Business Relocation to Cyprus in 2023: tax and economic advantages for companies

Economic and political swings in countries worldwide force entrepreneurs to relocate their businesses to more stable jurisdictions. Cyprus has historically attracted foreign investors and businesses, creating a favorable environment for them. And suppose you are considering relocating your company to the island. In that case, we will go through all the nuances together, understand why Cyprus is very favorable for doing business, and look at step-by-step instructions on how to open a company in Cyprus.

Many companies are looking for stable jurisdictions and reliable ways to minimize risks with the unfolding economic crisis of 2023, political reshuffling in many countries, rising business taxes, and financial instability. Therefore, when relocating a company, Cyprus is now high on the list of preferred jurisdictions for business relocation.

In this article, we will look at why business relocation to Cyprus in 2023 is at the peak of its popularity, explore the advantages of the Cyprus tax system for businesses, and consider the economic and geographical factors that make this island an attractive investment destination. In addition, we will provide step-by-step instructions that will help you to relocate your business to Cyprus successfully.

So, let’s begin!

The popularity of business relocation to Cyprus in the Crisis 2023

As we have said more than once, about 1000 new companies are registered in Cyprus every year. However, in 2023 this statistic is no longer relevant as it has shown a significant increase. According to the Cyprus Statistical Service, between January and June 2023, more than 6000 new companies were registered on the island. Today, 1000 new companies are registered not per year but per month!

This growth is due to the economic crisis of 2023, changes in tax rates, and political changes in the world, which has made relocating businesses to Cyprus particularly popular among companies seeking a stable and profitable location for their activities. The impact of the crisis spans multiple markets, causing uncertainty and unpredictability. Cyprus presents an attractive and sustainable business prospect in such an environment due to its continued tax benefits, economic stability, and geographical location.

Cyprus offers tax incentives for companies, including low tax rates on profits, dividends, and capital payments. For example, the preferential IP-box regime allows companies to reduce income tax to as little as 2,5% under certain conditions. This makes Cyprus an attractive destination for international companies seeking to minimize their tax liabilities, especially in the IT and intellectual property sectors.

For example, by 2023, around 450 startups and scalable companies are already on the island, with a total value of more than €3.7 billion.

In addition, the financial system’s stability, high level of property rights protection, British law, and confidence in the economic future create a favorable environment for business and investment.

The geographical location of Cyprus is another factor that makes this country a magnet for businesses. Cyprus is located at the junction of Europe, Asia, and Africa, which provides convenient trade links and access to major markets.

The country also offers a variety of investment opportunities, including real estate, tourism, financial services, and the information technology sector. This creates an array of choices for entrepreneurs and companies looking for the best way to optimize their business in times of crisis.

This island of Aphrodite’s national treasure offers companies favorable conditions to minimize risks and ensure the stability of their business in times of crisis. Thousands of companies have found their «safe harbor» in this jurisdiction. But we will not be unsubstantiated and will look closely at all the key factors.

Tax advantages of Cyprus for business

The Cyprus tax system offers several favorable provisions for companies and investors, creating a suitable environment for business development and minimizing tax liabilities.

Cyprus offers one of the lowest corporate tax rates in Europe. The corporate income tax is only 12,5%, making it one of the most attractive for entrepreneurs and companies. For comparison: in Hungary, the corporate income tax is 9%. However, starting in 2024, Hungary will increase it to 15% for large companies; Lithuania also has a standard rate of 15%; on average, European countries set the corporate income tax rate at 21,7%).

The island also offers special tax incentives for companies dealing with intellectual property. According to the IP-Box program, up to 80% of profits from qualified assets (e.g., software) are tax-free.

Double tax treaties with 67 countries prevent double taxation and reduce the tax burden for companies with international operations.

In addition, investors are exempt from tax on dividends and income from foreign subsidiaries. Cyprus does not tax inheritances and gifts, provides tax vacations, and offers favorable conditions for non-domiciled residents.

