Cyprus

At a Glance

The island of Cyprus is the third biggest in the Mediterranean (9,250 sq km). Cyprus has a nearly ideal Mediterranean climate, with more than 300 warm, sunny days a year, and a brief, mild winter with occasional rain.

• Location: situated in the Eastern Mediterranean, south of Turkey and west of Syria and Lebanon; the main cities are Nicosia (the capital and business centre), Limassol, Paphos and Larnaca

• Population: 792,604 (July 2008 est) of whom the majority are ethnically Greek and living in the southern part of the island

• Official language: Greek and Turkish, but most Cypriots speak English, which is extensively used in business and commerce

• Currency: Euro (since 2008); the island's EU accession has of course led to the complete removal of exchange controls

• Legal/Government: an independent sovereign republic; a member of the UN, the EU and the Commonwealth
  

• Major industries: tourism (around 40% of GNP)

• Principal offshore activities: trust management, mutual funds and captive insurance (banking has not been encouraged, as an apparently successful defence against money laundering)

Trade and investment in Cyprus
Businesses operating within Cyprus Larnaca Industrial Free Zone are subject to minimal customs formalities; they may import plant, machinery, equipment and raw materials duty-free, while their foreign employees are liable to only 50% of the normal rates of income tax. Import of foreign capital is subject to the EU Savings Tax Directive.

Cyprus Investments by Foreigners
In many sectors 100% foreign ownership is now permitted, especially in services, but the formal position remains that Central Bank approval is required, and if the level of participation exceeds 49% or if the investment exceeds a designated amount (formerly CY£750,000, now its Euro equivalent), then the Ministry of Commerce, Industry and Tourism also becomes involved.

The Central Bank permit for foreign investment specifies the activities that may be carried on. Usually, it also requires that foreigners' equity capital must originate outside Cyprus, and must equate to the size of the investment, ie there are thin capitalization rules. Any loan capital must be raised by foreign and domestic shareholders in proportion to their equity stakes.

Permission is required for repatriation of capital, profits, dividends and interest arising from a direct foreign investment in Cyprus, but is normally granted readily.