Cyprus: Cyprus International Tax & Business Environment - Tax Services

Last Updated: 13 October 2016
Article by Pieris Markou, Christos Papamarkides, Panos Papadopoulos, Antonis Taliotis, Panikos G. Teklos and Christos Neocleous
Most Read Contributor in Cyprus, December 2018

THE CYPRUS BUSINESS ENVIRONMENT

In recent years Cyprus has been voted as one of the most attractive European tax jurisdictions by major business organisations across Europe. Cyprus has been commended for the stability of its tax law, the consistency in interpreting its tax legislation and its low tax rates.

Reputation and stability

Cyprus joined the European Union in 2004, resulting in an economy offering a great number of advantages within a common European market. The Euro was adopted by Cyprus as its unit of currency on 1 January 2008, further confirming the country's macro-economic stability and its commitment to low inflation, low interest rates and high growth.

Cyprus participates in the European Union's internal market where there is free movement of goods, services and capital. European citizens are able to conduct business, travel to, and live in Cyprus with no legal restrictions.

Demonstrating a business-friendly environment since the 1970s, Cyprus has attracted foreign investment and capital flows for decades. The country's financial and regulatory environment is harmonized with that of the European Union.

Furthermore, Cyprus tax system is aligned with the framework of the European Union Code of Conduct for business taxation and demonstrates a commitment to the OECD policies against harmful tax practices.

Strategic location

The island of Cyprus is situated in the eastern Mediterranean at the hub of three continents, linking Europe with Africa and Asia.

Cyprus is one hour by air from Athens, Egypt and Israel, three hours from Dubai and Moscow and four hours from London.

Cyprus is two hours ahead of Greenwich Mean Time (GMT).

International familiarity

Banking & financial regulation

Commercial banking follows the British and European Union models and is of a very high standard. There are currently over 40 Cypriot and international banks operating in Cyprus.

The banking system conforms to EC Directives, under the regulation of the constitutionally independent Central Bank of Cyprus, as integrated with the Eurosystem. The Bank's governance is compatible with the provisions of the Treaty establishing the European Community and the Statute of the European System of Central Banks and of the European Central Bank.

The Cyprus Securities and Exchange Commission (CySEC) supervises and controls the operation of the Cyprus Stock Exchange and the issuers of securities listed on the Exchange.

The Central Bank and CySEC supervise and licence the growing number of investment services companies, collective investment schemes, brokerage firms, investment consultants and mutual fund management companies.

Legal system

Cyprus has a well-functioning common law legal system based on principles established through historical links with the United Kingdom.

The origin of Cyprus company law and other laws regulating business is the laws of the UK, updated for 21st century business practice and harmonised with EC Directives.

The familiarity of the legal and commercial systems assists international business people in working within the Cypriot commercial environment. English is spoken universally and is the accepted language of business.

Political respectability

Cyprus has excellent diplomatic and economic relations with the rest of Europe as well as, China, Russia, India, North America and the countries of the Middle East. As a result, Cypriot entities enjoy great respectability around the world.

Telecommunications

Cyprus has a highly advanced telecommunications infrastructure system with a number of companies providing modern telecommunication products and solutions.

Air transport

The two international airports in Cyprus are served by over 35 international airlines. There are daily flights to other European countries, Russia and the Middle East including major hubs for onward and long haul international destinations. New airport terminals at both Larnaca and Pafos international airports can serve up to 10 million passengers per annum.

Economy

Cyprus is a small and adaptable free-market economy built upon tourism, financial services and real estate, which account for almost 85% of the island's total GDP.

The country's economy has been remarkably resilient following the financial crisis. Cyprus has recently implemented structural reforms across all major sectors of its economy, with progress made in all key objectives set out by the country's international lenders. Despite the short-term challenges, the discovery of significant quantities of natural gas in Cypriot exclusive economic zone raises the prospect of a resurgence of the Cypriot economy in the medium to long term.

High standard of living – low cost base centre and skilled workforce

Economic indicators place Cyprus amongst the few international financial centres with low operational costs. At the same time, the island offers a high standard of living with an enjoyable climate and a very low crime rate making it an ideal place to live and conduct business.

The costs of setting-up and maintaining a structure in Cyprus are low when it comes to incorporation costs and fees for meeting Cypriot tax and company law compliance obligations.

The cost of labour, rents and other infrastructure are highly competitive and often lower than in other European countries.

Cyprus has a young and flexible work force, with university education obtained predominantly in the UK and the USA. The island ranks among the leading countries in the world and the highest in the European Union in respect of university graduates in proportion to its population, with the percentage of graduates from tertiary institutions being the highest in the EU.

To read this Report in full, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Pieris Markou
Panikos G. Teklos
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