IP-Box program with 2,5% rate for IT companies

IP-Box is a favorable tax regime for companies dealing with intellectual property, including IT development. This program significantly reduces the tax burden on profits from qualifying assets such as software, mobile applications, games, patents, and other intellectual products.

The main benefit is that profits from qualifying assets are taxed at a rate of 2,5% if all conditions are met. This allows IT companies to significantly reduce tax costs and increase the efficiency of their business.

In addition, this preferential regime helps attract talent and investors from all over the world, making Cyprus an attractive location for developing high-tech projects and start-ups.

Please note! In many developed countries that have implemented IP-Box in their jurisdictions, the rates of return on qualifying assets are significantly higher: in Luxembourg — 5,76%, in the Netherlands — 7%, and in Belgium — 15,8%.

You can learn more about IP-Box in Cyprus in our expert article.

Geographical location and access to international markets

Cyprus is located at the crossroads of Europe, Asia, and Africa and has a favorable geographical position and developed logistical infrastructure.

The island is located in the Eastern Mediterranean and is just a few hour’s flight from major European capitals such as London, Paris, Berlin, and others. Due to its proximity to Europe, Cyprus provides excellent connectivity to European markets and is a convenient point for trade and transportation.

The country has a well-developed logistics infrastructure, including modern ports and airports. The main ports of Cyprus are located in Limassol and Larnaca. They provide convenient connections to Europe, Africa, and the Middle East, facilitating ease of trade transactions and movement of goods.

Cyprus airports provide air links to many cities worldwide, making the island accessible for business travel and tourism. The main airport in Cyprus is Larnaca, which has regular flights to many major European cities, as well as to Asia and Africa. The second largest is the airport in Paphos.

Cyprus' geographical location promotes international connections for business, making it an attractive destination for companies looking to expand globally. In addition, the island offers a pleasant climate and a measured life.

Cyprus' infrastructure also includes modern office and business facilities, technology parks, and business centers, making the island attractive to companies of all sizes and orientations. The country actively invests in its infrastructure to support its growing business climate and attract new investors.

The island is also a member of the European Union, providing companies with more than 500 million potential customers to access the European market.

In addition, Cyprus offers modern banking services and investment opportunities, making it a favorable destination for investors looking for stability and high returns. All these factors help Cyprus to be one of the most attractive business and investment destinations, especially in times of crisis when companies are looking for stable and reliable platforms for their development.

How to relocate a business to Cyprus: step-by-step instructions

Registering a company in Cyprus and obtaining licenses is not too cumbersome, but it requires understanding some aspects. Therefore, we have prepared step-by-step instructions for you.

Step 1: Explore the legal and juridical aspects of relocation

Relocation to Cyprus requires the registration of a new company or re-registration of an existing company. Cyprus offers various legal entities, such as Limited Liability Companies (LLC), Joint Stock Companies (JSC), and others, allowing you to choose the most suitable structure for your business. A private company (LLC) is the most common form of doing business in Cyprus. 

It is essential to familiarize yourself with Cyprus’s local legislation and business rules. Compliance with legal regulations and requirements will provide security and stability for the company.

For example, when opening an LLC, you need to:

• To indicate an English-language name that ends with the abbreviation LTD or LLC;
• Have a Memorandum of Association;
• Draw up Articles of Association;
• Nominal director and secretary can be appointed;
• In the form of LLC, it is possible to make settlements in any currency and any bank of the world;
• The incorporation documents are executed exclusively through a local licensed attorney.

When relocating a company, it is also necessary to consider Cyprus labor laws, employee rights and obligations, hiring and firing procedures, and the terms of employment contracts. For example, when hiring a new employee, an employer must enter into a written employment contract stating the working conditions, salary, working hours, and other essential terms and paying the relevant taxes.

