Over the recent years, we have witnessed an important number of innovative and high-tech enterprises relocating or setting up their business in Cyprus. This is mainly attributed to the very welcoming and fertile business ecosystem the island offers. The ecosystem is based on fundamental elements delineated below.
Setting up a business in Cyprus is time and cost efficient. It is noted that the cost for setting up a business on the island is significantly lower compared to other major European capitals. According to Eurostat, the estimated hourly labour cost in Cyprus was Euro 17.4, whereas in the EU-area it was Euro 27.7 and, in the Euro-area it was Euro 31.4, in 2019. Also, business-related services such as accounting and legal advice services are quite competitive compared to other EU member states. Additionally, the government, in an effort to attract foreign business and make the Cypriot corporate environment simpler and faster, has recently come up with solutions that are of great assistance to foreign investors. For instance, lately, the government has devised the fast-track business activation mechanism, where it offers aid in getting all important registrations needed for a company to set up, from the outset, saving time and cost for new and existing businesses, subject to criteria.
Cyprus offers a strong regulatory framework and legal system. There is legislation protecting intellectual property developed by high-tech companies. In addition, the legal system is based on English Common law and English Case Law and is considerably used in many situations. Also, as a full member of the European Union, Cyprus follows European legislation and directives that enlarge the business areas covered by laws in Cyprus.
The country provides access to a highly-skilled, and well-educated workforce with the majority of local professionals being university graduates. Also, EU nationals can come and work in Cyprus without the need for a visa or any other work permit. Furthermore, the government, as part of its policy to ease foreign business set up, offers the ‘’startup visa program’’ where potential entrepreneurs can come to Cyprus, set up their business and bring to the island employees from non-EU areas, subject to conditions.
Innovative companies that fulfill certain criteria can benefit from funds and grants that Cyprus and other European organizations offer. For instance, local banks can assist in providing funding solutions with favorable financing terms through the Cyprus entrepreneurship fund. This particular fund aims to support and strengthen entrepreneurship in the country by easing access to financial solutions for small and medium-sized enterprises.
Cyprus offers a business-friendly tax regime both at corporate and individual level. At corporate level, Cyprus tax resident companies are charged an income tax rate of 12.5%, one of the lowest within EU countries. Also, there are other internationally approved tax incentives that startup businesses can enjoy by settling on the Island. For instance, through the intellectual property tax regime, companies producing intellectual property can apply for an 80% tax exemption, reducing their corporate tax rate to an effective rate of 2.5%. Other companies, that bring in new equity can benefit from the notional interest deduction regime. According to this scheme, they can enjoy an 80% deduction on the income associated with the new equity. At individual level, tax rates are amongst the lowest in the European Union, with the first Euro 19,500 of income being tax free. Most importantly, non-domiciled taxpayers do not pay tax on dividends, interest or rental income. It is worth saying that highly remunerated employees that earn more than Euro 100,000 per annum can enjoy a 50% tax exemption on their total remuneration for 10 years, provided that certain conditions are met.
Cyprus, by being part of the European community, offers to its residents the merits of being a member of this family. Entities can enjoy all the benefits that the European Union has to offer, such as free movement of goods, services and capital to and from other member states and members of the European Free Trade Association.
Last but not least, the island provides a high standard of living. Businesspeople can relocate to Cyprus with their families, as here they will find the Mediterranean weather, culture and nature at its best. Cyprus has relatively small cities making commuting easy, it provides a great and expanding road infrastructure, two newly renovated airports and great healthcare service. Also, the island offers a selection of reputable schools and universities.
5 January 2021: Cyprus - A unique and competitive jurisdiction for startups and innovative enterprises .
by: Michalis Eleftheriou