Attitude Toward Foreign Direct Investment
Republic of Cyprus
The ROC has a favorable attitude towards foreign direct investment (FDI), putting to good advantage its strategic geographic location, low corporate and personal tax rates, 59 double taxation avoidance treaties (including with the United States), and transportation infrastructure, and an educated and mostly English-speaking labor force. The 2013 financial crisis brought to the surface several underlying structural and institutional obstacles to investment, ranging from delays in obtaining building permits and court judgments, to difficulties in starting a business, and limited access to financing. In the aftermath of the crisis, ROC authorities have addressed these challenges in an effort to make Cyprus attractive to foreign investors. Key sectors that hold potential for future investment include tourism-related infrastructure, casinos, ports, banks, real estate, and hydrocarbons/energy-related support services. Foreign investors may establish a business in Cyprus with the same benefits as local investors in most sectors with a few well-defined and transparent limitations for non-EU investors in certain sectors (see limits on Foreign Control, below).
For more information:
One-Stop-Shop & Point of Single Contact
Ministry of Commerce, Industry and Tourism (MECIT)
13-15 Andreas Araouzos
1421 Nicosia, Cyprus
Tel. +357 22 409318 or 321
Fax: +357 22 409432
Email1: onestopshop@mcit.gov.cy
Email2: psccyprus@mcit.gov.cy
Website: www.businessincyprus.gov.cy
Area Administered by Turkish Cypriots
TCs welcome FDI and are eager to attract investments, particularly those that will lead to the transfer of advanced technology and technical skills. Priority is also given to investments in export-oriented industries. The “Turkish Cypriot Investment Development Agency” (“YAGA”) is a one-stop shop for all investors.
Other Investment Policy Reviews
Republic of Cyprus
Cyprus has been a member of World Trade Organization (WTO) since July 30, 1995. As of May 1, 2004 it is a member State of the EU. Cyprus has not undergone investment policy reviews by the Organization for Economic Cooperation and Development (OECD) or United Nations Committee on Trade and Development (UNCTAD). The WTO published a Trade Policy Review on the EU28, including Cyprus, in July 2015. The text is available at: https://www.wto.org/english/tratop_e/tpr_e/tp417_e.htm
Area Administered by Turkish Cypriots
TC “officials” have not conducted policy reviews on investment.
Laws/Regulations on Foreign Direct Investment
Republic of Cyprus
Below are links to laws affecting incoming foreign investment:
http://www.investcyprus.org.cy/media-center/publications/
http://www.cypruslawdigest.com/topics/foreign-investments/item/149-protection-of-foreign-investments
http://www.cypruslawdigest.com/
Area Administered by Turkish Cypriots
http://www.investinnorthcyprus.org/
Business Registration
Republic of Cyprus
Domestic and foreign investors may establish any of the following legal entities or businesses in the ROC:
- Companies (private or public);
- General or limited partnerships;
- Business/trade name;
- European Company (SE); and
- Branches of overseas companies.
The registration process takes approximately two working days and involves completing an application for approval/change of name, followed by the steps outlined in the following link:
http://www.businessincyprus.gov.cy/mcit/psc/psc.nsf/All/A2E29870C32D7F17C2257857002E18C9?OpenDocument
The Ministry of Energy, Commerce, Industry, and Tourism’s (MECIT’s) One-Stop-Shop offers assistance with the logistics of registering a business in Cyprus to all investors, regardless of origin and size.
In addition to registering a business, foreign investors, like domestic business owners, are required to obtain all permits that may be necessary under Cypriot law. At a minimum, they must obtain residence and employment permits, register for social insurance, and register with the tax authorities for both income tax and Valued Added Tax (VAT). In order to use any building or premises for business, including commerce, industry, or any other income-earning activity, one also needs to obtain a municipal license. Additionally, town planning or building permits are required for building new offices, or converting existing buildings. There are also many sector-specific procedures. Information on all of the above procedures is available online at: http://www.businessincyprus.gov.cy/mcit/psc/psc.nsf/eke08_en/eke08_en?OpenDocument
The World Bank’s 2015 Doing Business report (http://www.doingbusiness.org/rankings) ranked Cyprus 47 out of 189 countries for ease of doing business, although starting a new business in Cyprus was ranked less favorably at 64 out of 189.
