INVESTING IN CYPRUS
A guide for the Members of the
CYPRUS - SPAIN BUSINESS ASSOCIATION
- Cyprus is the third largest island in the Mediterranean Sea,
- It lies at the crossroads of Europe, Africa and Asia
- It is close to the shipping and air routes that link Europe with the Arab World, the Far East and Africa.
It therefore represents a strategic hub for business activities in the region especially for EU and Non EU countries.
General Information Incentives
- Cyprus is a member of the European Union (since 1st May 2004), the World Trade Organization, the Commonwealth, the World Bank, the International Monetary Fund, the United Nations and the Council of Europe.
- Since joining the European Union exchange controls have been abolished (see below). Consequently any capital gains, profits, capital invested, interest and dividends arising from the disposal of shares in such investments can be freely remitted overseas without any limitation.
- Since membership in the European Union, it is being transformed into a key outpost in the eastern Mediterranean, and facilitates and serves as a bridge between the EU and the emerging and important market of Middle East.
- The geographical proximity of Cyprus to the Middle East can be considered an important factor in creating business partnerships between Europe and the Middle East; two different regions bound by mutual interests.
- Cyprus has formed a favourable business environment that is evidenced via the attraction of the geographical position of Cyprus in the association with the availability of high skilled labour at rates the are generally cheaper than the rates of pay of other European or industrialised countries, hence Cyprus provides value for money support facilities and services.
- The Industrial Free Zone in Larnaca, offers all modern facilities. Industries established within the Free Zone have the capacity to import their machinery, equipment and raw materials free of customs duty. Ideally products manufactured in the Free Zone are permitted to enter the Cypriot market on payment of the lowest preferential tariff.
- There are provisions for various grants and incentives for projects, especially for the attraction and development of high-tech industries, labour skills improvement and other.
- The Middle East manufacturers, professionals and traders may gain easier access to the prosperous EU market via Cyprus.
- As reported in May 5, 2004 edition of the Wall Street Journal 'Cyprus offers a strategic location, favourable tax environment, educated work force, excellent telecommunications and modern banking and legal infrastructure which makes the country the perfect business bridge for the European Union and the Middle East'.
1. Foreign Direct Investment Policy
- The Foreign Direct Investment (FDI) policy has been liberalised.
- Administrative procedures have been simplified.
- Bureaucratic intervention has been reduced.
- Foreign companies can directly invest and establish business in Cyprus.
- Direct Investment
- Foreign investors may invest in any Cypriot enterprise with equity participation of up to 100% in most sectors.
- No minimum level of capital investment required.
- No approval from the Central Bank of Cyprus required.
- Can register a company directly with the Registrar of Companies and obtain any licence, if needed, from the appropriate authority.
- Portfolio Investment
- Easy trading of shares by non-residents on the Cyprus Stock Exchange (CSE).
- Non-residents are subject to the same rules and regulations of the CSE as Cypriots, regarding capital distribution.
- Investors may acquire up to 100% of the share capital of all Cypriot companies, except companies operating in specific sectors, such as the banking sector.
- Acquisition of Real Estates
As of 1st of May of 2004:
- No restrictions are imposed on registered companies for the acquisition of real estates linked to primary residence and foreign direct investment, or the acquisition of real estates by EU real estates agents and land developers.
- The acquisition of residence for secondary use is prohibited without prior authorisation by the Council of Ministers.
- Exchange Control
- Since 1st May 2004 Exchange Control has been abolished.
- Resident and non residents may hold and manage assets and liabilities in any foreign currency and in any foreign country.
- Bonded Factories and Warehouses
- Can be established close to related areas other than the Industrial Free Zone.
- The customs status extended to bonded factories concerning customs exemption on imported machinery and raw materials is generally the same as in the Industrial Free Zone.
- General bonded warehouses are available for use on a rental basis.
- Local and international business may be given authority to operate their own private bonded warehouses.
2. Establishment of Companies
- Since 1st October 2004, foreign investors deal directly with the Office of the Official Receiver and Registrar of Companies for establishing a company and not the Central Bank of Cyprus.
- The procedure for a company's formation is:
- An Application for the approval of the name of the Company is submitted to the Registrar of Companies.
- The relevant documents for the company's registration are to be submitted through a lawyer.
- Registration is completed within one month under the normal procedure, and within one week under the accelerated procedure at the additional fee of £ 30.
- Shares or participation must be registered under the investors name at the Registrar of Companies.
- Cost of registering a local company varies according to share capital.
- Corporate tax rate of 10%, lowest in Europe.
- Non Tax Residents pay NO TAX on dividend received. Criteria 1) minimum participation of 1% is required and 2) the company must derive its income from trading activities.
- Gain from the sale of investments are tax-free.
3. Foreign Investors Service Centre
- The Government's development policy objective is to foster the infusion of foreign investment.
- The Foreign Investors Service Centre operates under the auspices of the Ministry of Commerce, Industry and Tourism.
- The Centre operates as a One Stop Shop for foreign companies which are interested to investigate investment opportunities in Cyprus.
- It constitutes the central agency of information, support and foreign investors relations.
- It plays a vital role in attracting FDIs:
- In targeted industries.
- In enhancement of R&D and technology transfer fields essential for upgrading.
- In enrichment of the production capacity.
This document is the property of Joseph G. Hadjihannas Advocates, and it is for information purposes only, exclusively for the use of the Cyprus - Spain Business Association and it is therefore NOT intended to provide professional advice or quidance.