E-mail: stofan@mcit.gov.cy

Cyprus as an International Business and Financial Centre

Cyprus is the third largest island in the Mediterranean Sea, situated at the crossroads of three continents and in the trading paths of the first merchants of antiquity. Cyprus’ significant geographic location has been a major factor in shaping its history.

The island’s strategic location, in conjunction with its agricultural and mineral wealth, rendered it a transit trade centre in the region. These were the main reasons that attracted various conquerors, who managed to control the main trade routes of the time by having the island under their rule.

After having experienced a lot of conquerors, Cyprus finally gained its independence in 1960 and was declared an independent State. One of the main tasks of the first government was to accelerate the rate of economic growth and create a sustainable infrastructure. Consequently, the yearly rate of growth during the first years of independence had reached 7%.

The favourable results of 13 years of planned development were led to a temporary halt as a result of the Turkish invasion and occupation of the northern part of Cyprus in 1974. For a while, the economy was on the brink of total collapse and faced with a series of difficulties. It managed, however, not only to recover but also develop.

At present, the tertiary sector (services) is considered the backbone of the island’s economy, and Cyprus has been established as an international business centre and centre for providing services.


Foreign Investments in Cyprus

One of the primary objectives of the Government’s development policy is to foster the infusion of foreign investment in all economic sectors, with an emphasis οn the field of high-technology.

In order to attract foreign investments and enhance economic prosperity in Cyprus, the government has liberalised the Foreign Direct Investment (FDI) policy for both EU and non-EU nationals. Administrative procedures have been simplified and no limitations apply in most sectors of the economy, as per the minimum level of investment and the foreigners΄ participation percentage. Moreover, bureaucratic intervention has been reduced, fostering investment opportunities by non-residents.

Consequently, foreign companies now have the opportunity of investing and establishing business in Cyprus on equal terms with local investors; no distinction is being made between foreign and Cypriot companies.

Among the significant advantages that Cyprus has to offer as an international business centre are:
· Member of the European Union
· Strategic location at the crossroads of three continents, serving as Europe's Middle Eastern outpost
· Favourable tax regime including 10% corporation tax
· Liberal Foreign Direct Investment regime
· Simplified administrative procedures for acquiring necessary permits
· Bilateral investment agreements with 17 countries
· Low set up and operating costs
· Highly qualified, well-educated and multilingual labour force
· Double tax treaties with 40 countries
· Freedom of movement of foreign currency
· Availability of Freezone Αrea
· Efficient legal, accounting and banking services
· European standard of living
· Pleasant climate and agreeable topography
· Excellent telecommunications
· Democratic country with a free market economy
· Political stability
· Low crime rate: one of the lowest in Europe

Should you require any further information regarding foreign investments in Cyprus, please contact the Foreign Investors Service Centre (6 Andrea Araouzou Street, 1421 Nicosia, Cyprus – Tel.: +357 22 867239 / 867143, Fax: +357 22 375541, e-mail: ids@mcit.gov.cy).

The Dynamism of the Cyprus Economy

Cyprus’ economy is market-oriented, with the private sector playing the dominant role in the production sphere. The government’s role focuses on the creation of a favourable entrepreneurial climate, through the maintenance of conditions of macroeconomic stability, the upgrading of socio-economic and legal infrastructure, and the pursuit of sustainable development.

The economy of Cyprus has exhibited dynamism and flexibility throughout the period since the island’s independence. In spite of the 1974 Turkish military invasion and its devastating aftermath, the economy managed to recover and attain some major accomplishments. It is no coincidence that a few years after the invasion, the international Press described the Cypriot economy’s leap forward as a real “economic miracle”.

Some of the accomplishments are the following:

• An impressive real annual rate of growth of GDP.

• The rapid growth of GDP accompanied by the creation of a large number of employment opportunities and the consolidation of conditions of full employment.

• The satisfactory growth performance accompanied by conditions of relative internal and external economic stability.

• The rapid rate of growth was accompanied by a profound restructuring of the economy from the sectoral point of view.

Cyprus – European Union

As of 1 May 2004, Cyprus is a full member state of the European Union.

Formal relations with the EU date back to 1972 with the signing of the Association Agreement which was basically a trade agreement. In 1987, a Customs Union Agreement was signed between Cyprus and the EU. The relations of Cyprus and the EU entered into a new dimension with the application of Cyprus for full membership to the Union in July 1990. Accession negotiations began in 1998 and were successfully concluded at the end of 2002. On 16 April 2003, Cyprus singed, along with the other nine acceding countries, the Treaty of Accession to the European Union, paving the way towards full EU membership on 1 May 2004.

The EU constitutes Cyprus' main trading partner absorbing more than 55% of its domestic exports and supplying around 50% of the total imports to Cyprus. Furthermore, around 70% of tourists visiting the island originate from EU member states.

In addition, Cyprus maintains close political and trading ties with the countries of the Middle East region, both the Arab world and Israel, as well as with the former socialist countries of Central and Eastern Europe. In that sense, as an EU member state Cyprus will become a bridge connecting the united Europe and the Middle East.

Cyprus – A Shipping Centre

Cyprus has also developed into an international shipping centre for the conduct of maritime activities and the rendering of shipping services worldwide. It ranks sixth in the list of leading maritime nations, with a fleet of 2,700 vessels of over 26 million gross tonnages.

This development is attributed to the comparative advantages of Cyprus as well as the excellent services offered to the sector. However, Cyprus cannot be regarded as an opportunity flag state. The government of the Republic of Cyprus has ratified major international conventions on maritime safety, the prevention of sea pollution, the training, certification and watch-keeping of seafarers, and the limitation of ship-owners' civil liability in case of oil pollution damage, as well as conventions on maritime labour.

Over the last two years, the legislation ruling merchant shipping has been significantly modernised, particularly through the ratification of all major international maritime conventions and the adoption of the acquis communautaire.

Cyprus has also set up a network of inspectors of Cyprus’ ships, which is expanding constantly, now amounting to 35 inspectors covering 25 ports in 14 countries. These measures aim at improving the safety conditions of Cypriot ships.

Department of Registrar of Companies and Official Receiver

Central Bank of Cyprus

Cyprus Stock Exchange

The Cyprus Chamber of Commerce and Industry

Employers and Industrialists Federation

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