Cyprus follows the EU definition on micro, small and medium-sized enterprises (MSMEs), as follows:
Foreign-owned MSMEs are free to take advantage of programs in Cyprus designed to help such companies, including the following:
http://www.fundingprogrammesportal.gov.cy/easyconsole.cfm/page/programme/fsId/18/lang/en
http://www.mcit.gov.cy/mcit/mcit.nsf/dmlsme_en/dmlsme_en?OpenDocument&print
http://www.cyprusreporter.com/newsdetail/EBRD-supports-Cypriot-SMEs-through-a-two-year-programme-3773
Foreign investors can take advantage of the services and expertise of the Cyprus Investment Promotion Agency (CIPA), a non-profit agency aimed at helping investors stand-up businesses in Cyprus. CIPA is mainly geared towards larger investors, investing in the country more than approximately EUR 500,000, although this not a fixed minimum requirement. Even smaller investors should not hesitate to contact CIPA for assistance:
CIPA
9A Makarios III Ave
Severis Bldg., 4th Flr.
1065 Nicosia
Tel. +357-22-441133
Fax: +357-22-441134
Email: info@investcyprus.org.cy
Website: http://www.investcyprus.org.cy/
Area Administered by Turkish Cypriots
The “Registrar of Companies’” website is available only in Turkish: http://www.rkmmd.gov.ct.tr/ . An online registration process for domestic or foreign companies does not exist and registration needs to be completed in person.
“YAGA” was established by TC authorities with the aim of it becoming a one-stop-shop for both local and foreign investors who are interested in investing in the area administered by TCs. Their website provides explanations and guides in English on how to register a company in the area administrated by Turkish Cypriots.
As of March 2015, the "Registrar of Companies Office" statistics indicated there were 18,798 registered companies, of which 18,070 were TC majority-owned limited liability companies; 354 foreign companies; and 374 offshore companies.
The area administered by TCs defines MSMEs as entities having less than 250 employees. There are several grant programs financed through Turkish aid and EU aid targeting MSMEs.
The TC Chamber of Commerce (KTTO) publishes an annual Competitiveness Report on the TC economy, based on the World Economic Forum’s methodology. KTTO’s 2015-2016 report ranked northern Cyprus 121st among 144 economies, dropping seven places from its 114th ranking in 2015.
For more information and requirements on establishing a company, obtaining licenses, and doing business visit:
“Turkish Cypriot Development Agency” (“YAGA”)
Tel: +90 392 - 22 82317
Website: http://www.investinnorthcyprus.org
E-mail: mehmet.yildirim@investinnorthcyprus.org
Turkish Cypriot Chamber of Commerce (KTTO)
http://www.ktto.net/english/index.asp
Tel: +90 392 - 228 37 60 / 228 36 45
Fax: +90 392 - 227 07 82
Industrial Promotion
Republic of Cyprus
In the aftermath of the financial crisis, the ROC is pursuing an economic strategy known as the “Growth Action Plan” to reform the economy and address investment climate challenges, focusing on reducing bureaucracy and increasing transparency in public administration. The ambitious plan seeks to reform the regulatory framework to boost investment, particularly in key sectors such as tourism, shipping, green energy, and generic pharmaceuticals. Details of this plan are available at:
http://www.reform.gov.cy/crcs/crcs.nsf/All/FE9B14F25265813BC2257DF7004596B7/$file/GROWTH%20ACTION%20PLAN%20(REVISED%2010%202%202015).pdf
Additional information on key sectors is available from:
http://www.cipa.org.cy/easyconsole.cfm/page/media_section
http://www.investcyprus.org.cy/en/cyprus-investment-promotion-agency
Area Administered by Turkish Cypriots
According to “YAGA”, the primary sectors in the area administrated by TCs that may be attractive to foreign investors include tourism (specialized, non-seasonal or off-seasonal), the construction of university dormitories, specialized niche investment, high value-added agriculture and food processing, software development, and telecommunications.
Limits on Foreign Control and Right to Private Ownership and Establishment
Republic of Cyprus
The following restrictions apply to investing in the ROC:
Non-EU entities (persons and companies) may purchase only two real estate properties for private use (two holiday homes or a holiday home and a shop or office). This restriction does not apply if the investment property is purchased through a domestic company or as a corporation elsewhere in the EU.
- Non-EU entities also cannot invest in the production, transfer, and provision of electrical energy. Additionally, the Council of Ministers may refuse granting a license for investment in hydrocarbons prospecting, exploration, and exploitation to a third-country national or company if that third country does not provide similar treatment to Cyprus or other EU member states.
- Individual non-EU investors may not own more than five percent of a local television or radio station, and total non-EU ownership of a local TV or radio station is restricted to a maximum of 25 percent.
