REPUBLIC OF CYPRUS
The business and investment climate in Cyprus has improved since the financial crisis of 2013. Cyprus is now experiencing a solid economic recovery, driven by the tourism sector and domestic demand. The economy grew 3.9 percent in 2017, up from 3.4 per cent in 2016, and is expected to continue growing over the medium-term, but at a slower rate. In March 2016, the island graduated from a three-year economic adjustment program, boosting investor confidence in the economy. Despite a major restructuring of the banking sector and improved capital positions, the stock of non-performing loans (NPLs) has declined slowly, undermining local banks’ asset quality and restraining their lending ability. In November 2017, NPLs stood at 43.7 percent of all loans, compared to 47.8 percent in December 2014. Poor contract enforcement, inefficiencies in the judicial system, and bottlenecks in the implementation of the foreclosure and insolvency legislation hamper private sector deleveraging and the further reduction of non-performing loans. Reform momentum has weakened since 2016, slowing down progress in areas like reforming the civil service and privatizing state-owned enterprises (SOEs). The European Commission’s 2018 Country Report on Cyprus, released March 7, as part of the European Semester assessment, noted that the island’s “robust economic recovery could help accelerate the correction of excessive macroeconomic imbalances and provide a window of opportunity to implement growth-enhancing reforms."
Strategically located at the crossroads of Europe, Asia, and Africa, Cyprus offers significant promise and opportunity to U.S. investors. Sectors offering the greatest potential for investment are in energy (including renewables), tourism infrastructure, shipping, services, and technology. Smaller, niche investment opportunities exist in food processing and franchises. Cyprus offers a low-tax business environment, skilled and English-speaking professionals, and excellent infrastructure for doing business in the eastern Mediterranean. U.S. citizens traveling with a U.S. passport may enter Cyprus without a visa for up to 90 days.
Table 1
AREA ADMINISTERED BY TURKISH CYPRIOTS
Since 1974, the southern two-thirds of Cyprus has been under the control of the government of the Republic of Cyprus (ROC), while the remaining area in the north has been administered by Turkish Cypriots (TCs). In 1983, the TC-administered area declared itself the “Turkish Republic of Northern Cyprus" (“TRNC"), but this has not been recognized by any country other than Turkey. While the unresolved conflict has implications for all potential investment on the island, companies considering investments in the TC-administered area should be aware of complications that arise from the lack of international recognition and the absence of a comprehensive political settlement in Cyprus. TC businesses are interested in working with American companies in the fields of agriculture, renewable energy, and franchises. The accession of the ROC to the European Union (EU) in 2004 also had important consequences for the northern part of Cyprus. Although the EU suspended implementation of the acquis communautaire (AC) in the area administered by TCs, EU-funded technical programs are being used to bring TC goods and services into compliance with EU standards and norms.
Turkish aid and investment continue to take place in the area administrated by TCs.
The single greatest catalyst for island-wide Cypriot economic growth and prosperity lies in the efforts of both communities to achieve a political settlement. According to some analysts, prospects for a settlement hold the promise of significantly increasing the island’s GDP.
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards 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, 63 double taxation avoidance treaties (including with the United States), transportation infrastructure, and an educated, 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 some of these challenges in an effort to make Cyprus increasingly attractive to foreign investors. Key sectors that hold potential for 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 (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
Email 1: onestopshop@mcit.gov.cy
Email 2: 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.
“Turkish Cypriot Development Agency" (“YAGA")
Tel: +90 392 - 22 82317
Website: http://www.investinnorthcyprus.org
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.
The 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 more than 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.
Other Investment Policy Reviews
REPUBLIC OF CYPRUS
The ROC 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.
Business Facilitation
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.
At the end of 2017, there were 217,588 companies registered in the ROC, 13,677 of which had been registered in 2017 (for more statistics on company registrations, please see: http://www.mcit.gov.cy/mcit/drcor/drcor.nsf/company_statistics_en/company_statistics_en?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 2018 Doing Business report ) ranked Cyprus 53rd out of 190 countries for ease of doing business. Among the ten sub-categories that make up this index, Cyprus performed best in the areas of resolving insolvency (21/190) and protecting minority investors (43/190), and worst in the areas of enforcing contracts (138/190) and dealing with construction permits (120/190). Despite making small gains in several important areas, such as dealing with construction permits and starting a business, Cyprus backtracked in other areas, including paying taxes and protecting minority investors, causing it to slip in the overall ranking. However, using another metric, the Global Competitiveness Index, issued by the World Economic Forum, Cyprus climbed 19 spots in the 2017-2018 edition, ranking 64th rank out of 137 countries, compared to 83rd out of 138 countries in the previous year. The two most problematic factors for doing business in Cyprus, according to this report were providing access to financing and an inefficient government bureaucracy.
