Cyprus is second leading European destination for German business migrants
07:00 - 02 December 2023
Cyprus is one of the top two European destinations for German business migrants, a recent German study has found.
According to mittelstandinbayern, relative to its size, Cyprus is the second most popular non-German-speaking destination for German entrepreneurs and private individuals emigrating, after Mallorca.
In 2022 alone, more than 250,000 Germans emigrated abroad. 16% of the 3.5 million self-employed people in Germany are currently moving jobs abroad, with 30% considering to emigrate. The number of self-employed people in Germany has fallen by 18.6% during the last 10 years. The number of female founders fell by 22% in 2022.
Stefan Nolte, Managing Director of Shanda Consult, an international consulting firm based in Nicosia, as well as President of the Cyprus Germany Business Association, said in an article published on the company’s website that there are a variety of reasons why fewer and fewer people in Germany are daring to become self-employed and at the same time more and more self-employed people are emigrating abroad.
“The bureaucracy, which has completely gotten out of control, is particularly hampering the self-employed and small businesses. Self-employed people and companies in Germany have to compile a huge number of statistics and report them to various authorities, often physically, by letter. The same or very similar figures and reports must be reported to a number of authorities, rather than the authorities distributing submitted information internally,” he explained.
The constant increase in regulations, some of which coming from the EU, as well as the associated increase in documentation requirements makes it almost impossible for self-employed people who work alone or with only a few employees to focus more on the actual work than on the completion of official requirements, he added.
“Unfortunately, authorities and the state usually do not support the self-employed and small businesses,” said Nolte. “Economic policy is aimed almost exclusively at large companies and corporations.”
These are just a few of the issues mentioned.
Cyprus in the focus of German self-employed people and small businesses
And so, many self-employed people and small businesses want to emigrate, but want to stay within the EU because of the known advantages.
“For this group of self-employed people and small businesses, Mallorca is the most popular destination and Cyprus is the second most popular destination,” said Nolte. “We at Shanda Consult can only confirm this from our own experience. The number of self-employed people, small businesses and wealthy people relocating from Germany to Cyprus has risen sharply in recent years. Wealthy people are moving their centre of life to Cyprus, particularly because of the non-dom tax status. The non-dom tax status in Cyprus allows tax-free receipt of dividends and interest income over a period of 17 years.”
In addition to the excellent climate, Cyprus offers a more relaxed work and lifestyle than Germany, the German expert said. “In contrast to Germany, the famous work-life balance is generally not a subject of discussion in Cyprus. In Cyprus, family and social exchange play an important role.”
Also, even though real estate prices and rents have increased in recent years, they still lag significantly behind comparable prices in Germany.
“With over 3,000 years of history as a trading centre in the Eastern Mediterranean, Cyprus has developed a business-friendly culture that has become part of the country’s DNA,” said Nolte. “Of course there is bureaucracy in Cyprus, where does it not exist? However, the time that self-employed people and small businesses have to spend completing bureaucratic duties is only a fraction of what it takes in Germany. VAT returns, for example, must be submitted quarterly in Cyprus and not on a monthly basis. There is no advance VAT deduction in Cyprus. Most matters in Cyprus can be completed electronically. Water and electricity bills are issued every two months to reduce bureaucratic burdens.”
Cyprus’ tax advantages
The annual tax exemption on salaries and salary-like benefits in Cyprus is €19,500. A progressive tax rate then sets in, starting with 20% income tax. The income tax rate increases by 5% in increments of approximately €7,000 – 8,000, whereby the calculated income tax is only applied to the respective progression level and not to the total income, as in Germany. The maximum income tax rate in Cyprus is 35% and is applied to annual income over €65,000.
In addition, there is a 50% income tax waiver for high earners in Cyprus with a gross annual salary of €55,000 or more, which is granted for a certain period of time under certain conditions.
Income from the sale of shares and securities is not subject to tax in Cyprus on individual level, while Cyprus also offers significant advantages over Germany in the entrepreneurial area. Corporate tax is 12.5% on taxable profits. There is no business tax in Cyprus (“Gewerbesteuer”), nor is there a solidarity surcharge. Income from the sale of shares and securities is again not subject to tax for companies.
Corporate profits from dividends are not taxable in Cyprus for a period of two years. Thereafter, a capital gains tax (“Special Defence Contribution”) of 17% on 70% of the undistributed dividend profits applies. However, every person who moves to Cyprus benefits from the so-called non-dom tax status, which exempts the taxpayer from taxation on dividend income for a period of 17 years.
“So if a company has dividend profits and passes them on to its shareholders within two years, the company’s dividend profits are not taxed either at the company level or at the level of the taxpayer as a natural person,” Nolte explained.
Furthermore, Cyprus has no withholding tax, wealth tax or inheritance tax.
“Overall, Cyprus offers a very tax-friendly environment for the self-employed and for companies as well as for private individuals,” he said.
(Read the full article here)