Since the 1970s, Cyprus has been a prominent international business centre, attracting business and investment from all over the world. The accession of Cyprus into the European Union in 2004 and the adoption of the EU regulatory requirements regarding international business have cemented the reputation of Cyprus as a well-established international financial centre and one of the most valued venues for setting up a company.

In January 2008 the euro became the island’s currency, further integrating the Cypriot economy with the EU’s core. Cyprus’ 2012 EU presidency provides an excellent opportunity to enhance its investment potential to attract foreign investment, increase international business, encourage trade and boost tourism.

In recent years, while the effects of the international recession have posed significant challenges for the world economy, Cyprus has experienced a higher growth rate than the EU average and achieved sustainable macroeconomic and price stability – thanks to its policy of maintaining conditions where business can be conducted without red tape, high taxes and unproductive attitudes, thereby fostering a strong and vibrant economy.

Under the present financial crisis, investors seek confidence, safety and security – credentials that Cyprus certainly has.

Ideal for business
Cyprus lies at the crossroads of three continents, at Europe’s most south-eastern outpost. It is close to the busy shipping and air routes linking Europe with the Arab world and the Far East, representing a strategic hub for business activities in the region.

The island has a favourable corporate tax rate at 10 percent, the lowest in the European Union, offers freedom from tax on dividends and capital gains from investments and a wide network of double taxation treaties, while Cyprus provides an ideal environment for holding companies.

This unique combination gives a number of attractive planning opportunities and allows tax advisers to use Cyprus in a variety of international structures to effectively reduce the total tax burden of their clients.
Cyprus may be used not only as an effective jurisdiction for routing investments within the European Union by third-country investors, but also as a portal for investment outside the EU, particularly into the rapidly growing economies of Central and Eastern Europe, India, China, the MENA region and the Gulf area. It is therefore not surprising that Cyprus is considered as the gateway to Europe.

As an international business centre, Cyprus also offers a highly educated workforce with 47.5 percent of 25-34 year olds holding university degrees. English is the language of business and commerce and French, German and Russian are widely spoken, especially by graduates of overseas universities.

Cyprus offers a high standard of living with a well organised banking system, an advanced telecommunications network and a modern transport infrastructure, including two multi-purpose ports and two new international airports.

All this makes the country one of the world’s most globally orientated and business-friendly environments for establishing corporate structures. The island now hosts more than 237,000 registered companies, including businesses hailing from most members of the EU, as well as Russia, Ukraine, the US, Canada, China, India and countries from the Middle East and North Africa.

Growth opportunities
Cyprus’ investment policy is very liberal and offers significant benefits and many niche opportunities to investors across a number of selected sectors. It actively supports the development of high value-added, knowledge and innovation-based sectors that augment the island’s innovative capacity, international competitiveness and status as a knowledge economy.

The Cyprus Investment Promotion Agency (CIPA), as the national agency for attracting foreign investments in Cyprus takes a lead role and actively promotes Cyprus as an attractive investment destination. CIPA is striving to attract investment in areas such as banking and financial services, shipping, energy, professional services, wellness tourism, education, ICT, R&D and medical services.

Moreover, CIPA is advocating and promoting legal and administrative reforms to remove hurdles and strengthen the investment environment in Cyprus. CIPA also provides aftercare services to foreign investors and supports the implementation of key large-scale infrastructure and development projects which will further improve the competitiveness of Cyprus’ economy.

Cyprus’ score of 73.3 percent in the 2011 Index of Economic Freedom, makes the island the 18th most-liberated economy internationally. This score is higher than last year, when Cyprus was ranked 24th, with 70.9 percent.

Banking and financial Infrastructure
As Cyprus emerges as one of the leading international financial centres, the island’s banking sector has gone from strength to strength. There are 41 banks in Cyprus – 15 of them Cyprus-incorporated – and none of them required direct government support during the financial crisis. Instead they were praised for holding capital and liquidity ratios well above the regulatory minimum, a factor that helped retain investor confidence through the crisis.

The Cypriot banking system is internationally recognised for its conservative approach, based on sound banking fundamentals. Holding strong deposit bases, with no reliance on interbank lending, the Cypriot banks’ effective and prudent risk management policies have created an environment of stability and confidence for financial services operators and investors conducting business on, or from, the island.

The two main banks of Cyprus successfully passed the 2011 EU-wide stress testing exercise, reaffirming the solid financial fundamentals of the banks, which by maintaining adequate capital ratios, strong liquidity and profitability successfully endured even the most adverse stress scenarios.