Here are some of the central taxes and contributions payable by employers in Cyprus:

• Corporate Income Tax — the standard income tax rate is 12,5%.
• Value Added Tax (VAT) — a mandatory tax on goods and services levied on the final consumer. In Cyprus, the VAT rate is 19%, but there are lower rates for some categories of goods and services.
• Social Insurance Contributions for its employees cover various social benefits, including pensions, health insurance, etc.
• Payroll Tax for employees.
• Property Tax — If a company owns real estate, it may be required to pay property tax.
• Other Taxes and Contributions. Depending on the nature of the business and the company’s operations, employers may also be required to pay Land Taxes, Real Estate Sales Taxes, etc.

Step 2: Registering a company and obtaining licenses

To relocate a business to Cyprus, registering a new company or re-registering an existing one is necessary. Company registration usually involves choosing the form of a legal entity, determining the company’s name, and preparing all the essential documents. Special licenses and permits may also be required depending on the company’s business type.

Starting a company always starts with applying for name approval. The name can be in English, unique, and contain the abbreviation LTD or Limited if it is a private limited company or PLC / Public Company Limited for public limited companies.

Documents you will need to register a company in Cyprus:

• Charter;
• Memorandum;
• Form HE1, which is an official statement of the lawyer, in which the specialist confirms in writing that all documents have been prepared by the current Cypriot legislation governing the operation of companies;
• Form HE2, which specifies the address of the registered office, which is mandatory, as this is where all correspondence and official notices will be received;
• Form HE3, which specifies the director and secretary, who may be one person and may be both natural and legal persons and are not required to be shareholders.

When you have collected all the necessary documents, you must submit them to the Registrar of Companies. The processing of your application may take from 2 to 4 days. Once your application has been approved and completed, you will receive the relevant certificates for each of the documents submitted — one in English and one in Greek. You will also receive a certificate that your company is registered. The Registrar will publish the statement of incorporation of your company in the Official Gazette.

Once you have received the certificate, it means that the legal existence of your company has begun and that all requirements have been complied with and are in compliance with the law.

Step 3: Opening a bank account

After registering a company in Cyprus, the next step is to open a bank account. Cyprus offers a variety of banking services and business opportunities. The choice of a bank depends on your needs and preferences. Choosing a reliable and prestigious bank that can provide convenience and quality of service is essential.

The procedure for opening a bank account in Cyprus may vary slightly depending on each specific bank, type of account, and currency. But in general, it proceeds as follows:

• Choice of bank and type of account: Cyprus has many quality banks whose services may vary. Choose according to your needs and requirements.
• Applying for an account. This can be done at the bank’s office or online on its official website.
• Providing the necessary documents. You will need a passport or other identity document and documents confirming the place of residence and origin of funds.
• Signing the agreement will specify the rules of using the account, commissions, and tariffs.
• Making an initial deposit. The amount may vary depending on the bank and type of account.
• Obtaining bank details for banking operations.

Please note that the account opening process may take some time, so it is recommended to apply in advance and consider all stages of the procedure.

Step 4: Finalizing the company registration process

When registering a business in Cyprus, several important steps must be followed to ensure that the company operates correctly and complies with the taxation and registration laws. The steps outlined below should be carried out as soon as the registration is completed and the certificate is issued:

• Registration in the Government Portal. The owner must register within 30 days of company creation.
• Obtaining a tax number. Within two months after the company’s registration, you must apply to the tax office and get your tax number.
• Registering as an employer. Visit the Social Security Office and apply to register your company as an employer.
• Trademark Protection. If you have a unique trademark, you can apply to the Intellectual and Industrial Property Section to register it. This will ensure that your brand is protected in the marketplace.
• Change notification. If your company details, such as name, capital, director or secretary, memorandum, articles of association, or office address change, you must notify the Registrar of Companies of any changes immediately.

Following these steps will allow you to establish a sustainable business in Cyprus that complies with all legal requirements and ensures the successful operation of your company in the future.

