 The
Turkish invasion of 1974, which left some thirty seven
per cent of the northern part of the island under
Turkish occupation, did little to interrupt the unparalleled
period of growth, prosperity and commercial expansion
which followed independence. However, due to the authorities`
expansionary economic policy and the initiative and
enterprising spirit of the private sector, social
and political security continue to form the cornerstone
of Cypriot society. Indeed, although the Cyprus
problem has not yet been solved, the rule of law and
political stability in the Republic of Cyprus
are guaranteed by the efficient functioning of democratic
institutions and by dynamic economic development.
Today the authorities are demonstrating more clearly
than ever before that they are seriously committed
to refining and expanding the legislation and regulations
to secure foreign involvement in the island`s economy.
Therefore, an extremely favourable environment for
all forms of inward business activity and international
foreign investment has been created to ensure that
they enjoy an infrastructure which has the maximum
potential for success and growth. Consequently, applications
for the registration of international business companies
have always been handled with speed and efficiency
by all the relevant authorities.
 The
number of international business companies being registered
annually in Cyprus continues to grow and so
does the volume of companies which are incorporated
abroad and register a place of business or branch
in the island. Currently, there are more than twenty
thousand international entities registered in Cyprus
and some one thousand two hundred of them maintain
fully-fledged offices in the island.
Accordingly, it is anticipated that the status of
the island as a major international business centre
will continue to expand and flourish
Cyprus
as an ideal location
Cyprus compares extremely favourably with similar
jurisdictions because of the numerous advantages which
it offers. Many of these advantages are inherent in
the country`s geographical position, while others
have been tailored to suit the demands of foreign
investors and international entities. The result is
a most attractive package of incentives which covers
every facet of business life.
Prominent among these incentives are straightforward
registration procedures, constructive administrative
measures, an impressive range of double taxation treaties
and tax benefits. However the authorities have successfully
maintained a balance so that the creation of a favourable
commercial environment has not disturbed the impeccable
reputation enjoyed by all international businesses
on the island. Clearly, the fact that the island is
a low-tax jurisdiction and not a tax haven is material
and ensures that these businesses do not attract the
suspicion of foreign revenue or tax authorities.
The tremendous growth in the number of foreigners
participating in the Cypriot economy is evidence of
the enormous appeal which Cyprus has to international
investors. Certainly, there are few locations which
are able to offer the same wide-ranging incentives
that are offered in Cyprus with warmth, hospitality
and pride.
The following advantages are perhaps the
most appealing:
Stability
Though located in the often volatile Eastern Mediterranean
area, Cyprus is a centre of democracy and stability
where businessmen from all nations are able to conduct
their affairs in an harmonious and friendly environment.
The rule of law is a well-entrenched principle which
is endorsed by free elections and a European-style
parliamentary system. In addition, the authorities`
desire to assist foreign businesses is strengthened
by the friendly and enterprising spirit of the Cypriot
people themselves.
Geographic
location
Cyprus is privileged to enjoy what is possibly one
of the most strategic geographical locations in the
world. The island is situated at the crossroads of
Europe, Asia and Africa and also forms a gateway to
the oil-rich Arab states and the rest of the Middle
East. It is, therefore, a convenient springboard for
business activities in any of the trade centres located
in those areas.
In addition, the island shares the same time zone
as other major centres in the area and is also within
easy travelling distance of the rest of Europe and
the Middle East. The international airports at Larnaca
and Paphos offer daily flights to all major destinations
in these areas.
Taxation
All Cypriot international business entities are free
to take advantage of the many tax benefits which the
authorities have designed specifically to provide
maximum profit potential. Chief among these benefits
are the low tax rate applicable to the net profits
earned by international business companies, and the
total tax exemption for international partnerships.
Foreign personnel enjoy equally favourable tax rates.
In addition, tax incentives have been introduced to
attract foreign investment in respect of certain local
companies and projects. The various tax benefits are
examined in more detail in sections 4 and 9 of our
brochure: "Business & Investment Opportunities
in Cyprus."
Double
taxation treaties
 Cyprus
has concluded double taxation treaties with more than
40 countries which provide important tax advantages.
Treaties with the Central and Eastern European countries,
China and India contain no anti-avoidance provisions
and Cypriot international business companies may therefore
be used beneficially as holding, licensing and finance
investment vehicles in those countries. Of the treaties
now in force, only those with Canada, Denmark, Germany,
France, Sweden, the UK and the USA contain limitation
of benefits articles. Canada and the USA exclude Cypriot
international business companies from all the provisions
of the relevant treaties, but in all other treaties
Cypriot international business companies, while denied
the reduced rates of withholding taxes, may still
claim the benefit of other treaty provisions such
as the permanent establishment clause or tax sparing
credits. The "limitation of benefits" article
contained in the above treaties only affects the flow
of income from these countries to Cyprus and
not income flows from Cyprus to other countries.
The treaties and some of the ways in which they can
be put to beneficial use from a tax planning point
of view are discussed in section 21 of our brochure
" Business & Investment Opportunities in
Cyprus". .