- The right to register as a building contractor in Cyprus is reserved for citizens of EU member states. Non-EU entities are not allowed to own a majority stake in a local construction company. Non-EU physical persons or legal entities may bid on specific construction projects but only after obtaining a special license by the Council of Ministers.
- Non-EU entities cannot invest in private tertiary education institutions.
- Provision of healthcare services on the island is also subject to certain restrictions, applying equally to all non-residents.
- Finally, the Central Bank of Cyprus’ prior approval is necessary before any individual person or entity, whether Cypriot or foreign, can acquire over 9.99 percent of a bank incorporated in Cyprus.
Area Administered by Turkish Cypriots
According to the “Registrar of Companies Office,” foreign ownership of construction companies is restricted to 49 percent. Currently the travel agency sector is closed to foreign investment. Registered foreign investors may buy property for investment purposes. Foreign natural persons also have the option of forming private liability companies, and foreign investors can form mutual partnership with one or more foreign or domestic investors.
Privatization Program
Republic of Cyprus
Under the provisions of its adjustment program with international creditors, the ROC agreed to undertake a privatization program aimed at raising EUR 1.4 billion (USD 1.5 billion) by 2018.
An independent Privatizations Unit, established March 2014, oversees the privatizations program. Below are recent developments concerning specific organizations included in the privatizations plan:
- Electricity Authority of Cyprus (EAC): In December 2015, under threat of strikes, the government reversed earlier plans to privatize the EAC. The government intends to push ahead with unbundling the EAC’s generation and transmission operations into separate legal entities by the end of 2017.
- Cyprus Telecommunications Authority (CyTA): In February 2016, the House of Representatives initiated discussion of draft legislation for CyTA's corporatization, a “prior action” required for disbursement of the last tranche of bailout funding, although most political parties currently oppose the bill.
- Limassol Port commercial activities: This is the only privatization that has taken place. In February 2016, the government selected three pre-qualified bidders to run the port’s three main operations (container terminal, marine services, and a multi-purpose terminal). The House of Representatives approved the transaction March 24, 2016. The winners include two consortiums headed by prominent port operating firms Dubai Ports (DP) World Ltd. and Eurogate International GmbH. The Cyprus Ports Authority will remain the regulator of Cypriot ports, but management of Limassol port’s commercial activities will be transferred to the private sector, a public-private partnership model already implemented for Larnaca port.
- Other Privatizations: There are plans for other, smaller privatizations, including selling parts of the national lottery, the logo of the now-defunct Cyprus Airways, and 30 pieces of government land, some in prime locations across the island.
For more information, please see text on privatization goals contained in the 7th review of the Cyprus program by international creditors: http://www.mof.gov.cy/mof/mof.nsf/Revised%20Memorandum%20of%20Understanding%20September%202015.pdf
Area Administered by Turkish Cypriots
In the TC-administered area, the below-listed institutions are known as "public economic enterprises" (POEs), "semi-public enterprises" and “public institutions,” which aim to provide common utilities and essential services.
Some of these organizations include:
- Turkish Cypriot Electricity Board (KIBTEK)
- RTK - State Television and Radio Broadcasting Corporation
- Cyprus Turkish News Agency
- Turkish Cypriot Milk Industry
- Cypruvex Ltd. - Citrus Facility
- EMU - Eastern Mediterranean Foundation Board
- Agricultural Products Corporation
- Turkish Cypriot Tobacco Products Corporation
- Turkish Cypriot Alcoholic Products LTD
- Coastal Safety and Salvage Services LTD
- TC Development Bank
The airport at Ercan and K-Pet Petroleum Corporation have been converted into public-private partnerships, the concept of privatization continues to be controversial in the TC community.
In March 2015, TC authorities signed a public-private partnership agreement with Turkey regarding the management and operation of the water obtained from an underwater pipeline funded by Turkey.
Within the area administrated by TCs, there has also been discussion about privatizing the electricity authority “KIBTEK” and the TC telecommunications operations.
Screening of Foreign Direct Investment
Republic of Cyprus
The ROC does not pre-screen foreign investment, and has a welcoming attitude towards investors, subject to certain transparent limitations in certain sectors such as property (see Limits on Foreign Control).
Area Administered by Turkish Cypriots
There are no pre-screening requirements.
Competition Law
Republic of Cyprus
The oversight agency for competition is the Commission for the Protection of Competition: www.competition.gov.cy
Area Administered by Turkish Cypriots
The relevant “agency” for competition is the “Competition Board”. More information can be found here: www.rekabet.gov.ct.tr.