2023 Doing Business in Cyprus (UK Edition)

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DOING BUSINESS C YPRUS 14 UNITED KINGDOM EDITION Following the country’s financial crisis in 2013, Cyprus undertook a major reform agenda and while still facing some economic challenges, the small EU nation has demonstrated resilience and an ability to bounce back to growth. The year 2015 signalled a sooner-thanexpected exit from recession and a rapid economic turnaround followed, with 2017 recording almost 4% growth – earning Cyprus praise as an economic success story. Cyprus’ resilience in the face of the pandemic was once again evident with GDP growth reaching a strong 5.6% in 2022, although the European Commission forecasts a downturn to 2.2% growth in 2023. Consistent credit rating upgrades have further boosted confidence and foreign direct investment has been flowing into all key sectors. Cyprus has retained and strengthened its status as an attractive investment gateway to the EU and other high-growth markets, as well as a secure base to tap into opportunities in the Middle East. Offering a tax-efficient EU company domicile, the country is emerging as an increasingly attractive location for fund managers and promoters, and a compelling destination for regional headquarters and a base for tech companies. GROWING TECH CLUSTER The technology space in Cyprus is seeing a fresh boost with more state support to the sector, the launch of new national strategies to integrate innovative tech, and fresh incentives to attract more digital nomads, IT start-ups and regional headquarters. With its new focus on long-term development outcomes, Cyprus is determined to diversify and harness growth with a technology-driven economy. The biggest spender by far on IT in Cyprus is the financial sector, followed by the telecoms providers and the public service. Albeit one of the smallest EU member states, research and EU Member since 2004, Eurozone member since 2008 Cyprus is the EU’s largest shipmanagement centre and amongst the top three in the world Cyprus is an established international business and service centre for shipping, financial services and commerce, and is classified by the World Bank as a high-income country With its new focus on longterm development outcomes, Cyprus is determined to diversify and harness growth with a technology-driven economy.
DOING BUSINESS C YPRUS 15 UNITED KINGDOM EDITION development is an area where Cyprus punches well above its weight. Unprecedented investment into the sector and ground-breaking projects are establishing this small island, not only as an innovation and research hub, but as a regional centre of excellence providing strong links with the global scientific and technical innovation community. INVESTMENT FUND BOOM C yprus has big ambitions in the investment funds sector to target a bigger piece of the global asset management pie. The steady growth in both Assets under Management and in the number of fund structures licensed and active in Cyprus have underlined the strength and appeal of the novice domicile. Assets under Management (AuM) have seen a formidable increase from €2.7 billion in 2016 to €10.7 billion in the second quarter of 2023, showing that it is not the sector’s size but its fast growth that has impressed, and is being recognised by the global asset management and investor community. Investment funds have already invested more than €2.5 billion in several sectors of the Cypriot economy, such as shipping, hospitality, education, healthcare, and renewable energy. Cyprus offers both EU-regulated Undertakings of Collective Investment in Transferable Securities (UCITS) and Alternative Investment Funds (AIFs). In July 2018, the country upgraded its AIF framework and introduced Registered AIFs (RAIFs), which do not require authorisation by the supervising Cyprus Securities and Exchange Commission (CySEC) to commence operations provided they are externally managed by an Alternative Investment Fund Manager (AIFM) based in Cyprus or another EU country. The upgraded legislation has been hailed ‘groundbreaking’ and offers a significantly more time- and cost-efficient means of establishing AIFs in Cyprus. Today, the majority of alternative investment funds in Cyprus are of a small and medium size and focus on debt and equity securities, real estate and private equity. However, Cyprus has also attracted larger funds including one with assets of €500 million under management. The number of alternative investment funds has more than doubled in the last five years and foreign UCITS are now widely marketed in Cyprus, including ones promoted by major international financial institutions.
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