Respectability
While the policy of the authorities has been in favour
of assisting and promoting all business sectors in
Cyprus, this has not operated to affect adversely
their respectability or good standing in the eyes
of the international business community. The framework
of control placed on most business activities serves
to boost the reputation of all Cyprus-based
entities, while also allowing them to operate in an
environment which is as free from burdensome bureaucratic
restrictions as possible.
In many sectors no specific legislation has been
passed to give international business entities special
advantages or benefits. For this reason, international
business companies, international banking units (IBUs),
captive insurance companies and international trusts
are subject to the same laws and regulations as those
pertaining to their local counterparts: there can
be no suggestion that they operate in accordance with
inferior standards or in an unprofessional manner.
Registration
procedures
The procedure for the incorporation of a Cyprus
legal entity can be completed within a period of two
weeks at the most and enables the legal entity to
start business forthwith. Applications for registration
of captive insurance companies, international banking
units and shipping companies as well as all other
forms of international business entities are favourably
considered. In certain instances, these companies
may also be exempt from many of the regulations applying
to their local counterparts, although not to an extent
that will endanger their respectability.
Commercial
infrastructure
 The
commercial infrastructure of Cyprus is well-developed.
It offers a civilised and respectable environment,
in which pleasant working and accommodation conditions
are combined with low operational costs and living
expenses.
Not only are there many well-qualified lawyers who
are experienced in company law and tax planning but
also a number of international accounting firms are
represented in Cyprus as well as many engineering,
insurance, trust and ship management companies. Furthermore,
there is an ample supply of university graduates who
are available to work in all sectors of the economy.
The English legal system, practice and procedures
which the island acquired during the period of British
rule are firmly embodied in the fabric of almost every
commercial sector. As these procedures are widely
used in most English speaking countries and certainly
in the majority of former British colonies, they are
usually readily understood by foreigners who have
registered Cypriot international business companies
or are engaged in international tax planning exercises
in the island. Although the official languages of
the Republic are Greek and Turkish, English is spoken
by the majority of the population. It is also a language
which is taught extensively in schools and is widely
used in commerce, industry and administration.
 Telecommunications
in Cyprus are of a very high standard and Cyprus
prides itself as one of the most developed countries
in this area. Nearly 99% of the world`s telephones
in 197 countries can be reached automatically from
Cyprus, while the rest of the world is accessible
via the operators. The telefax service is available
to all countries operating such a service, and the
telex service is provided to almost all countries
of the world. Audiotex, video conferencing, videotext,
electronic mail, message handling system X.400 and
voice mail services are also available.
Cyprus is served by two international airports
situated near Larnaca and Paphos. They handle about
360 scheduled flights operated each week by 33 international
airlines, as well as flights operated by 28 charter
airlines. The island is rapidly becoming a major international
transit station for commercial air transportation
with excellent conditions in the entire region. Seaborne
traffic is served by the two multi-purpose ports of
Limassol and Larnaca which are being used increasingly
as regional warehouse, distribution and container
transhipment centres. About 100 shipping lines include
Cyprus in their regular schedules to and from
six continents. More than 5,500 ships totalling 15
million net registered tons call at Cypriot ports
every year.
International
relations
 The
promotion of good relations with neighbouring states
and countries further abroad is an express policy
of the Republic of Cyprus and every effort
is made to ensure that close connections are maintained
with all international organisations. Cyprus
maintains extensive diplomatic relations and is a
member of the United Nations, the Council of Europe,
the Commonwealth, the World Bank, the International
Monetary Fund, and the Non-Aligned Group. It is also
a signatory to various international conventions and
bilateral co-operation agreements.
An association agreement was signed in 1972 between
Cyprus and the European Union which provided for the
abolition of all barriers to trade and the establishment
of a customs union in two stages: the first was completed
in 1997 and the second is due to be completed by 2003,
by which time the free and unrestricted movement of
industrial and agricultural products between the member
states of the EU and Cyprus, the abolition of all
quantitative restrictions and the Common Customs Tariff
will be fully effective. In July 1990 Cyprus applied
for full membership of the European Union: the accession
process began in March 1998 and Cyprus hopes to complete
it by 2003.
Exchange
control
A rough guide is approximately CYP 50 - 150 per year
depending on the size of the property. This tax is
for refuse collection, street lighting, sewerage,
etc. The basic utilities, electricity, water and telephone
are payable individually and in accordance with the
consumption based on a meter reading.
Confidentiality
Cyprus based entities have been increasingly expanding
into international markets. There are already numerous
multinational companies operating in the island and
Cypriot businesses maintain good links with markets
abroad. Naturally, the elements of respectability
and confidentiality assist in foreign expansion and
this is supported by the island`s international relations.
Low
costs
The incorporation costs of all Cypriot entities are
quite reasonable when compared with those of other
jurisdictions. In addition, all other administrative
and official fees and levies are inexpensive. While
office space and living accommodation is both plentiful
and of a high standard, it is not expensive. The overheads
of all businesses can therefore usually be kept at
a conservatively low figure.
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