Cyprus has long held a reputation as being a tax haven. In recent years, the Cypriot government has gone to great lengths to build on that reputation in a variety of ways. It has partnered with many other countries and some large corporate organizations in order to create an economy that is geared towards innovation and entrepreneurship.
The country’s government focused its attention on making Cyprus a very enticing place for entrepreneurs to do business. This has involved building on the strengths the country already possesses, such as a favourable tax system and excellent geographic location. It has also involved introducing incentives, programs for loan grants, and development initiatives.
Added to this is the top-notch co-working system that has been growing rapidly in all of the country’s major economic centres. There is also a wide range of high-quality professional services available. It is no wonder that Cyprus, despite its diminutive size, is outpacing many of its European counterparts as a commercial hub.
Why Is Cyprus Such A Magnet For Startups?
The growing number of start-ups in Cyprus are coming from a variety of industries. However, the largest percentage of the influx of entrepreneurial endeavours can be attributed to the following sectors;
- ICT Developers
- Financial Tech Firms
- Forex Trading
- Blockchain And Cryptocurrency
These industries account for more than two-thirds of the startup companies that want to come into Cyprus in the last four years. Some of the biggest organizations in these industries have already established Cyprus as headquarters for offices to serve clientele from the Middle East, Europe, and Africa. This draws prospective entrepreneurs to Cyprus as well. This is only a small part of the cause of the inflow, however.
Startup Friendly Through Government Policies
Cyprus is one of the few countries that offers lots of competitive advantages to startups that come in and invest. Cyprus has a contemporary, services-based economy with a strong regulatory, tax, and legal framework that allows international entrepreneurs, investors, and local enterprises to invest, grow and succeed.
The country also benefits from a strong economic presence accompanied by incentives targeted at emerging economic sectors. This has assisted greatly with strengthening and upgrading the local business environment.
A Tax Haven, Especially for Entrepreneurs
Very favourable tax policies make Cyprus popular among major corporations. The local government has built on that by creating policies that foster a startup-friendly climate. The corporate income tax rate is only 12.5%. To make the situation even more favourable, there are incentives and legal channels that can cut it to a mere 2.5% for entrepreneurs. This makes it more profitable for startups to build from here since it is not easy for new businesses to turn profits at the beginning.
If a corporation holds registered property, it is eligible for an 80% tax break. Also, in a bid to help firms that do not make enough profit to cover their costs, Cyprus permits its tax resident enterprises to carry forward their tax year debt for five years and pay it off with future earnings.
Incentive Programs That Provide Investment Opportunities
The government of Cyprus has been steadily increasing its efforts to attract and sponsor creative companies in order to enhance the economy. Cyprus began to offer startup visas in 2017 in a bid to attract tech and blockchain entrepreneurs with strong development potential. The program gives startups residence permits for 12 months at the initial stage, which can be subsequently renewed. If the business thrives, the entrepreneurs will be granted benefits, including permanent residency and family reunification visas.
All of this has been done in order to boost the country’s innovation ecosystem. The government of Cyprus has also taken steps to offer funding programs, in collaboration with other countries and some big corporations. The government has created a Research and Innovation Foundation. These entrepreneurial innovation initiatives for startups are offered through this department:
- Pre-seed Initiative. This initiative provides loans of up to €100,000 for early-stage companies.
- Seed Program. This fund awards €500,000 to established startups that have great concepts but need assistance with commercialization.
- The Innovate Program. This grants €1,000,000 to established businesses that are already in the market or are in the pilot phase of developing innovative products or services.
At the start of this year, over 40 startups registered in Cyprus and received funding through these programs.
In addition, there are partnership programs that work in conjunction with the governments of countries within the European Union. These benefits entrepreneurs, specifically those coming from European countries. The government of Cyprus allocated €20,000,000 to a new fund to assist investments in innovative firms. The Cypriot government is reaping the rewards of these initiatives, as the local venture capital market is booming.
Cyprus Has A Highly Skilled Local Workforce
Cyprus has a small population, yet still has one of the highest rates of tertiary level education in the European Union. With a large pool of highly educated and skilled employees, firms have easy access to the trained talent necessary to grow as quickly as possible. In order to promote innovation and entrepreneurship, the Cyprus authorities also made plans to provide new job possibilities for researchers and high-level scientists. A larger reservoir of European talent is readily available and open here.
Regulations Are Geared Towards Enabling Startups
IT businesses can use what is known as English law to transfer intellectual property in a secure and convenient manner, organize corporate deals, manage operations with warrants and equity, and so on.
Entrepreneurs can get a permit for employing foreigners, including citizens of countries outside the European Union. They qualify by investing a substantial amount of money in the IT company. The specific amount is decided by a number of factors.
The most important requirement is that the Cypriot labour market remains competitive. To achieve this, the government mandated that any positions with the necessary qualifications that can be found among Cypriot citizens must remain local. This prevents foreign investors from hiring staff from other countries when skilled and qualified citizens are available locally.
Very Low Cost Of Living
The cost of living in Cyprus is among the lowest in the entire European Union. In the capital Nicosia, for example, the hourly rates are nearly 50% lower than in other major European cities. The legal system is closely tied to English common law, and the regulatory structure is simple and transparent.
The process of registration procedures is maintained to a minimal amount so that starting a business in Cyprus is simple and inexpensive.
Co-working Offices Are Of High Standard
In Nicosia, Limassol, and other major economic centres, co-working spaces are well-equipped and maintained to a high standard.
Cyprus offers affordable prices on office space rents as well as several co-working buildings and financial centres. This is in addition to competitive company registration fees, low labour expenses, and state and private funding available to promote new enterprises.
There are certain perks or benefits that are accessible for entrepreneurs seeking co-working opportunities. They include;
- Lease plans are usually for one year of economic activity and residency in Cyprus, with the option of renewal for at least another year.
- Self-employment or the right to work for a registered startup is guaranteed for any startup.
- Residency for an unlimited period of time if the newly formed business succeeds, in addition to Family reunification if the business succeeds.
- Recruitment of a set number of personnel from non-EU nations in the future without the necessity for Department of Labor permission.
Cyprus Is The Ideal Setting For Startups
The Cypriot government has made it a mission to provide all of the necessary apparatus, resources, and favourable economic conditions for startups to do business. However, one of its main competitive advantages is that it provides a package deal that includes both a great business environment and a high quality of life.
Opposing the ‘work-hard-only’ mentality and emphasizing the need for balancing a strong work ethic with rest, hobbies, and overall quality of life. A balance between these two worlds is what produces actual long-term productivity and, more crucially, considerably higher life satisfaction and happiness.
The good network of co-working spaces makes it easy to find an office in Cyprus. This is an added bonus. Cyprus has one of the most in-demand co-working sectors in the European Union. Contemporary co-working spaces are best suited for small firms and start-ups. Another benefit is that it provides an opportunity for networking among various businesses.
For any entrepreneur considering the establishment of a business in Cyprus, a team of professionals at Soho Cyprus can assist you. Soho Cyprus offers assistance with co-working spaces in the economic centres around Cyprus for startups. For more information about their services, visit sohocyprus.cy.
Cyprus is undoubtedly a place with a very favourable business climate. With tax benefits and a highly skilled and multilingual workforce, all the essential components for building a business are there. The nation is a hotbed for startups, entrepreneurship, and innovation. Instead of staying stagnant and letting the economy stay still, the government has boosted IT innovation and digital transformation with good policies and procedures.