Doing Business In: Cyprus’ contemporary corporate and commercial landscape
Elias Neocleous & Co LLC
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Before delving into Cyprus’ contemporary corporate and commercial landscape, it is essential to understand the historical context that has shaped the country as a business hub. The island’s strategic location has made it a sought-after territory throughout history, with influences from various civilizations. The British colonial era, which lasted from 1878 to 1960, further impacted Cyprus’s legal and economic structures.
In 1960, Cyprus gained independence, and its journey towards establishing a stable and thriving business environment began. The subsequent decades saw the development of a diversified economy, with a focus on services, trade, and tourism. Joining the European Union in 2004 and adopting the euro in 2008 marked significant milestones, reinforcing Cyprus’s position in the global economic arena.
An ideal relocation destination
Cyprus boasts a diverse economy, and in November 2024, ratings agency Moody’s upgraded the island’s credit rating to ‘A’, assigning it a score of ‘A3’. This marks Cyprus’ return to the ‘A’ grade for the first time since 2011. Moody’s credited this upgrade to the country’s significant reduction in its public debt ratio since its peak in 2020, noting that the country ranks among those with the largest debt ratio reductions globally.
According to the state statistical service, Cyprus saw growth across several key economic sectors in 2024. The service’s latest report, covering economic trends from January to December 2024, included a comparison of data from the past four years, with figures available up to February 11, 2025. Manufacturing production grew by 1.8% from January to November 2024 compared to the same period in 2023. Approved building permits increased by 18.0%, totalling 1.72 million square meters between January and August 2024. Vehicle registrations also rose by 9.1%, with private saloon cars up by 11.2% and light trucks increasing by 36.1%. The Consumer Price Index saw a 1.8% rise compared to the previous year. Tourism showed positive growth, with tourist arrivals reaching 4,040,200, marking a 5.1% increase from 2023.
Additionally, in an economic forecast by the European Commission, “Cyprus’ growth is expected to remain robust in 2025 and 2026. Inflation is projected to decelerate and wage growth to stay high, boosting household purchasing power and consumption. The government budget balance is set to remain in surplus, supported by continued strong growth in revenue and moderate increases in expenditure.”
Cyprus’ strong economic performance, coupled with its improving credit rating, makes it an ideal relocation destination for individuals and businesses alike. The island’s diverse economy offers opportunities across key sectors such as manufacturing, real estate, and tourism, all of which have shown significant growth in recent years. With a stable fiscal environment, low inflation projections, and a continued surplus in the government budget, Cyprus presents a secure and attractive option for those seeking to relocate. The growth in wages and household purchasing power, as forecasted by the European Commission, further enhances the appeal of Cyprus as a destination for both expatriates and investors. Its robust economy, favourable business conditions, and high quality of life make Cyprus a compelling choice for relocation.
Cyprus’s tax regime is a significant driver of its appeal to global businesses.
The country’s tax system is designed to encourage ongoing investment and promote economic growth. A range of incentives contribute to the creation of a tax-efficient environment for businesses operating in Cyprus.
Cyprus offers a highly attractive tax regime for global businesses, with a low 12.5% corporate tax rate, no withholding tax on dividends, and over 60 double taxation treaties. These features make the island a compelling choice for companies looking to operate and invest internationally, providing significant opportunities for tax optimisation.
In addition to its favourable corporate tax environment, Cyprus provides various incentives to foster innovation. The island offers tax exemptions for research and development (R&D) activities and features a beneficial IP Box regime. Under this scheme, qualifying companies can benefit from a reduced corporate tax rate on income generated from intellectual property such as patents, trademarks, copyrights, and other intangible assets, making it an ideal location for tech-driven startups.
Cyprus also exempts capital gains tax on the sale of shares, enhancing the attractiveness of the island for investors. Furthermore, businesses enjoy favourable tax treatment on dividends, which further incentivizes investment in the country.
Regarding VAT, Cyprus imposes a standard rate of 19%, with reduced rates for certain sectors, including tourism. Its strategic location within the EU, combined with a business-friendly regulatory environment, strengthens Cyprus’ position as a prime destination for international enterprises. For expatriates, Cyprus offers appealing tax benefits, such as flat tax rates for high earners and exemptions on certain foreign income. These incentives make the country an even more attractive option for professionals seeking a favourable tax environment.
Banking and Financial Services: Expansion and Consolidation
The banking and financial services sector plays a pivotal role in Cyprus’s corporate and commercial landscape, with both local and international banks operating within the country. The sector has evolved to provide a comprehensive suite of services, from traditional banking products to sophisticated financial instruments and wealth management services.