Foreign-owned micro, small and medium-sized enterprises (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.ebrd.com/cs/Satellite?c=Content&cid=1395266780410&d=Mobile&pagename=EBRD%2FContent%2FContentLayout.
It should be noted that Cyprus follows the EU definition of MSMEs.
Additionally, foreign investors can take advantage of the services and expertise of the Cyprus Investment Promotion Agency (CIPA), an agency registered under the companies’ law and funded mainly by the state, dedicated to attracting investment. CIPA is structured to support larger investors, investing in the country more than approximately EUR 500,000 (USD 550,000), although this is not a fixed minimum requirement.
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
Information available on 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.
The “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 TCs.
As of March 2018, the “Registrar of Companies Office" statistics indicated there were 19, 821 registered companies, of which 18,874 were TC majority-owned limited liability companies; 403 foreign companies; and 422 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 2017-2018 report ranked northern Cyprus 109 among 137 economies, dropping five places from its ranking in 2016.
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.yaga.gov.ct.tr/
Turkish Cypriot Chamber of Commerce (KTTO)
https://www.ktto.net/en/
Tel: +90 392 - 228 37 60 / 228 36 45
Fax: +90 392 - 227 07 82
Outward Investment
REPUBLIC OF CYPRUS
The ROC does not restrict outward investment, other than in compliance with international obligations, like specific UN Security Council Resolutions. In terms of programs to encourage investment, businessmen in Cyprus have access to several EU programs promoting entrepreneurship, such as the European Commission’s Investment Plan for Europe (EC IPE), known as the “Juncker Plan" for projects over EUR 15 million (USD 16.6 million) or the Erasmus program for Young Entrepreneurs, in addition to the European Investment Bank’s guarantee facilities for SMEs for projects under EUR 4 million (USD 4.4 million).
AREA ADMINISTERED BY TURKISH CYPRIOTS
TC “officials" do not incentivize or promote outward investment. The TC authorities do not restrict domestic investors.
2. Bilateral Investment Agreements and Taxation Treaties
REPUBLIC OF CYPRUS
Cyprus is a party to 27 bilateral investment treaties (BITs) listed here:
http://investmentpolicyhub.unctad.org/IIA/CountryBits/54.
The ROC does not have a BIT with the United States, but it does have a bilateral agreement relating to Investments Guarantees, which came into force in 1963 through the exchange of notes. This agreement is listed as item 16 in the ROC’s list of bilateral treaties between the ROC and the United States:
http://www.olc.gov.cy/olc/olc.nsf/all/D2F8E99BBA5B2FD5C22575D700359092/USD file/UNITED%20STATES.pdf?openelement.
For additional reference on bilateral agreements in effect, please refer to the Department of State’s Treaties in Force: https://www.state.gov/s/l/treaty/tif/index.htm.
The United States and the ROC entered into a Tax Convention in 1985, which remains in force today as per:
https://www.irs.gov/businesses/international-businesses/cyprus-tax-treaty-documents.
Under this treaty, residents or citizens of the United States are taxed at a reduced rate, or are exempt from foreign taxes, on certain items of income they receive from sources within Cyprus. This income tax treaty contains what is known as a saving clause, this prevents a citizen or resident of the United States from using the provisions of a tax treaty in order to avoid taxation of U.S. source income.
An agreement between the United States and the Republic of Cyprus on the Foreign Account Tax Compliance Act (FATCA) entered into full effect January 4, 2017.
Additionally, Cyprus has signed bilateral double tax treaties with 63 countries: http://www.mof.gov.cy/mof/taxdep.nsf/page29_en/page29_en?OpenDocument.
3. Legal Regime
Transparency of the Regulatory System
REPUBLIC OF CYPRUS
The ROC achieved a score of 3.8 out of 6 in the World Bank’s composite Global Indicators of Regulatory Governance score (based on data collected December 2015 to April 2016) designed to explore good regulatory practices in three core areas: publication of proposed regulations, consultation around their content, and the use of regulatory impact assessments. For more information, please see: http://rulemaking.worldbank.org/data/explorecountries/cyprus.
