An ideal location for establishing business operations and living

Over the years, Cyprus has established itself as a recognised financial hub. Recently, an increasing number of international companies have relocated a part or all of their operations to the country. The combination of attractive headquartering incentives, strong and transparent legal and tax systems and a high quality of life has attracted both individuals and corporations. Its strategic location at the crossroads of Europe, Asia and Africa, coupled with an evolving infrastructure and ongoing efforts to streamline procedures through electronic governance, makes Cyprus a prime investment destination with immense potential.

An Attractive Place for Families

The allure of Cyprus for individuals lies in its unique blend of lifestyle benefits and financial advantages. The island offers a high quality of life, characterised by its Mediterranean climate, picturesque award-winning blue-flag beaches and safe environment. The cost of living – relatively low compared to other European countries – makes it an attractive location for those seeking a luxurious yet affordable lifestyle. Additionally, the combination of public and private educational institutions provides greater opportunities for families choosing Cyprus as their permanent residence. Cyprus is also known for its advanced healthcare system, cosmopolitan lifestyle and high-quality tourism and restaurant services. The island’s vibrant cultural scene – featuring numerous festivals, historical sites and culinary delights – adds to its charm as a preferred destination for affluent individuals.

Tax Regime for Individuals

One of the most compelling reasons – though not the only one – why High Net Worth Individuals (HNWIs) choose Cyprus is its advantageous tax regime, which is fully harmonised with European Directives and best international practices. Cyprus offers significant tax incentives for non-domiciled individuals, who are exempt from paying taxes on dividends and interest income for seventeen years from the first day of becoming Cyprus Tax Residents. This provision, together with the exemption from taxes on profits from the sale of securities, is particularly appealing to wealthy individuals who seek to optimise their tax liabilities while benefiting from the island’s numerous lifestyle advantages. Additionally, Cyprus does not impose inheritance tax or wealth tax, further enhancing its attractiveness as a financial hub. These tax incentives, together with trust structures in full compliance with European directives, provide a competitive advantage for HNWIs to manage and safeguard their assets. As a result, Cyprus has witnessed an increase in the use of its International Trusts, which are based on common law and are used for succession planning.

Corporation Headquartering and Employees

As part of the headquartering incentive plan for employees that decide to relocate to Cyprus, 50% of their emoluments are tax exempt for the first 17 years provided that their annual income exceeds €55,000. This enables corporations relocating in Cyprus to bring their managers and senior personnel. The plan also provides for fast-track procedures for working visas for employees in the IT, shipping and pharmaceutical sectors.

Cyprus also offers significant benefits for businesses. The corporation tax rate is currently 12.5% while business expenses may be deducted. Through its intellectual property (IP) tax regime under the nexus approach for patents and trademarks developed through qualifying research and development activities conducted in the country, an amount of up to 80% of the qualifying profits is exempted. This favourable tax treatment encourages innovation and investment in Intellectual Property and has already made Cyprus an attractive destination for companies looking to capitalise on their proprietary technologies and creative assets, with a substantial number of global companies establishing a strong presence on the island. Additionally, there are specific tax deductions in terms of investments in research and development, innovation and startups. The Notional Interest Deduction in relation to equity injected to Cyprus Companies also reduces the net tax payable while Cyprus imposes no withholding taxes on dividends distributed to non-domicile Cyprus Tax Residents or Overseas Tax Residents. Furthermore, Cyprus has a robust regulatory framework for Alternative Investment Funds which, coupled with the tax characteristics mentioned above, has been a great success for sophisticated HNWIs and family offices looking into their succession planning.

Ease of Doing Business

Cyprus offers a multitude of advantages making it an ideal location for establishing and managing international businesses. The island’s well-regulated financial sector, characterised by a robust banking system and a transparent legal framework, provides a secure environment for conducting business. Cyprus is a member of the European Union and the eurozone, ensuring access to a vast single market and facilitating seamless trade with other EU countries. It also allows access to important EU funding through the various programmes at the pan-European level but also through structural funds cascaded to the local level. The island’s efficient and transparent company formation process, coupled with its favourable corporate governance practices, including the implementation of electronic governance (e.g. the new online Tax For All system) ensures ease of doing business. Cyprus also boasts a skilled and multilingual workforce, capable of meeting the diverse needs of international companies.

In recent years, Cyprus has seen a significant net immigration of skilled labour, particularly in the technology, fintech and renewable energy sectors. Over the past five years, the island has attracted thousands of professionals from around the globe, drawn by its advantageous business environment, quality of life and opportunities for growth in emerging industries. This influx of talent has bolstered the local workforce, enabling Cyprus to become a competitive player in the international market.

Education & Healthcare

Education is another area where Cyprus has made significant strides. The island has seen the opening of several new international private schools through significant foreign direct investment, catering to both local and international students. The high number of international students in medicine, for example, is a testament to the quality of education offered in Cyprus, as well as to the island’s appeal as a multicultural and welcoming place to study.

In addition to advancements in education, Cyprus has also witnessed the opening of several new medical centres, driven by significant local and foreign direct investment. The establishment of these medical centres not only enhances the quality of healthcare available to residents and expatriates but also contributes to further economic growth by creating employment opportunities and boosting the local economy.

Conclusion

Cyprus stands out as a premier investment destination and international business centre, offering a host of benefits for HNWIs, shareholders and business owners. Its strategic location, favourable tax regime and robust infrastructure make it an attractive choice for those seeking to optimise their investments and expand their business operations. The island’s unique blend of lifestyle advantages and financial incentives, coupled with its commitment to fostering innovation and entrepreneurship, positions it as a leading destination for global investors. As Cyprus continues to enhance its appeal through progressive policies and a business-friendly environment, it is poised to solidify its status as a hub for international business and a home for affluent individuals. Cyprus provides a comprehensive and compelling proposition for individuals and companies seeking a stable, advantageous and attractive environment for their investments and operations. The island’s strategic location, coupled with its favourable tax regime and robust legal and financial systems, makes it an ideal choice for those looking to establish and grow their international business ventures.

• By Pangratios Vanezis, Board Member, Head of Enterprise & Startups, and Petros Mavrommatis, Board Member, Head of Asset Management Services, KPMG in Cyprus

This article was first published in the special publication Doing Business in Cyprus. To view it, click here. To read the entire publication, click here.