Entering the Cypriot Market
The Cypriot Market
Foreign companies who wish to expand into Cyprus will be met with a highly educated workforce, attractive tax incentives and reasonable regulations, a hub for tourism, information technology, shipping and fintech companies, and a variety of business incentives with the state. Cyprus’ geographical position benefits from international access to diverse marketplaces in the EU, Africa, and Asia. With both a strong services sector and a growing manufacturing sector specializing in metalworks, information technology and electronics, as well as high-quality logistics and infrastructure, this creates an attractive environment for any business owner who seeks to expand their business.
However, setting up shop in an unfamiliar place comes with its own challenges. Foreign businesses must comply with employment, tax, payroll, and corporate legislation whilst ensuring that their employees are working productively and efficiently.
Starting a business in Cyprus
To start a business in Cyprus you must go through a company registration procedure, which is straightforward and designed to be executed easily. These steps can be done online or in person through the Registrar of Companies office.
The necessary steps to start a business in Cyprus include:
- Obtain a business address in Cyprus and prepare the documents for registration.
- Obtain a business license with the Trade Register and register with the Customs Authorities (if required).
- Appoint a company secretary for incorporation.
- Submit the company name for approval from the Registrar of Companies.
- Prepare the appropriate registration documents and have them translated to Greek or English (depending on the document types).
- Open a local bank account in Cyprus and deposit the appropriate share capital.
- Register your company at the Registrar of Companies.
- Register with Cyprus’ Inland Revenue Department.
- Register for a VAT Number.
- Register with the employers’ register for social insurance services.
- Publish the incorporation in the official gazette.
Once the incorporation has been approved, the founders will receive Certificates of: Incorporation, Shareholders, Directors and Secretary, and Registered Office Address.
Expanding Business into Cyprus
Foreign entities wishing to expand into Cyprus will be met with a thriving, services-based economy with one of the lowest corporate tax rates in Europe and in the EU, a number of business incentives by the state, highly-qualified talent pool and attractive labor and administrative – which is provided to all entities that enter the market.
Cyprus’ location in the Mediterranean acts as a bridge between the West and East and is at a crossroads between 3 continents – Europe, Africa, and Asia. It can also be seen as a gateway for investments in and out of the EU. The country’s position also offers easy trade between continents, with the help of strong infrastructure – it possesses a global shipping power, international airlines, and telecommunications.
Cyprus boasts a strong services sector and a thriving tourism industry, which contributes almost 80% to the country’s GDP, and employs more than half of the country’s workforce. However, the country also does quite well in the industry and construction sectors.
Expanding one’s business into Cyprus creates a lot of opportunity for expansion both nationally – particularly to popular district capitals such as Famagusta, Kyrenia, Larnaca, Nicosia and Paphos, which are popular tourist and commercial destinations – and internationally.
Cyprus Business Facts
- Capital City – Nicosia
- Population – 1,215,671
- Cities – Famagusta, Kyrenia, Limassol, Larnaca, Paphos, Achna, Akaki, Bellapais, Chirokitia, Dali, Fyti, Gerakies
- Official language(s) – Greek, Turkish
- Economy/GDP (2020) – $35.531 billion (PPP)
- World Ranking (Ease of Doing Business) – 54th
- Leading sectors – tourism, food and beverage processing, textiles, ship repair and refurbishment, light chemicals, metal products, wood products, stone products, clay products, cement, and gypsum
- Main exports – ships, boats, and floating structures; mineral fuels; pharmaceutical products; dairy produce, eggs, and honey; electrical machinery and equipment; organic chemicals; vegetables, beverages, and spirits; nuclear reactors, boilers, and machinery.
- Main imports – Oil and mineral fuels; ships and boats; motor vehicles and parts; industrial machinery; electrical machinery; pharmaceuticals; plastics; iron and steel; beverages; furniture
- Main trading partners – Greece, Netherlands, United Kingdom, United States, Norway, Germany, Israel, Hong Kong, China, France, Italy, South Korea
- Government – Unitary presidential constitutional republic
- Currency – Euro
Advantages and Challenges of the Cypriot Market
The Cypriot market has a variety of significant advantages:
- Low costs of doing business: Cyprus benefits from low labor and business costs, and a high quality-to-cost ratio.
- Competitive tax system: Cyprus boasts one of the lowest tax rates in Europe, as well as attractive tax incentives due to double tax treaties.
- Educated workforce: Cyprus’ workforce is highly educated and skilled, with several local universities ranking internationally for their performance in education. Cyprus also has the second-highest tertiary educational attainment rate in the EU, at 57.1%.
- Language: Due to the multicultural workforce most workers are multilingual, but the main language for business in Cyprus is English.
- Ranking: Cyprus ranks high in the Ease of Doing Business Survey regarding the ease of paying taxes. Currently, Cyprus ranks 29th of the 190 countries for tax payments.
- Logistics: Cyprus’ location in Europe offers access to markets across 3 different continents, with high-quality logistics options such as its deep-sea ports and international airports.
- EU Benefits: Cyprus is a full member of the EU and has access to the largest single market in the world. Thus, businesses in Cyprus also benefit from access to the EU market, as well as incentives and benefits from being part of a member-country.
The biggest challenge facing the market in Cyprus currently is the effects of COVID-19, like many other nations in the EU and around the world. Other challenges the economic constraints due to the de facto division between Northern Cyprus that is under Turkish rule, and the rest of the island that is under Greek rule; the recovering financial system; and high administrative burden and bureaucracy.
Limited Company / Subsidiary or Branch in Cyprus?
In Cyprus, a subsidiary entity is considered a legally separate entity from the parent company, with independent administration and management, which provides freedom to explore the local market and create international credibility.
A branch, however, does not have any independence from the parent company – but it is taxed and reported similarly to resident entities, and is limited in its commercial activities.