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Whether it be its strategic location, the sophisticated infrastructure, the highly-educated workforce or the favourable tax system, Cyprus has a great deal to offer for businesses. But navigating the complex regulatory environment can be challenging without the right help on board.
Cyprus has a modern, free-market, service-based economy giving international investors and domestic businesses confidence to invest, grow and prosper. The tertiary sector of services is considered the backbone of the Cyprus economy and with a high income per capita, the consumer market is particularly strong.
But the strong level of consumerism and a healthy national GDP hasn’t impacted the cost of doing business, and Cyprus offers one of the lowest set up and operating costs within the EU. There is a significant number of multinational companies and international banking units already operating in Cyprus, further enhancing the productive and positive nature of the national economy. The average economic freedom score is 69.0, making it one of the freest in the Heritage Foundation 2013 Index.
But for any business to succeed, it needs the support and assistance of a local team who are familiar with the investment climate. With low rankings on many of the Doing Business rankings - compiled by the World Bank and International Finance Corporation - having prior knowledge of the investment climate is crucial.
Starting a Business
Starting a business requires the navigation of six procedures. First and foremost, companies must get initial approval from the Registrar of Companies. A memorandum and articles of association should then be prepared and submitted to the companies section of the Department of Registrar of Companies and Official Receiver, before registering with the Ministry of Commerce for tax, the Ministry of Finance for VAT and Ministry of Labor for social security contributions.
Dealing with Construction Permits
Property considerations can be time consuming and costly in Cyprus. Getting construction permits alone takes an average of 677 days, which far supersedes the OECD average and the average in Eastern Europe and Central Asia. Although there are only nine procedures involved in the process, these often get bogged down at a local level, such as with the town planning departments or with the municipalities.
Getting Electricity
Electrical connections are administered and carried out by the Electric Authority of Cyprus, which will give an estimate, inspect the premises and complete the external connection works and meter installation. The process takes 247 days on average to complete.
Registering Property
Cyprus only just makes it into the top 100 countries in the world for ease of registering property, ranked in 99th place by the World Bank and IFC. The legal aspects must first be administered by a lawyer before a contract is submitted at the Department of Lands and Surveys, all taxes are paid and a declaration of transfer is submitted at the Land Registry.
Getting Credit
Cyprus is home to a strong tertiary sector, however, the recent bailout from the European Union is likely to change the ease of getting credit, with strict restrictions placed on major banks in the country which have hampered the flow of capital.
Protecting Investors
The World Bank and IFC rank Cyprus in the top 40 economies in the world for investor protection, thanks to strong performances on key indicators, such as the extent of disclosure index and the ease of shareholder suits.
Paying Taxes
There are a massive 28 corporate tax payments to be made each year in Cyprus which can take up to an average of 147 hours of the company’s time. There are four corporate income tax payments to be made and 12 social insurance payments. Despite the company tax rate being low compared to other EU nations, the time it takes to process fiscal payments certainly makes the country less competitive.
Trading Across Borders
As an island economy Cyprus has kept the cost of trading across borders down. It takes less than a week to both import and export, although there are seven documents to file when shipping either way.
Enforcing Contracts and Resolving Insolvency
It takes well over two years to enforce a contract and requires navigating 43 difficult procedures. Resolving insolvency, on the other hand, is a more streamlined endeavour, taking only 1.5 years compared to over two in most other Eastern European nations.
Culture
Respect, hospitality and personal trust are the cornerstones of the Cypriot business environment. Cyprus has long experienced international trade in one form or another and businesspeople are international in their outlook and shrewd and knowledgeable in their negotiations. Trust is the key, so be sure to build personal relationships.
TMF Group
We have the local knowledge to help you navigate these minefields. Whether you want to set up in Cyprus or just want to streamline your Cypriot operations, talk to us.