U.S. companies competing for ROC government tenders have noted concerns about opaque rules and possible bias by technical committees responsible for preparing specifications and reviewing tender submissions. Overall, however, procedures and regulations are transparent and applied in practice by the government without bias towards foreign investors. The ROC actively promotes good governance and transparency as part of its administrative reform action plan: http://www.reform.gov.cy/en/.
In line with the above plan and EU requirements, the ROC launched in 2016 the National Open Data Portal (www.data.gov.cy ) to increase transparency in government services. Government agencies are now required to post on this portal publicly-available information, data, records, on the entire spectrum of their activities, for use, including commercial use, by the public. The number of data sets available through this portal has been growing rapidly in recent months.
Several agencies and non-governmental organizations (NGOs) share competency on fostering competition and transparency, including the ROC Commission for the Protection of Competition (www.competition.gov.cy ), the Competition and Consumer Protection Service, under MECIT ), the Cyprus Consumers Association (www.cyprusconsumers.org.cy ), and the Cyprus Securities and Exchange Commission (www.cysec.gov.cy ).
Most laws and regulations are published only in Greek and obtaining official English translations can be difficult. When passing new legislation or regulations, Cypriot authorities follow the EU acquis communautaire. A formal public notice and comment procedure is not required in Cyprus, except for specific types of laws. In general, the ROC will seek stakeholder feedback directly. Draft legislation must be published in the Official Gazette before it is debated in the House to allow stakeholders an opportunity to submit comments. The ROC House of Representatives also typically invites specific stakeholders to offer their feedback when debating bills. Draft regulations, on the other hand, do not have to be published in the Official Gazette prior to being approved.
In an effort to contribute to global tax transparency, the ROC has adopted the Standard of Automatic Exchange of Information developed by the Organization for Economic Co-Operation and Development (OECD) known as Common Reporting Standard (CRS). Since Jan. 1, 2016, the ROC Tax Department requires all financial institutions to confirm their clients’ jurisdiction(s) of Tax Residence and Respective Tax Identification Number, if applicable. Additionally, the ROC has signed the U.S. Foreign Account Tax Compliance Act (FATCA), allowing Cypriot tax authorities to share information with U.S. counterparts.
AREA ADMINISTERED BY TURKISH CYPRIOTS
The level of transparency for “lawmaking" and adoption of “regulations" in the area administered by TCs are lagging behind U.S. or EU standards.
International Regulatory Considerations
REPUBLIC OF CYPRUS
As an EU Member State since May 1, 2004, the Republic of Cyprus must ensure compliance with the acquis communautaire - the body of common rights and obligations that is binding on all EU members. The acquis is constantly evolving and comprises of Treaties, international agreements, legislation, declarations, resolutions, and other legal instruments. EU legislation, for its part, is subdivided into:
* Regulations, which are directly applicable to Member States and require no further action to have legal effect;
* Directives, which are addressed to and are binding on Member States, but the Member State may choose the method by which to implement the directive. Generally, a Member State must enact national legislation to comply with a directive;
* Decisions, which are binding on those parties to whom they are addressed;
* Recommendations and opinions, which have no binding force.
When there is conflict between European law and the law of any Member State, European law prevails; the norms of national law have to be set aside, under the principle of EU law primacy or supremacy.
Legal System and Judicial Independence
REPUBLIC OF CYPRUS
Cyprus is a common law jurisdiction and its legal system is based on English Common Law, in both substantive and procedural matters. Cyprus inherited many elements of its legal system from the United Kingdom, including the presumption of innocence, the right to due process, the right to appeal, and the right to a fair public trial. Courts in Cyprus possess the necessary powers to enforce compliance by parties who fail to obey judgments and orders made against them. There is a high level of public confidence in the integrity of the Cypriot legal system, although long delays in courts tend to undermine this trust.
International disputes are resolved through litigation in Cypriot courts or by alternative dispute resolution methods such as mediation or arbitration. Businesses often complain of court gridlock and judgments on cases generally taking years to be issued, and even more for claims involving property foreclosure.
