Cyprus: Cyprus Chapter Of "International Franchising, Second Edition"

Last Updated: 25 January 2018
Article by Elias Neocleous and Ramona Livera
Most Read Contributor in Cyprus, August 2018

INTRODUCTION

Economic and Business Infrastructure

Cyprus is the third largest island in the Mediterranean Sea, with an area of 9,251 square kilometers. It is strategically located in the Eastern Mediterranean at the crossroads of Europe, Asia, and Africa. Its total population is estimated at 1.1 million, of whom approximately 840,000 live in the area controlled by the Republic of Cyprus according to the 2011 census. Up-to-date information for the occupied area is unavailable.

The island was invaded in 1974 by the Turkish army and about a third of the territory remains under Turkish occupation. The so-called Turkish Republic of North Cyprus is recognized only by Turkey, and all the references in this chapter to Cyprus relate to the legitimate government of the Republic of Cyprus. While political uncertainty continues to surround "the Cyprus problem", and it is hoped that there will be a satisfactory resolution in the near future, day-to-day business life is unaffected by the issue.

Cyprus is very well placed as an international business and financial center. Apart from its strategic geographical location, relaxed way of life, and attractive climate, it offers an excellent commercial infrastructure, a highly educated English- speaking labor force, a business-friendly environment, particularly in the area of taxation, a high standard of living, and a low rate of crime. Living costs are moderate, and good airline connections and telecommunications and increasing alignment with the European position in matters of culture and trade make it an effective bridge between West and East. Its time zone is seven hours ahead of New York, two hours ahead of London, one hour behind Moscow, and five hours behind Beijing. The official languages are Greek and Turkish, but English is the lingua franca of business.

Cyprus is an independent, sovereign republic with a presidential system of government and a written constitution which safeguards the rule of law, political stability, human rights, and the ownership of private property. Cyprus has been a member of the European Union (EU) since 1 May 2004. In preparation for EU membership, Cyprus made significant structural and economic reforms that transformed its economic landscape and created a modern, open, and dynamic business environment. Since joining the EU, Cyprus has successfully faced the challenge of European integration, and has established itself as the natural portal for inward and outward investment between the EU and the rest of the world, particularly the rapidly-growing economies of Russia, Eastern Europe, India, and China.

Cyprus is a member of the Commonwealth, the Council of Europe, the International Monetary Fund (IMF), the United Nations (UN), the World Bank, and the World Trade Organization (WTO), and a founder member of the Organization for Security and Cooperation in Europe. On 1 January 2008, Cyprus adopted the euro as its currency.

The legal system, modelled on the English common law system since independence in 1960, is harmonized with the acquis communautaire of the EU. Cyprus is a signatory to a large number of international conventions and treaties, including an extensive network of double taxation treaties covering 50 countries.

Cyprus is a low-tax jurisdiction whose fiscal and regulatory regimes are aligned with EU norms, particularly the Code of Conduct for Business Taxation, and fully satisfy the requirements of the Organization for Economic Cooperation and Development (OECD), the Financial Action Task Force of the OECD, and the Financial Stability Forum.

It has been on the OECD White List of jurisdictions complying with international best practice since its inception. The regulatory framework is designed to maintain the respectable and responsible reputation of Cyprus while allowing businesses to conduct their activities in an environment as free as possible from onerous bureaucratic restrictions.

Commercial Environment

Cyprus has an open, free-market, service-based economy with some light manufacturing. According to the International Monetary Fund, in 2012, GDP per capita was US $27,086, thirty-seventh in the world and on a par with Malta and the Czech Republic. The United Nations Human Development Index for 2012 ranks Cyprus thirty-first in the world as regards quality of life.

The government's economic policy is aimed at promoting and maintaining favorable investment conditions and supporting private initiatives. Foreign participation in the economy has been officially encouraged and liberalized for many years. Administrative procedures have been simplified and, in all but a few strategic or specifically regulated industries such as banking, there are no limits on foreign investment. Citizenship is available for significant investors and there is a growing awareness among foreign corporations and individuals of the advantages of using Cyprus as a business base for both inward and outward investment.

Cyprus has 24 bilateral treaties for the encouragement and reciprocal protection of investments and more are under negotiation. The purpose of the treaties is to create and maintain favorable conditions for investments made by nationals of one treaty state in the other treaty state for their mutual benefit ona long-term basis, to guarantee the protection of such investments (including the repatriation of profits), and to establish procedures for settling any disputes that may arise.

World-class professional and business services are available: there are many well-qualified lawyers who are experienced in all aspects of company law and tax planning and the principal international accounting firms have offices in Cyprus, as well as insurance, financial services, and fiduciary companies. Limassol, Cyprus's commercial and shipping center, is among the world's most Important third-party ship management centers. The Cyprus tele- communications system is excellent and costs are among the lowest in Europe.

The country's two international airports, situated near Larnaca and Paphos, which serve numerous international airlines, were reconstructed and upgraded in the past few years. Seaborne traffic is served by the two multi-purpose ports of Limassol and Larnaca, which are used as warehouse, distribution, and container transshipment centers.

DOING BUSINESS IN CYPRUS

In General

In general, there are no restrictions on direct investments by natural or legal persons from EU Member States except in regulated sectors such as financial services. Investors from the EU wishing to register a company in Cyprus may do so through a local lawyer.

