Cyprus is the third-largest island in the Mediterranean Sea and is strategically placed at the easternmost tip of Europe, at the crossroads of major sea and air routes connecting Europe, Africa, and Asia. Furthermore, Cyprus is aiming to become a center for European innovation as a business and talent hub. To boost its economy and encourage development across a variety of industries, the government has been aggressively seeking to recruit new companies, entrepreneurs, and talented people.
Economic trends and growth
Since the financial crisis of 2013, Cyprus’s economy has been growing and recovering steadily. To foster a more favorable business climate, lure in more foreign investment, and broaden the economy’s base of activity, the government has enacted a number of changes. Economic development in Cyprus may mostly be attributed to the hospitality, construction, transport, banking, and IT industries.
Foreign Direct Investment
Surprisingly, Global Finance magazine’s “FDI Superstars 2018” placed Cyprus as the eighth best country in the world for attracting and retaining foreign direct investments. Since the financial crisis of 2013, Cyprus has gone a long way and surpassed all worldwide expectations. Investments from the United States, Russia, India, China, and other nations in the Middle East and Far East have recently poured into Cyprus. Regaining its former prominence as an attractive location for foreign direct investment (FDI) has been facilitated by a number of factors, including higher credit ratings from international agencies, the successful recapitalization of its major banks, and recent government bond issues raising over €5 billion in the international markets.
It should be noted that this is directly linked to the fact that the Greenfield FDI Performance Index showed that Cyprus is among the top ten countries for investment recovery after the Covid-19 pandemic. In this particular category, Cyprus managed to record an increase of 150 per cent in the first half of 2022, compared to the corresponding period of 2019.
In comparison to the previous quarter’s rise of 41.7%, FDI in Cyprus grew by 129.7% of the country’s Nominal GDP in the fourth quarter of 2022. Studies forecast this growth will continue its positive increase unless any crisis or other pandemic occurs. According to Invest Cyprus, the National Investment Promotion Authority of Cyprus, it is expected for FDI to certainly increase even further at around 150% of Cyprus’ Nominal GDP by the end of 2023. As it is seen in the graph below, during the pandemic the uprising growth took a heavy turn and decreased at all costs, as it did in the majority of nations.
Education and talent capital
To support its aspirations as a talent hub, Cyprus has been investing in education and training initiatives to develop a skilled workforce. The country has a solid education system with a focus on promoting science, technology, engineering, and mathematics (STEM) disciplines. Additionally, there are various vocational training programs and university courses tailored to meet the demands of the evolving job market. Taking into account the small size of the country and the relatively low population, Cyprus offers a great variety of educational resources:
- 11 public and private universities,
- +40 higher education institutes,
- 40 english-speaking private secondary schools,
- Some schools offer tuition in French, Arabic and Russian languages.
Furthermore, Cyprus’ most significant competitive advantage is its low cost of doing business with its talented population. With the youngest population and workforce in the European Union, the nation benefits from a highly educated and adaptable talent. Cypriots are not only highly educated, but also fluent in many languages. Although Greek and Turkish are recognized as official languages of Cyprus, English is widely spoken and used in commerce.
A significant fallout from the conflict in Ukraine has been the rapid relocation to Cyprus of thousands of highly skilled, highly compensated workers who have found jobs with the island’s hundreds of newly established businesses or with foreign businesses already operating there, many of them engaged in the technology sector.
In only one year, thanks to the incentives provided by Cyprus via the Business Attraction Strategy, Cyprus has awarded over 9,000 work permits to highly paid professionals and their families relocated to this nation (mostly in Limassol).
Business trends in Cyprus
Firstly, the business scene in Cyprus is active and varied. The country’s economy is booming, and it’s not only in the old standbys like tourism and shipping. The government has encouraged startup creation and venture capital investment via a number of programs and initiatives.
Cyprus’s advantageous tax policy and strategic position at the crossroads of Europe, Asia, and Africa have also attracted several multinational corporations to establish regional headquarters or offices there. An innovative and collaborative business climate is encouraged by the presence of both international corporations and a culturally varied business community. Because of this, companies may more easily enter certain areas.