AREA ADMINISTERED BY TURKISH CYPRIOTS
Investors should note the EU’s acquis communautaire is suspended in the area administered by the TCs.
The area administrated by TCs is a common law jurisdiction. Judicial power other than the “Supreme Court" is exercised by the Heavy Penalty “courts," “District Courts," and “Family Courts."
TCs inherited many elements of their legal system from the British rule in the island pre-1960, including the right to appeal, and the right to a fair public trial. There is a high level of public confidence in the judicial system in the area administrated by TCs. The current judicial process is procedurally competent, fair, and reliable.
Foreign investors can make use of all the rights guaranteed to TCs. Alternative dispute resolution mechanisms are not available in the TC-administered area. The resolution of commercial or investment disputes through the “judicial system" can take several years.
The TC administration has several trade and economic cooperation agreements with Turkey. For more information about legislation, visit http://www.yaga.gov.ct.tr.
Laws and Regulations on Foreign Direct Investment
REPUBLIC OF CYPRUS
Below are links to various publications and laws affecting incoming foreign investment:
* http://www.investcyprus.org.cy/en/media-center ;
* http://www.cypruslawdigest.com/topics/foreign-investments/item/149-protection-of-foreign-investments ;
* http://www.cypruslawdigest.com/.
AREA ADMINISTERED BY TURKISH CYPRIOTS
Visit the one-stop-shop, “YAGA" website, for more information about laws, regulations on FDI: http://www.yaga.gov.ct.tr.
Below are links to laws affecting incoming foreign investment: http://www.yaga.gov.ct.tr.
Competition and Anti-Trust Laws
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.
Expropriation and Compensation
REPUBLIC OF CYPRUS
Private property may, in exceptional instances, be expropriated for public purposes, in a non-discriminatory manner, and in accordance with established principles of international law. The expropriation process entitles investors to proper compensation, whether through mutual agreement, arbitration, or the local courts. Foreign investors may claim damages resulting from an act of illegal expropriation by means other than litigation. Investors and lenders to expropriated entities receive compensation in the currency in which the investment was made. In the event of any delay in the payment of compensation, the Government is also liable for the payment of interest based on the prevailing six-month LIBOR for the relevant currency.
The bail-in of depositors (converting deposits to equity) in March 2013 and other related actions sparked lawsuits in Cyprus against the ROC and the banks, most of which are still pending. Additionally, haircut victims have filed a class- action suit against various European bodies at the General Court of the European Union, while similar disputes are still pending before the World Bank’s International Centre for Settlement of Investment Disputes, and the Paris-based International Chamber of Commerce (ICC) International Court of Arbitration. The ROC set up a solidarity fund in 2017, aimed at helping depositors who lost their money in the haircut, although it is still unclear how this will work in practice. In September of 2016, the European Court of Justice (ECJ) ruled that adoption of the Memorandum of Understanding (MOU) was not an unlawful act, and dismissed actions for compensation. Additionally, in its 2017 Annual Report, the European Central Bank noted that it did not expect any losses from four lawsuits filed against it and other EU bodies by depositors, shareholders and bondholders of Cypriot banks.
AREA ADMINISTERED BY TURKISH CYPRIOTS
Private property may be expropriated for public purposes. The expropriation process entitles investors to proper compensation. Foreign investors may claim damages resulting from an act of illegal expropriation by means other than litigation.
In the cases involving private owners, these are notified, the property is then inspected, and if an agreement is reached regarding the amount, then the owner is compensated. In cases where the owner declines the compensation package, the case is turned over to local courts" a final decision.
Dispute Settlement
REPUBLIC OF CYPRUS
ICSID Convention and New York Convention
The ROC is a member state to the Convention on the International Centre for the Settlement of Investment Disputes (ICSID Convention), and a signatory to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
Investor-State Dispute Settlement
There have been no reports of investment disputes in Cyprus involving U.S. persons over the past 10 years, and there is no history of extrajudicial action against foreign investors. Local courts recognize and enforce foreign arbitral awards issued against the government.