Recommendations and tips for successful business and employee relocation

Relocating your business and employees to Cyprus is an exciting and promising step that can lead to significant success. Based on our personal experience and that of successful entrepreneurs, we would like to share valuable tips:

• Create a friendly and supportive atmosphere. It is essential to take care of your employees and provide them with a comfortable working and living environment in Cyprus. A supportive and friendly team environment will help relocating employees adapt to the new environment faster and more successfully. It is necessary to rent apartments in Cyprus for employees, prepare all migration documents and permits, help find schools and kindergartens for children, and organize transfers.
• Learn the local customs and culture. This will help you adapt and build fruitful relationships with local partners and clients. This can be a crucial factor for the success of your business on the island. For example, it is essential to understand that the locals of Cyprus, like any Mediterranean island, are «siga-siga». They are a bit slow, prefer to work early in the morning, and greatly value rest. Also, the island’s population is quite conservative and religious, and in institutions of state importance, issues are often solved more slowly than in other countries.
• Plan for the future, as relocation is a long-term business development strategy. Rely on market forecasts and trends. Consider possible changes in the economic and political spheres to make informed and well-informed decisions.

Relocation to Cyprus is a unique opportunity to expand your horizons and ensure your business has a stable and promising development. By following the above tips and drawing on your personal experience, you can make this process as successful and beneficial as possible for your business and team. Cyprus and SPM will help you with this.

Assisting SPM in relocating the company to Cyprus

SPM is your most valuable Cyprus contact and real estate expert. We will provide comprehensive assistance in relocating your company to the island. We understand that relocating a business is a responsible and important step, and our team is ready to provide you with everything you need for a successful relocation and start in your new environment.

How we can help you:

• Tax advice. We will provide detailed information on tax exemptions and rates in Cyprus, which will help you optimize your taxation and reduce your financial risks.
• We will help you open an account with a local bank and advise you on choosing the right bank and type of charge for your business.
• Optionally, we will build a business model for your business and investments, analyze the market and competitors, make a long-term business forecast, and allow you to see realistic figures.
• We will assist in employee onboarding. You can expect us to fully support your employees in adapting to Cyprus. We will help find accommodation, educational institutions for children, medical care, and other aspects.

Trust the experience and professionalism of SPM, and we will help you make your business relocation to Cyprus as successful and comfortable as possible. We are ready to become your reliable partner on the island and provide everything you need to succeed in the new market.

Get advice on relocation

Business prospects in Cyprus and stability for the future

Now in recession, many countries are experiencing uncertainty and slowing growth. In some cases, change is stagnant. In the case of Cyprus, according to the Economic forecast for Cyprus 2023, the island is expected to experience a slight slowdown in economic activity in 2023 and 2024, with growth rates of 2,3% and 2,7%, respectively, following strong growth of 5,6% in 2022. However, despite this slowdown, the labor market is expected to remain resilient, and the government budget surplus will continue throughout the forecast period.

The Cypriot Recovery and Resilience Plan (The Cypriot Recovery and Resilience Plan) is expected to support investment in construction and equipment throughout the forecast period. Tourism and other export-oriented services are projected to continue to grow, albeit at a slower pace.

In addition, inflation in Cyprus is expected to decline after peaking at 8,1% in 2022. It is projected to fall to 3,8% in 2023 and 2,5% in 2024 as global energy prices fall and supply chain disruptions subside.

Regarding the future of business in the country, tourism, construction, and finance will be the leading sectors driving growth and development in Cyprus' post-settlement economic future. The potential for significant financial contribution from non-traditional sectors, including higher education, is also high.

You can see from our analytical article about the most profitable business in Cyprus.

You will also be interested to know why investing in real estate in Cyprus can be an exciting option in the crisis of 2023 and what factors should be considered when making a decision. This material reviews the basic principles of portfolio diversification and assesses the riskiness of investing in real estate and Cyprus as a jurisdiction.

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