In 2022, exactly 1,640 firms operating mostly in the areas of professional and financial services, energy, and information technology and communications obtained registration in the Register of Foreign Interest firms. Plus, bringing with them 9,800 specialized members of staff. The Company Facilitation Unit has informed us that the aforementioned businesses have shown an interest in establishing themselves in any and all of the cities in issue.
Key business sectors
Technology and innovation
Cyprus has been making strides in the technology and innovation sectors. The country has witnessed the emergence of numerous tech startups and digital enterprises. Government initiatives and support for the tech ecosystem, including funding opportunities, tax incentives, and the establishment of innovation hubs and accelerators, partially fuel this growth..
The ICT sector alone is estimated to have contributed approximately €3 billion to the Cypriot economy. The industry also consists of telecommunications firms, although the gain of almost €1 billion is mostly attributable to the migration of international enterprises and the entrance of specialized members of staff to Cyprus, notably in the middle of the crisis created by the conflict in Ukraine. In addition, Cyprus recorded a massive 600% increase in technology investment compared to 2019.
Cyprus has made a name for itself as a major hub for the financial sector in the European Union. Foreign corporations and investors are drawn to the nation because of its well-regulated financial sector, which allows them to easily enter the European Union. Because of its convenient location and enticing tax climate, many multinational corporations choose Cyprus as a springboard to the European Union. Notably, the island was chosen as the first place outside of the United Kingdom to teach accountants for the Institute of Chartered Accountants in England and Wales (ICAEW) and the Chartered Institute of Management Accountants (CIMA). More than 120 limited accounting businesses, 160 limited liability law firms, and offices of the leading worldwide accounting firms are all now active in Cyprus.
Real Estate and construction
Cyprus’s real estate and building industries have been significant economic drivers for the island nation. Plus, rising demand for both commercial and residential real estate, as well as the development of the tourist industry, have spurred growth in these areas. Government initiatives to make building permits easier to get and encourage foreign investment in the real estate market have contributed to the growth of these sectors.
Renewable energy and green initiatives
Investment in green projects and renewable energy sources has increased in Cyprus in recent years. To combat climate change and maintain its natural resources, the government has invested in renewable energy including solar and wind power. In addition, businesses of all stripes are starting to see the benefits of being green.
Startups and entrepreneurship
The startup community in Cyprus is thriving, and the government is making significant efforts to support and encourage entrepreneurs and top talent. Start-ups and new ideas may get help from a wide range of grants, loans, and incubator programs. An additional factor in the development of the startup ecosystem is the proliferation of co-working areas and entrepreneurial groups.
Tourism and hospitality
Cyprus’s economy relies heavily on the hospitality and tourism industries. Millions of visitors flock to the nation every year to enjoy its Mediterranean climate, rich history, and stunning beaches. The government’s efforts to expand the country’s tourist industry have focused on drawing visitors interested in more than just the sun and sea.
Remote work and digital nomadism
The spread of the COVID-19 epidemic has accelerated the rise of remote work, making Cyprus a desirable location for digital nomads and telecommuters. Because of its mild temperature, high quality of life, and convenient access to modern infrastructure, it has become a popular choice for telecommuters looking for a change of pace.
In fact, in 2021 the Council of Ministers approved the following Temporary Residence permit for digital nomads:
- Foreign nationals from outside the European Economic Area and the European Union who are able to work remotely through the use of telecommunications technology are eligible to apply for a “Cyprus Digital Nomad Visa” and temporarily live and work in Cyprus for an employer registered outside of the EU. By attracting digital nomads, the Scheme hopes to boost Cyprus’s standing as a hub for the provision of electronic services, which, in turn, will boost the island nation’s business ecosystem and, by extension, its economy. The benefits include:
- A one-year residency permit in Cyprus with the option to extend for two more years.
- Family members have the same right to stay in Cyprus as the Digital Nomad for the same duration, but they don’t have the privilege of working or doing business while there.
- If individuals spend more than 183 days in the Republic during the tax year and they are not tax residents of any other nation, Cyprus deems them as tax residents.