International Commercial Arbitration and Foreign Courts
Cyprus offers several different means of Alternative Dispute Resolution (ADR). However, recourse to ADR is not common. Some of the entities offering ADR are the following:
* The Cyprus Chamber of Commerce and Industry (CCCI): http://www.ccci.org.cy/ ;
* The Scientific and Technical Chamber of Cyprus: http://www.etek.org.cy/site-menu-82-en.php ;
* The ROC Financial Ombudsman’s office, offers mediation services between banks and customers since 2015: www.financialombudsman.gov.cy ;
* The Cyprus Arbitration and Mediation Centre (CAMC): http://cyprusarbitration.org.cy/;
* The European Court of Arbitration in Cyprus: http://cour-europe-arbitrage.org/contacts/ ;
* The Euro-Mediterranean Alternative Dispute Resolution Centre: http://www.euromedadr.org/.
Additionally, the ROC Ministry of Justice and Public Order maintains a publicly-available Register of Mediators for both commercial and civil disputes: http://www.mjpo.gov.cy/mjpo/mjpo.nsf/All/64BC1F595AB40EB6C22579AD00346FE2?OpenDocument&highlight=mediation.
EU citizens and businesses can also use SOLVIT, a free, online service, to resolve problems pertaining to internal EU market issues, like visa and residence rights, pension rights, and VAT refunds, within 10 weeks from the day the problem is reported: http://ec.europa.eu/solvit/what-is-solvit/.
Under the Arbitration Law of Cyprus, if the parties are unable to reach a settlement an arbitrator can be appointed. Arbitration rulings are fully enforceable and the court may settle an arbitral award in the same way as a judgment. Mediation is not fully enforceable, unless the settlement agreement explicitly stipulates that the parties can apply to court for enforcement. The ROC honors the enforcement of foreign court judgments and foreign arbitration awards. Domestic legislation on binding international arbitration is modeled after internationally-accepted regulations, such as the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, which the ROC adopted in 1985. Cyprus’ bilateral investment treaties with several countries also include dispute settlement provisions (see Section 3, Bilateral Investment Agreements).
AREA ADMINISTERED BY TURKISH CYPRIOTS
Foreign investors can make use of all the rights guaranteed to TCs. Alternative dispute resolution mechanisms are not available in the TC-administered area. The resolution of commercial or investment disputes through the “judicial system" takes can take several years.
Bankruptcy Regulations
REPUBLIC OF CYPRUS
The ROC parliament approved in 2015 a new package of insolvency laws to overhaul existing bankruptcy procedures and help resolve the island’s very high levels of non-performing loans. Bankruptcy procedures can be initiated by a creditor through compulsory liquidation or by the debtor through voluntary liquidation. The court can impose debt rescheduling, in cases where aggregate liabilities do not exceed EUR 350,000 (USD 385,000) and individuals with minimal assets and income may apply to the court via the Insolvency Service for a debt relief order of up to EUR 25,000 (USD 27,500). Discharge from bankruptcy is automatic after three years, provided all debtor assets are sold and the proceeds distributed to creditors. Fraudulent alienation of assets prior to bankruptcy and non-disclosure of assets draws criminal sanctions under the new legislation. Cypriot authorities are monitoring closely progress in implementing the new insolvency framework in order to ensure it helps rehabilitate the real economy. In March 2018, the government and political parties agreed to set up a committee of experts to forge a new national strategy on how best to deal with the persistent problem of non-performing loans.
The World Bank’s 2017 Doing Business report ranked Cyprus 21st from the top among 190 countries in terms of the ease with which it resolves insolvency. For additional information, please see: http://www.doingbusiness.org/data/exploreeconomies/cyprus#resolving-insolvency.
AREA ADMINISTERED BY TURKISH CYPRIOTS
In 2013, the TCs passed a debt restructuring “law" aimed at providing incentives to restructure debts.
4. Industrial Policies
Investment Incentives
REPUBLIC OF CYPRUS
The ROC offers investors one of the lowest corporate tax rates in the EU at 12.5 percent. Other tax advantages include:
* One of the EU’s lowest top statutory personal income tax rates at 35 percent;
* An extensive double tax treaties network with 63 countries, enabling lower withholding tax rates on dividend or other income received from the subsidiaries abroad;
* No withholding tax on dividend income received from subsidiary companies abroad under certain conditions;
* No withholding tax on dividends received from EU subsidiaries; and
* Low Tonnage Tax for shipping.
Additionally, Cyprus offers the option of fast-tracking investments (soon to be enhanced through dedicated legislation) and obtaining Cypriot citizenship through investment. Recently, Cyprus harmonized and enhanced all its regulations regarding investment funds, becoming a more attractive jurisdiction for managing and home-basing investment funds.
