respect of dividends received from local and foreign subsidiaries, profits of permanent establishments abroad, capital gains derived from the disposal of securities, outward dividends, company reorganizations, free repatriation of profits and capital, amongst others.

As a result of the high educational level of the population and due to historic and economic links between Cyprus, Britain and other European countries, legal, accounting, management, computer and other services are of the highest standard in Cyprus.

Based on the Worldwide Quality-of-life Index 2005 conducted by the Economist Intelligence Unit, Cyprus marks favourably ιn terms of the 2005 quality of life index; hence enjoying an exceptional lifestyle and top quality of life. Moreover, some socio-economic indicators position Cyprus favorably among the rest European Union member-states, such as the excellent housing conditions, pollution free environment, and low crime rate.

The Foreign Direct Investment (FDI) Policy is liberalised for both EU and non-EU nationals in most sectors of the economy; hence, limitations as per the minimum level of investment and the foreigners´ participation percentage have been abolished.

Foreign Direct Investments during the period of 1998- 2004 based on the UNCTAD World Investment Report 2005, were in the region of US$ 5.619 billions, showing an upward trend from US$ 264 million in 1998 to US$ 1146 millions in 2004. Cyprus´ Foreign Direct Investments originate mainly from European countries (87%), out of which EU-25 account for 81,5%, while the majority of the FDIs (96%) are directed towards the services sector.

The Foreign Investors Service Centre (FISC) assists foreign-based companies investigating investment opportunities in Cyprus. The Centre constitutes the central agency of information, support, and foreign investors/ relations. Recognizing the importance of serving the already established foreign-based companies, the Centre also provides aftercare development aimed at anchoring existing investors and encouraging them to upgrade their activities in Cyprus.

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