A key development in 2025 is Alpha Bank’s acquisition of AstroBank’s banking operations in Cyprus for over €205 million, a strategic move that strengthens Alpha Bank Group’s presence in the Cypriot market. The transaction, executed through Alpha Bank Cyprus Ltd, is set to be finalized in the fourth quarter of 2025, subject to regulatory approvals.
This acquisition marks a significant expansion for Alpha Bank Cyprus, increasing its loan portfolio by more than 60%, deposits by approximately 70%, and total assets by around 65%. As a result, Alpha Bank Cyprus is positioned to become the third-largest bank in the country, with a market share of around 10% in total assets.
With Cyprus experiencing strong real GDP growth, the country remains an attractive market for financial institutions seeking expansion. The deal also highlights the growing consolidation trend in the Cypriot banking sector, ensuring a more resilient and competitive financial landscape.
Corporate governance and legal framework
Cyprus’s legal system is based on English common law principles, providing a familiar and transparent legal environment for investors. The Companies Law, Cap. 113, as amended, governs the establishment and operation of companies in Cyprus. The Cyprus legal system ensures protection of shareholders’ rights, with mechanisms in place for dispute resolution and corporate governance. Companies in Cyprus typically adopt a one-tier board structure, with a board of directors responsible for the overall management and decision-making process. The emphasis on accountability and transparency aligns with international standards, fostering investor confidence.
Furthermore, Cyprus offers an efficient and streamlined company registration process. The Cyprus Registrar of Companies, operating under the Ministry of Energy, Commerce, and Industry, oversees the registration and regulation of companies. The process is known for its simplicity and speed, facilitating swift establishment and commencement of business operations.
Projects & initiatives
€1.3 billion infrastructure investment plan for 2025
The government’s 2025 infrastructure development plan, valued at over €1.3 billion, includes a series of major projects aimed at enhancing connectivity and addressing transportation challenges across Cyprus. In Nicosia, the next phases of the ring road will continue with a budget of €120 million, while the Akaki-Astromeritis motorway is in its final planning stages, with an estimated cost of €107 million. Limassol will see extensive improvements to ease traffic congestion, with projects exceeding €250 million, including the first phase of the Northern Bypass.
Significant developments are also planned in other regions. The second phase of the Saittas motorway, valued at €65 million, is set to proceed, alongside the much-anticipated Larnaca Port and Marina project, which will be implemented in collaboration with local authorities. The Paphos to Polis Chrysochous motorway will be developed as a four-lane highway in two phases, with total costs reaching €330 million. Meanwhile, the Free Famagusta District will see infrastructure investments worth €60 million, including the completion of the Liopetri River project by summer 2025.
Further expansions include a €50 million upgrade to Latsi harbour and the construction of an industrial port at Vasilikos, a large-scale project budgeted at €350 million. These strategic investments reflect the government’s commitment to modernising infrastructure, improving transportation networks, and supporting economic growth across the island.
Renewable energy and environmental sustainability
Numerous opportunities for business ventures also exist in relation to the introduction of the EU Green Deal and the attainment of its sustainability objectives. Under the plan, greenhouse gas emissions are set to be reduced with key policies including promotion of natural gas and renewable energy sources, increase in carbon sink, improvements of energy efficiency in buildings, industry and infrastructure, and reduction of emissions in the transport, agricultural and waste sector. Aligning with EU policies on reducing greenhouse gas emissions from power generation is crucial for Cyprus. As the country moves toward electricity market liberalisation, significant growth in Renewable Energy Sources (RES) is anticipated in the coming years. In 2020, renewable energy technologies accounted for approximately 11.7% (340 MW) of the island’s total electricity production. Cyprus aims to double its share of renewable energy to 23% between 2021 and 2030. According to the Cyprus Renewable Energy Roadmap (CERA), the country is expected to generate between 25% and 40% of its total electricity from solar power by 2030, highlighting its commitment to sustainable energy development.
Shipping
The shipping sector continues to perform well, and its favourable tax tonnage scheme was extended until at least 2029. Further Cyprus has committed to the ‘greening’ of the industry, and this too is pushing boundaries in developing new technologies within the ambit of the EU Green deal and sustainability initiatives.
All of these initiatives and developments are filled with potential for market growth and activity, and therefore even in these challenging times, the outlook for legal and other services to support M & A transaction opportunities in Cyprus is promising.
https://cyprus-mail.com/2025/02/13/cyprus-reports-growth-in-key-economic-sectors-for-2024
https://cyprus-mail.com/2024/11/23/cyprus-credit-rating-restored-to-a-grade-by-moodys
https://in-cyprus.philenews.com/insider/cyprus-infrastructure-projects-2025-billion-euros/