At the end of 2016, Cyprus amended its citizenship-by-investment program (CIP), reducing the investment eligibility threshold from EUR 5 million to EUR 2 million (USD 5.5 million to USD 2.2 million), to make this program more attractive to high net-worth individuals. Under the new regulations, foreign investors are eligible for citizenship provided they invest at least EUR 2 million (USD 2.2 million) in real estate, financial assets, alternative investment funds or a combination of the above. Additionally, the applicant must purchase a residence in Cyprus worth at least EUR 500,000 (USD 550,000), unless he or she has invested in property. Benefits of the Cypriot CIP include citizenship in an EU member state, which allows visa-free travel to 163 countries, along with the right to live, work, and study in all 28 EU countries. Applicants must be over 18, have a clean criminal record, and cannot be included on the list of persons whose property is frozen within the boundaries of the EU. Investors need not reside in Cyprus or pay taxes unless they spend more than 183 days on the island.
In addition to the citizenship program described above, Cyprus continues to offer a residency program for non-EU investors, provided they purchase new, immovable property in Cyprus with a market value of at least EUR 300,000 (USD 330,000). The applicant must also deposit a minimum of EUR 30,000 (USD 33,000) in a Cypriot bank and retain it there for at least three years. Cypriot residency allows indefinite stay in Cyprus, but requires holders to obtain visas for travel to the rest of the EU, a process inherently easier for EU residents.
Please see the ROC Ministry of Interior website for more information on Cyprus’ citizenship and residency programs for investors: http://www.moi.gov.cy/moi/moi.nsf/All/36DB428D50A58C00C2257C1B00218CAB.
Additionally, CIPA’s website offers this resource under “Naturalization by Investment FAQs":
http://www.investcyprus.org.cy/en/media-center.
In February 2017, the Council of Ministers approved a scheme aimed at attracting foreign investment to Cyprus through third-country - i.e. non-European Union - innovative start-ups. The plan invited third-country nationals with start-up capital of at least EUR 50,000 (USD 55,000), undergraduate-level education, and fluent either in Greek or English, to set up their headquarters and tax residence in Cyprus, provided their proposed business is certifiably innovative. The plan made 150 visas available to eligible investors, valid for two years, provided the relevant business takes off. Additional info at: http://startupcyprus.org/.
AREA ADMINISTERED BY TURKISH CYPRIOTS
There are incentives in various forms for tourism and industrial-related investments, including:
* 100 to 200 percent investment allowance on the initial fixed capital investment expenditure for certain regions and sectors;
* exemption from “corporate tax" and “income tax" until the above-mentioned allowance percentages are met;
* exemption from “custom duties" when importing machinery and equipment the projects; and
* exemption from construction license fees.
Foreign Trade Zones/Free Ports/Trade Facilitation
REPUBLIC OF CYPRUS
The lead government agency handling areas subject to a special customs regime is the Department of Customs and Excise. Specific rules for the two main types of such areas, namely Customs Warehouses and Free Zones, are listed below and are fully harmonized with equivalent EU norms:
http://www.mof.gov.cy/mof/customs/customs.nsf/All/6D61C14C3E95345CC22572A6003BCBD5?OpenDocument.
There are two types of Free Zones:
* Control Type I Free Zone, in which controls are principally based on the existence of a fence; and
* Control Type II Free Zone, in which controls are principally based on the formalities carried out in accordance with the requirements of the customs warehousing procedure.
Cyprus has two Control Type II Free Zones (FZs) located in the main seaports of Limassol and Larnaca, which are used for transit trade. These areas are treated as being outside normal EU customs territory. Consequently, non-EU goods placed in FZs are not subject to import duties, VAT, or excise tax. FZs are governed under the provisions of relevant EU and ROC legislation. The Department of Customs has jurisdiction over both normal zones and FZs and can impose restrictions or prohibitions on certain activities, depending on the nature of the goods. Additionally, the MECIT has management oversight over the Larnaca FZ.
A Customs Warehouse can be set up anywhere in the ROC, provided the right criteria are met and with the approval of the Department of Customs. For more information, interested parties may Tags
Bureau of Economic and Business Affairs Bureau of European and Eurasian Affairs Cyprus
Source: U.S Department of State, Bureau of European and Eurasian Affairs
