Special Edition: Doing Business in Cyprus

In an era where protectionism is hardening borders, the space between Cyprus and Israel seems to have grown softer. What began as cautious diplomacy has matured into a confident, multifaceted partnership that straddles geopolitics, commerce and culture.

Over the past few decades, Cyprus and Israel have rewritten the rules of neighbourly engagement. Gone is the old reserve, replaced by shared ventures in energy, defence, science and no small amount of real estate. By 2024, some 12,000 Israelis were calling Cyprus home. Of course, the 55-minute flight helps, but that’s only part of the appeal. Cyprus offers what Israel’s middle class increasingly craves: eurozone stability, lower costs, liberal tax laws, negligible violent crime and, perhaps most importantly, a warm welcome. Even the duty-free area at Larnaca Airport makes its overtures in English, Greek and Hebrew.

The energy sector is where the real spark ignited, with the discovery of substantial natural gas reserves in the Eastern Mediterranean transforming diplomatic conversation. The once-hypothetical idea of an “Energy Triangle” – coined in 2010 by the Cyprus-Israel Business Association to describe emerging synergies between Cyprus, Israel and Greece – quickly became an organising principle for the region’s strategic planning. Israel’s Tamar and Leviathan fields, together with Cyprus’s Aphrodite reserves, formed the geological backbone of a proposed third energy corridor to Europe, one meant to reduce the continent’s overdependence on Russian gas. Whether it fully delivers on that promise remains to be seen but the alignment has already reshaped regional relations.

Tourism has followed energy’s lead. In 2023, 411,000 Israelis visited Cyprus, making Israel the second-largest tourist source of visitors and accounting for nearly 11% of total arrivals. With frequent flights and cultural compatibility, the Mediterranean has rarely felt so much like a shared backyard.

Unsurprisingly, real estate has seen a surge in interest. In 2021, Israeli investment in Cypriot property, especially in Limassol, jumped by 19%, focusing largely on residential and hospitality assets as Cyprus offers a rare combination of proximity and opportunity. Technology and research have also joined the fray. In 2024, Cyprus’ Research and Innovation Foundation (RIF) and Israel’s Ministry of Science and Technology (MOST) launched a joint funding programme, underwriting collaborative research with real-world applications. Each country pledged €900,000 for three years, offering up to €100,000 per project, with health, environment and renewable energy as the main areas of cooperation. In February 2025, a bilateral networking event co-organised by RIF and the Israel-Europe Research & Innovation Directorate (ISERD) gathered scientists and entrepreneurs together in Nicosia. Supported by the Israeli Embassy, the event showcased their capabilities and discussed potential collaborations for the joint submission of proposals under the EU’s Horizon Europe programme.

Business integration has gained pace. Since 2010, Israeli firms like Diplomat, Marfields, eToro, Plus500 and Fattal Hotel Group have set up shop in Cyprus. The draw? Beyond the EU access, the two economies are – charmingly – kindred spirits: nimble and service-oriented. Cyprus’ foreign direct investment strategy has further greased the wheels. Targeted incentives, such as a 50% tax deduction on investments in certified innovative companies and an IP Box regime with effective tax rates as low as 2.5%, have made relocation not just logical, but lucrative.

Cooperation between the two countries also extends into healthcare. In September 2024, new ground was broken with a cross-border kidney exchange programme, conducting eight transplants (five in Israel, three in Cyprus) in a single synchronised operation. It was the first such programme between the two nations – and it worked.

It would be naïve to suggest that the Cyprus-Israel partnership is without tension, as regional politics and global alignments will always cast long shadows. However, both sides have proven pragmatic in building a working relationship and a transactional intimacy built on shared interest, regional calculus and a dash of mutual admiration. Indeed, in a region better known for ancient grievances than modern cooperation, Cyprus and Israel are quietly building a stable, forward-looking alliance with real-world results.