Over the last few years, Cyprus has been characterized by many as the most attractive place in the world to start or carry out international activities. Cyprus might be a small island country, but one of the most attractive destinations when it comes to doing business. A summary of the main factors which have contributed to the success of Cyprus can be found below:
Factor 1: Cyprus has a high caliber skilled workforce.
High education and skills diversification characterize the workforce in Cyprus. The labor has been shaped by the country's activities and many business sectors adjusted to the needs of employees in the professional section. The high-caliber candidates perform functions such as accountants, solicitors, financial service institutions, consultants, etc. The workforce of Cyprus has been recognized by international associations like the Institute of Chartered Accountants in England & Wales (ICAEW) Association of Chartered Certified Accountants (ACCA), UK Bar Association, etc
The Cyprus labor market is also expanding in the fintech areas and we will see a significant increase in occupations like app developers, blockchain and crypto experts, data analysts and software developers, etc. Cyprus is serious about attracting labor with more knowledge of technology, research, and innovation. More details regarding the Cyprus Visa Incentives can be found here.
Factor 2: Cyprus Tax System
Cyprus holds one of the most favorable taxation systems in the world for its tax residents.
If you have spent more than 183 days in Cyprus you can benefit from Cyprus Tax as you will be taxed on salaried income. The more you earn, the greater you are to income taxation. There is a tax-free threshold of €19.500. Then the tax is adding up to 35% based on the table below:
|
Taxable Income in € |
Rate |
Amount paid: |
|
19,500 |
Free |
0 |
|
19,501-28,000 |
20% |
1,700 |
|
28,001-36,300 |
25% |
2,075 |
|
36,301-60,000 |
30% |
7,110 |
|
60,001 and more |
35% |
7,110 & more |
Cyprus has the lowest corporate income tax rate in Europe, rated only at 12.5%.
Cyprus Companies have many favorable exemptions and multiple allowances from taxes on the following types of income:
- Exception of tax on Profits from disposable securities
- Exceptions of tax on Earnings from interest and dividends
- Exception of tax on Profits from permanent establishments (PE) maintained abroad. Additionally, any tax losses from a PE abroad are allowed deductions for the Cyprus company.
- Foreign exchange differences arising from transactions
- Value Added Tax
The standard VAT rate is 19%, however, for some products/services the rates are different from 9% and 5% and 0%. The following sectors are completely exempt from VAT in Cyprus, they have a 0%:
- Health and welfare
- Education
- Postal services
- Cultural services provided by non-profit organizations
Factor 3: Banking Sector
Banking sector quality has dropped to a moderate satisfactory level following the Anti Money Laundering regulations forced by the European Union. Nevertheless, even though opening a bank account is not as speedy and efficient as it was in the past it still works at a satisfactory level. Even though the banks pay more attention to gathering the DDDs information, we can assist with the process and you will be able to open a bank account within 10 days.
The online banking services of all major banks in Cyprus meet the highest standards; some of them have been accredited by international banking institutions for their services and because they meet the requirements of the international associations.
Factor 4: Advanced Telecommunication systems
Cyprus is considered to be a Strategic Communication base and aims to be part of the European gigabit society by 2025. Cyprus started covering 5G coverage services and has reliable international connectivity with the largest telecommunications cable covering Southeast Asia, the Middle East, and Western Europe.
Cyta, one major Telecom player in Cyprus was awarded Europe's fastest network in 2021, competing with dozens of networks across the Globe, and it was a big achievement for a small island like Cyprus. Cyprus offers excellent conditions for Satellite operations due to the island's ideal climate. We anticipate that in the next decade the area of communications will be a dominant business activity in Cyprus, attracting already high tech companies focusing on software development or internet-based multimedia services.
Factor 5: The running cost of a local office.
Cyprus has one of the lowest operational costs among the world's International Financial centers but the standard of living is very high. Rental income varies from 500 eur per month to 2000 eur per month, depending on the square meters of the premises and the location. For example, running an office in Limassol is much more expensive than having an office in Nicosia.
Electricity costs and licensing are much lower compared to the UK or other European countries.
In Conclusion, Cyprus has established itself as a reputable and prime international business and financial center, besides the excellent human capital, institutions, tax, and legal structure. The new Visa Program of the Government we anticipate will be a Catalyst that will reinforce macroeconomic and financial stability in Cyprus thereby promoting an even stronger position of the island as an International and Business financial center.
Originally published 29 March, 2022
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.