The Cypriot government is very keen to offer and maintain a tax-efficient and relatively low-cost base for foreign banks and financial firms looking for an EU-compliant yet flexible domicile, that provides access to the European, former Soviet republics and other nearby markets. Cyprus has long enjoyed an excellent reputation as a top-tier financial jurisdiction and today the island is seeking to expand its role as a location in which to establish investment funds.

The new tax and regulatory framework set to attract funds has made the island a very competitive jurisdiction. Against the backdrop of unprecedented EU capital market integration, fund managers wishing to reap the benefits of cross-border activity are starting to look at Cyprus as a credible alternative to more expensive traditional fund jurisdictions. Cyprus is ideally placed to act as a springboard to raise funds within the European Union and maximise returns for investors at low cost and enhanced tax efficiency.

Shipping
Cyprus enjoys an international reputation as a shipping centre in Europe. The island’s merchant fleet has been growing steadily, reaching a top-three position in Europe and a top-10 global ranking. Cyprus’ unique geographical position at the juncture of three continents, its advanced infrastructure and services, and its attractive taxation advantages, make it an ideal location for ship owning, ship management and ancillary shipping-related companies. Shipping accounts for four percent of Cyprus’ GDP and there are more than 2,300 vessels with 46 million gross tonnage, making it one of the largest national shipping associations in the world.

The approval by the European Union of a fully revised and upgraded Cyprus Shipping Taxation System is considered a huge success for Cyprus and European shipping. With the new system, Cyprus covers the three basic international shipping activities offered today (namely ship-owning, ship-management and the chartering of vessels), making Cyprus the shipping metropolis of Europe.

Under the new Cyprus ‘tonnage tax’ system, ship-owners, charterers and managers are exempted from income tax or any other tax on dividends paid to shareholders, on interest earned on working capital, and on any profit made from the sale of a ship.

Corporate service providers
The World Bank Group’s 2011 ‘Doing Business’ report ranks Cyprus 37th out of 183 nations in terms of overall ease of doing business, and 15th among the EU member states.

The Cypriot professional services sector is able to support all aspects of business, including accounting, banking, international business and financial services, business consulting, computing and information technology, design, education, engineering, legal services, shipping, private health care, filming, risk management, sales and marketing, travel and tourism, real estate, and conferencing, at very competitive rates.
The high level of education, combined with the high ethics, professional standards and excellent training that exist in Cyprus, are confirmed by the fact that the Institute of Chartered Accountants in England and Wales (ICAEW) and the Chartered Institute of Management Accountants (CIMA) have chosen Cyprus as the first country in the world outside the UK to train ICAEW and CIMA accountants.

Major international accounting companies and various local ones are represented by partners with in-depth knowledge of the tax and accounting environment of Cyprus, and various law firms can assist foreign businesses with both set-up and contractual formalities. For any investment to succeed, it needs the support and advice of local professionals.

Company formation
Attracting new businesses to Cyprus is part of the government’s economic policy. Cyprus offers significant competitive advantages and a favourable business environment to investors.

International corporations may establish a business in Cyprus on equal terms with local companies. Administrative procedures for establishing a company have been simplified, reflecting the importance placed on the country’s development as an international business centre.

PSC Cyprus serves companies and entrepreneurs, whether operating on the island or in other European Union member states, as a single point of contact when enquiring about Cyprus or pursuing their business aspirations in the country. It provides comprehensive information relating to the procedures and formalities required for access to Cyprus and the exercise of business activities from the island, as well as online submission and progress-tracking of applications and decisions.

Apart from general information and guidance to investors, areas where assistance is provided also include company, VAT and income tax registration, as well as temporary residence and employment permits.

Persuasive package
Cyprus has worked hard on building its reputation. It offers an EU venue with easy access to the main regional markets. Many important  reforms have been made to legal, taxation and financial policies to fulfil investors’ expectations and bolster macroeconomic stability.

Recently the Cypriot government introduced two important packages of measures aimed at improving public finances and fiscal consolidation: the first of these packages was approved by parliament in August 2011.
The island, with excellent infrastructure, an open free-market economy, low corporate tax and good long-standing relations with Central and Eastern Europe as well as the Middle East, also enjoys more than 300 days of sunshine a year and an enviable quality of life.

With all the right elements firmly in place, Cyprus will continue to be ideally positioned to expand its reputation as an international centre of business excellence well into the next decade. International companies and investors, who are seeking a European bridgehead and a worthwhile business location, are invited to become part of the robust economy of Cyprus.

For more information please contact the Cyprus Trade Centre in London: www.cyprustrade.com; www.cyprusmeansbusiness.com