They also may acquire shares in existing companies. Investors from the EU also may acquire up to 100 per cent of the share capital of a company listed on the Cyprus Stock Exchange. As noted below, there are limited exceptions in strategically important or regulated sectors.

Direct Investment by Non-European Union Citizens

Foreign direct investment in Cyprus from non-EU countries has been fully liberalized since 1 October 2004. Except in regulated sectors such as financial services, there are no minimum investment requirements or limits on the maximum percentages of participation. There is no distinction between companies carrying on business outside Cyprus (previously known as offshore or international business companies) and companies carrying on business inside Cyprus.

One of the practical effects of the liberalization is that non-EU investors wishing to register companies in Cyprus or buy shares in existing Cyprus companies no longer need to seek approval from the Central Bank of Cyprus. The rules for indirect investment are identical to those applied to EU investors. Up to 100 per cent of the share capital of a company listed on the Cyprus Stock Exchange may be acquired.

Restricted Investment Sectors

For both EU and third-country investors, a small number of restrictions do exist in respect of acquisitions in areas related to national interest. In the banking sector, the maximum equity participation is 50 per cent, and no individual may own, directly or indirectly, more than nine per cent of a bank's share capital without the approval of the Central Bank of Cyprus. Specifically, there are restrictions on investment in the areas of real estate, tertiary education, public utilities, radio and television stations, newspapers, magazines, and airlines. The Acquisition of Immovable Property (Aliens) Law, which regulates the purchase of immovable property in Cyprus by non-Cypriots, is a relic of British rule, and the restrictions on foreign ownership of immovable property have all but disappeared.

Since Cyprus joined the EU in 2004, the restrictions on EU citizens have been removed and EU citizens and companies incorporated in other EU member states are free to acquire property on the same terms as Cyprus citizens. Only third-country nationals and Cyprus companies controlled by them are required to go through the approval procedure set out in the law, which in any event is generally a formality.

The provision of public utility services is covered by specific legislation, such as the production and distribution of electricity, telecommunication services, and postal services. With the exception of universities, all private tertiary education institutions can be founded and operated only by EU nationals.

Based on the registration requirements of certain medical professions, only Cyprus nationals or other EU nationals are allowed to exercise their profession in Cyprus. Such professions include, but are not limited to, dentists, dental technicians, psychologists, opticians, chemists, dieticians, physiotherapists, and psychiatrists. Non-EU nationals can individually obtain up to five per cent of the total share capital of broadcasting corporations (television and radio stations), while the total percentage of share capital owned by non-EU nationals is limited to 25 per cent.

Import Controls and Duties

As a member of the EU and the EU Customs Union, Cyprus is committed to the free movement of goods, persons, services, and capital across EU Member States. The common EU customs tariff applies to goods imported from third countries. Import restrictions are, therefore, introduced only where they are necessary on the grounds of public morality, public policy, or public security; protection of health and life of humans, animals, or plants; protection of national treasures possessing artistic, historic, or archaeological value; and protection of industrial and commercial property, provided that these grounds are not used as a means of arbitrary discrimination or as a disguised restriction on trade. Import restrictions fall into two categories. In the first, the importation of certain articles is prohibited. In the second, there is a requirement for an import license. The main articles falling in the first category are those that could prove detrimental to the people, flora, or fauna of Cyprus. Thus, items such as firearms, daggers, narcotics, seditious publications, and certain agricultural products, such as raw vegetables, mushrooms, citrus fruits, vine plants, and grapes, are included.

The articles that may require import licenses appear in relevant lists published in the Official Gazette. These articles are of a varied nature, ranging from rubber gloves and matches to raw materials for medicine. Certain exports also are subject to licensing requirements, and the exporting of antiques is prohibited except under a special license from the Director of Antiquities.

Incentives

Successive Cyprus governments have been keen to encourage foreign investment in Cyprus. To facilitate this aim, a number of incentives have been established. These include the following:

  • A favorable business environment, with well-educated human capital available at reasonable rates of pay, and world-class infrastructure and services;
  • A low taxation environment underpinned by double-taxation treaties with the main economic powers as well as developing nations;
  • Freedom from exchange controls, allowing profits, interest, and dividends from approved investments, capital invested, and any capital gains from the disposal of shares in such investments to be freely remitted overseas;
  • Membership of the EU and the Eurozone, providing a base for the production and export of goods to the large EU market;
  • Modern industrial estates, bonded factories and warehouses, and the Larnaca Free Zone (LFZ), close to the port and international airport, to which equipment and raw materials may be imported free of customs duty through which products manufactured in the LFZ may enter the domestic market on payment of the lowest preferential tariff;
  • A framework of grants and other financial incentives; and
  • A network of 24 bilateral treaties for the encouragement and reciprocal protection of investments, with more under negotiation.

International Business Entities

Until the end of 2002, Cyprus had a special tax regime for international business companies, i.e., companies incorporated and resident in Cyprus but having all their activities outside Cyprus. In preparation for EU accession, the old arrangements were phased out and, since 1 January 2003, there has been:

  • A single corporation tax rate for all Cyprus-resident companies;
  • No geographical limitation on the exercise of any company's activities, whereby its income may be derived from any source, including a Cyprus-based source; and
  • No restriction on the ownership of a company's shares.

To view the full article 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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Elias Neocleous
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions