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Home » Countries » Europe » Cyprus

Global expansion is a step to make for any business, regardless of what you wish to achieve. The opportunities that can come with an expansion can be both incredibly exciting as well as intimidating and confusing, especially when you consider all of the registration procedures that needs to be done and documentation required.

Expanding to countries such as Cyprus – which is characterized by a highly-skilled and productive workforce, complex employment and tax laws, an infrastructure network linking to the rest of Europe Asia and the Middle East, and leading sectors in ICT, tourism, shipping, energy, industry, construction, and agriculture – can bring both excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws.

Ensuring compliance without the sufficient knowledge of the country’s laws also adds to the stress of getting your new entity off the ground and ready to test new markets. Going at it without the proper support can increase the costs, time and risks involved.

Each new markets bring new challenges, and these can be worked through more efficiently and cost-effectively with the support of an International Professional Employer Organization (PEO) such as Bradford Jacobs, especially through our Employer of Record (EOR) framework. This can be best utilized when businesses are just beginning their expansion process and require more information before committing to incorporating an entity and fully establishing themselves in that market.

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Cyprus – The Economy

Cyprus is a major tourist destination in the Mediterranean. With an advanced, high-income economy and a very high Human Development Index, the Republic of Cyprus has been a member of the Commonwealth since 1961 and was a founding member of the Non-Aligned Movement until it joined the European Union on 1 May 2004. On 1 January 2008, the Republic of Cyprus joined the eurozone and adopted the euro as its official currency.

The Republic of Cyprus has de jure sovereignty over the entire island, including its territorial waters and exclusive economic zone, with the exception of the Sovereign Base Areas of Akrotiri and Dhekelia, which remain under the UK’s control according to the London and Zürich Agreements.

However, the Republic of Cyprus is de facto partitioned into two main parts: the area under the effective control of the Republic, located in the south and west and comprising about 59% of the island’s area, and the north, administered by the self-declared Turkish Republic of Northern Cyprus, covering about 36% of the island’s area. Another nearly 4% of the island’s area is covered by the UN buffer zone. The international community considers the northern part of the island to be territory of the Republic of Cyprus occupied by Turkish forces.

Since 1983 the economy of the Greek Cypriot sector has flourished, and unemployment and inflation have remained relatively low. Tourism has provided the main leverage of economic growth, and many areas have undergone technological upgrading. In the 1990s the Greek Cypriot sector increasingly transformed itself into a center of international transit trade, merchant shipping, banking, and related services.

The republic’s Greek-run government established special tariff arrangements with the European Union, whose member countries account for about half of the island’s imports.

The Turkish-occupied area has not experienced the same prosperity, however, and the Turkish government has had to subsidize its economy. The Turkish area still depends heavily on agriculture. Trade between the two areas ceased in 1974, and the two economies have remained independent. However, the southern zone continues to supply the northern zone with electricity, and the northern zone still processes the sewage of Greek Nicosia.

Small and Medium-Sized Companies

SMEs are the backbone of the Cypriot ‘non-financial business economy’. Their contribution to total value added and employment is striking, at 76.3% and 83.8% respectively. Both are substantially higher than the respective EU averages of 56.4% and 66.6%.

Cypriot SMEs employ 3.9 people on average, consistent with the EU average. The average annual productivity of SMEs in Cyprus, calculated as value added per person employed, is €32,900 — almost three quarters of the EU average.

Sectors dominated by SMEs include construction and professional activities (particularly legal and accounting).

CountryCyprus (Republic of Cyprus)
No. of States/Provinces6 administrative districts
Principal CitiesNicosia, Limassol, Larnaca, Stróvolos, Famagusta, Paphos, Kyrenia, Protaras, Pergamos, & Mórfou
Language(s)Greek and Turkish
Local CurrencyEuro (EUR)
Major ReligionChristianity (most notably Greek Orthodox, Armenian Church in Cyprus, Maronite, Roman Catholicism, and Protestants)
Date Formatdd/mm/yyyy
Time ZoneEastern European Time (GMT+3)
Country Dial Code+357
Population1.22 million
Border CountriesCyprus is located about 80 km (50 mi) south of the coast of Turkey, west of Syria and Lebanon, northwest of Israel, north of the Sinai Peninsula (Egypt) and east of the island of Crete (Greece.)
Tax Year1 January – 31 December (calendar year)
VAT %19%
Minimum WageN/A
Taxpayer Identification NumbersTaxpayer’s Identification Code (T.I.C.)
Social Security Number
Tax Identifier Number (for businesses)
VAT Number
Leading Sectorstourism, food and beverage processing, cement and gypsum, ship repair and refurbishment, textiles, light chemicals, metal products, wood, paper, stone, and clay products
Main importsRefined Petroleum, Passenger and Cargo Ships, Recreational Boats, Cars, and Packaged Medicaments
Main exportsPassenger and Cargo Ships, Packaged Medicaments, Refined Petroleum, Cheese, and Copper Ore
Main trading partnersGreece, United Kingdom, Liberia, Netherlands, Israel, China, Germany, Italy, and Turkey
Government TypeUnitary presidential republic
Current Prime Minister/PresidentNicos Anastasiades (President)

The Main Sectors of the Cyprus Economy

Cyprus focuses on the following key sectors, which all have a significant impact on the country’s economy:

  1. Industry and Manufacturing – The nation’s industrial and manufacturing sector has in recent years witnessed a gradual decline as the services sector continues rising. Manufacturing accounts for about 6% of the country’s GDP. The sector also employs about 9% of the nation’s labor force.

    Some of the main products manufactured in the country include textiles, food, and beverages, pharmaceuticals, machinery, and equipment.

  2. Professional Services – This sub-sector forms part of the dominant services sector and offers a wide range of individual services including company registration, finance, insurance, ship management, soliciting, accounting, auditing and more. This sub-sector contributes approximately 9% of total employment.

  3. Agriculture – The agricultural sector together with forestry and fisheries account for about 1.94% of the country’s GDP. The sector has witnessed a considerable decline due to the steady development of other sectors of the economy. The sector, however, is still crucial as it employed an estimated 2.41% of the nation’s labor force. Agriculture takes up about 13.5% of the country’s land.

  4. Construction – In 2020, total turnover of the broad construction sector was EUR 4.9 billion, contributing an estimate of 6.3% of overall gross value added. Pre-pandemic, the number of workers employed by this sector stood at approximately 32,731 people.

  5. Professional Services – This sub-sector forms part of the dominant services sector and offers a wide range of individual services including company registration, finance, insurance, ship management, soliciting, accounting, auditing and more. This sub-sector contributes approximately 9% of total employment.

Compliance Highlights

  • Cyprus Tax Department – The Department ensures the consistent application of the laws, ensuring fair taxation in a way that enhances the confidence of the taxpayer, the minimization of tax evasion and the effective collection of tax revenues of the state with the least possible cost.

    The Cyprus Tax Department is responsible for the implementation of the Laws on Direct and Indirect (VAT) Taxation, the collection of government revenues deriving from these Laws, the implementation of Double Tax Agreements between the Republic of Cyprus and other countries, and the Exchange of Information on Tax Matters on the basis of European Directives and other International Conventions.

  • The Department of Labor – a part of the Ministry of Labor, Welfare and Social Insurance of the Republic of Cyprus, is responsible for issues of employment, including equality between men and women. It is also responsible for the promotion and implementation of Government policy in the fields of employment and training of human resources, as well as for the care of persons with disabilities.

  • The Department of Labor Inspection (DLI) – The Department of Labor Inspection (DLI), which is responsible for labor inspection, comprises six sectors: the Safety and Health and Machinery Sector, the Field Operations Sector, the Industrial Pollution Control Sector, the Air Quality Sector, the Radiation Protection Sector, and the Chemical Substances Sector.

    The basic objective of the DLI is the continuous and steadfast improvement of Occupational Health and Safety standards, to ensure a satisfactory level of air quality and of the environment in general, safeguard of the employees, the public and environment against ionized radiation hazards and chemical substances.

Labor Contracts Law

In Cyprus, employment agreements are determined in written employment contracts, although it is not mandatory by law.

In Cyprus, an employment contract is not required to be concluded in writing, but the law does oblige the employer to provide the employee with an agreement that must be signed by both parties, and include specific information regarding the terms of their employment:

  • Personal/contact information about both parties
  • The place of work and the registered address of the business
  • The position or specialization of the employee
  • The commencement date of the contract and its duration (if fixed-term contract)
  • Notice periods
  • Annual leave entitlement
  • All payments which the employee may be entitled to and the time schedule for their payment
  • Working times for the employee’s working days and weeks
  • Application of collective agreements, if applicable

However, if employment contracts are used, there are three types of contracts that are applied in Cyprus:

  1. Indefinite employment contract – the standard type of employment contract in Cyprus, which is used for indefinite employment.
  2. Fixed-term employment contract – not as widely practiced, but still used in Cyprus, and only for a specific period of time. This type of agreement must be agreed to by both parties.
  3. Collective Agreements: Collective bargaining and agreements in Cyprus are widely practiced. In the public and semi-public sector, coverage by collective agreements are close to 100%.

    Collective bargaining in Cyprus takes place both at industry-level and company-level.

    Workers are not obligated by law to be represented by one or more trade unions, but it is common for certain industries to be represented by trade unions as well as have collective agreements in place that regulate their working status. The main industries that are represented include the building industry, transport sector, hotels, dockworkers, maritime workers, and farmers.

    Whilst industry-level collective agreements continue to maintain their importance, many companies (both inside and outside the coverage of the industry-level agreements) negotiate at company level.

In case of any employment condition amendments, The employer must inform the employee of the changes within 1 month of the changes being made. If the employer wishes to amend the employment terms, they must discuss and agree to the changes with the employee before doing so. However, in the case of worsening employee conditions after the amendments, an employee can claim enforced resignation and take the matter to the Industrial Disputes Tribunal.

Payroll – Tax Contributions and Benefits

A person is eligible to pay taxes in Cyprus if they are registered as a local employee or self-employed individual and is taxed on their individual income. If you are a non-resident in Cyprus, you are only subject to paying taxes on your income derived in Cyprus, as the country benefits from a double taxation treaty.

Eligibility for tax also depends on an individual’s residency status in the country. According to tax laws, an individual is classed as a tax resident if any of the following criteria are met:

  • An individual resides in Cyprus for at least 183 days in a tax year.
  • If the individual does not stay in any other country for more than 183 days in a tax year, is not a tax resident in any other country and stays in the Cyprus for at least 60 days.
  • Exercises business in Cyprus, is employed in Cyprus and/or holds an office with a Cyprus tax resident.

Maintains a permanent home (by owning or leasing) in Cyprus.

Health and Social Insurance: The Social Security office is responsible for implementing government policy on social welfare. Contributions are personal, by the employer, and the government.

Social insurance contribution in Cyprus is mandatory and covers everyone employed in the country. Both employees and employers must make their own contributions, as seen in the tables below.

Concerning the social cohesion fund, an exemption is granted in cases of foreign employees employed in international business companies, by foreign governments, ship management companies, or companies that own Cypriot ships.

Sick Leave & Pay: If an employee is sick or ill, the employee is obligated to visit a doctor who will decide on the number of days needed for sick leave. The first 3 days of sick leave are unpaid.

The employee’s salary and insurance for sick leave are covered by the Social Insurance Fund. For an employee to receive their salary, the employee must fill in a request form and submit the form to the Social Insurance Authorities.

The form must be submitted within 21 days from the date the sick leave is claimed.

Annual Leave: The amount of annual leave depends on the amount of working days of employees. For employees working a 5-day week, they are entitled to a minimum of 20 days of annual leave. For employees working a 6-day week, they are entitled to a minimum of 24 days of annual leave.

Holiday Leave: There are 15 public holidays in Cyprus, in which employees are entitled to paid leave on these holidays:

  • 1st January – New Year’s Day
  • 6th January – Epiphany
  • 15th March – Green Monday
  • 25th March – Greek Independence Day
  • 1st April – National Day
  • 30th April – Orthodox Good Friday
  • 1st May – Labor Day
  • 2nd May – Orthodox Easter Sunday
  • 3rd May – Orthodox Easter Monday
  • 21st June – Orthodox Whit Monday
  • 15th August – Assumption Day
  • 1st October – Cyprus Independence Day
  • 28th October – Ochi Day
  • 24th December – Christmas Eve
  • 25th December – Christmas Day
  • 26th December – 2nd Day of Christmas

However, if an employee works on a public holiday, they are entitled to double their normal rate of pay for every hour worked. Maternity Leave: Maternity leave is 18 consecutive weeks, which can start from 6 weeks before the estimated date of birth. In the case of the delivery of a second child, the duration of maternity leave extends by another 4 weeks, and in case of the delivery of two or more children, it is extended for another 4 weeks.

The mother’s salary and insurance contributions are normally paid by the Social Insurance Fund and equals 72% of her salary. If the mother is the head of the family and has more than one dependent, the contributions increase to 80% or 90%.

When the mother goes back to work, she is entitled to a shift reduction of one hour per day for the first 9 months after the date of birth.

Paternity Leave: Leave for fathers or partners in Cyprus is 2 weeks between the week of childbirth and the following 16 weeks, or between the week of confinement and the termination of maternity leave in the case of multiple births.

Parental Leave: Any parent with a child under 8 years old is eligible for 18 weeks of unpaid parental leave, per child. In the case of a widower/widow, they are entitled to parental leave of 23 weeks.

Parents are allowed to transfer about two weeks of parental leave to the other parent, if they have taken a minimum of two weeks themselves.


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