Cyprus is strategically located in the Eastern Mediterranean at the crossroads of Europe, Asia and Africa. It 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 EU since 1 May 2004 and of the Eurozone since 1 January 2008. 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, it 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 very well-placed as an international business and financial centre. Apart from its strategic geographical location, cosmopolitan environment and attractive climate, it offers an excellent commercial infrastructure, a highly educated English-speaking labour force, a business-friendly environment, particularly in the area of taxation, a high quality of life and a low rate of crime. The official languages are Greek and Turkish, but English is the lingua franca of business.
The island was invaded in 1974 by the Turkish army and about one-third of its territory remains under Turkish occupation. The so-called Turkish Republic of North Cyprus is recognised only by Turkey, and this chapter relates only to the area controlled by 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 life and business are unaffected by the issue.
The business environment
When Cyprus gained independence from the UK in 1960, it was left in a poor economic state by the former colonial power. Its economy was based largely on agriculture and tourism and its only resources were its people and its location. Cyprus sought to take advantage of its location and the talents of its people by becoming a maritime and trading post. It achieved its breakthrough in the 1990s, following the dissolution of the Soviet Union, when it established itself as the main portal for investment from the developed western economies into the newly liberalised economies of Russia and Eastern Europe Since joining the EU, Cyprus has consolidated its position as an international financial centre and a portal for cross-border investment between all the main economies of the world. It is a low-tax jurisdiction with fiscal and regulatory regimes fully aligned with EU norms, particularly the Code of Conduct for Business Taxation. It has a simple, modern tax system offering predictability in planning and a network of more than 60 agreements for the avoidance of double taxation.
Cyprus has a highly-educated workforce, with more than 40% of the workforce having completed tertiary education, and world-class communications and professional services.
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