Financial services, legal services, and consultancy are just few of the export-oriented service sectors that Cyprus has been emphasizing. The country’s English-speaking workforce and pro-business climate have made it a focal point for businesses serving customers throughout Europe and beyond. Cyprus’ Ship Management Center is the biggest in the European Union and one of the top three in the world. Its commercial fleet is the third biggest in the European Union and the eleventh largest in the globe.
Tax incentives for entrepreneurs
Cyprus offers several tax incentives and benefits to attract entrepreneurs and foreign businesses:
- Low Corporate Tax rate: Cyprus has one of the lowest corporate tax rates in the European Union, set at 12.5%. This attractive tax rate has been a significant draw for businesses looking to establish their presence in Europe.
- Intellectual Property Box regime: Cyprus has introduced a favorable Intellectual Property (IP) regime that provides tax incentives for companies holding IP rights, reducing their effective tax rate as low as 2.5% on IP-related profits.
- Double Tax treaties: Cyprus has an extensive network of double taxation treaties with over 60 countries. These treaties aim to prevent double taxation and provide a competitive advantage for businesses conducting international operations.
- Notional Interest Deduction: The Cypriot tax system allows for a notional interest deduction on equity capital, which further reduces the effective tax rate as low as 2.5% for qualifying companies.
Quality of life
Cyprus offers a high quality of life, with a pleasant Mediterranean climate, beautiful landscapes, and a rich cultural heritage. This attracts professional talent seeking an improved work-life balance.
Cyprus’ relationships within the European Union
The island nation of Cyprus officially joined the European Union (EU) on May 1, 2004. On that day, Cyprus joined the European Union with nine other nations, increasing the total number of members from 15 to 25. As of this momentous day, Cyprus became a fully-fledged member of the European Union, with all the privileges and responsibilities it entails, including access to the EU single market and participation in EU policies and programs. This connection profoundly influences the business climate and economic prospects of the nation.
As a matter of fact, the EU is home to more than 500 million potential customers for firms situated in Cyprus.
Single market and trade opportunities
The advantages of the EU’s single market for Cypriot enterprises include the elimination of customs taxes and other trade obstacles inside the EU as a whole. This has aided the expansion of the Cypriot economy and the globalization of its firms by making it easier for Cypriot products to enter EU markets.
EU funding and programs
Firstly, Cyprus may apply for and receive financing from a number of European Union (EU) initiatives and programs designed to stimulate the economy and encourage new business formation, research, and innovation. In fact, the availability of these funding enables Cypriot enterprises to expand and modernize in ways that boost their competitiveness.
European Economic Area (EEA)
Due to its membership in the European Union, EEA also included Cyprus. Adding Iceland, Liechtenstein, and Norway to the single market is one of the EEA’s main goals. Since these nations are now part of a larger economic bloc, commerce between Cyprus and them has expanded.
Bilateral trade agreements
Cyprus has BTAs in place with a number of European nations in an effort to streamline the process of doing business with one another on both sides. Businesses operating inside these agreements may be eligible for lower tariffs or other trade-related advantages.
International business hub
Cyprus has positioned itself as a worldwide economic center. It draws in talent and firms from all over the world who are wanting to grow their operations into the European Union and beyond. Because of its advantageous tax benefits, well-regulated financial services industry, and wide network of double taxation treaties, the nation is a popular choice for regional headquarters or holding corporations.
To sum up, Cyprus has shown itself to be one of Europe’s most dynamic markets for new talent. Professionals, entrepreneurs, and skilled employees from all over the globe are coming to the country. All because of its advantageous location, business-friendly atmosphere, and membership in the European Union (EU). The country’s proximity to the EU single market, low corporate tax rate, and thriving ecology for technological innovation have all contributed to its rapid economic development and worldwide prominence.
Cyprus is a great place to establish a company. Because the government places a premium on creating a highly educated and trained workforce. The increasing popularity of remote work and digital nomadism further adds to Cyprus’ attraction, as does the island’s pleasant climate and Mediterranean vibe. Cyprus will continue to attract talent, innovation, and investment as the country cements its place on the European economic scene. In conclusion, Cyprus is a rising star among European talent centers due to its extraordinary combination of possibilities and advantages.