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St. Gerardi General View of Lefkosia/Nicosia, provided courtesy of the Cyprus Tourism Organisation
PUBLISHED BY GLOBAL INVESTMENT I LIMITED AND DISTRIBUTED WITH THE SUNDAY TELEGRAPH
More than just a holiday destination with pristine white beaches and 300 days of sunshine, Cyprus can also cater to your business needs ranging from registering and setting up your companys operations to managing your EU, North African and Middle Eastern clients at a considerably lower cost. As well as being an EU country and a member of the European Monetary Union since 2008, Cyprus enjoys the lowest corporate tax rate in the EU of 10%. Cyprus belongs to those jurisdictions on the OECD White List which have substantially implemented the internationally agreed tax standard. In addition to this, Cyprus provides efficient business services, has a transparent legal and regulatory system and is committed to sustainable growth. Cyprus welcomes both visitors and investors to work here, so, if you are searching for a new business base, consider Cyprus. Its more than just beaches and sun.
Columbias growth and expansion over the years is attributed to the uniqueness of Cyprus; being the islands strategic position at the crossroads of three continents, its comprehensive legal framework, double tax treaties regime, communication system, banking system, infrastructure in general and last but not least its highly educated labor force.
Captain Dirk Fry, Managing Director Columbia Ship Management Ltd
The favorable business climate, the excellent telecommunications infrastructure, the well educated and skilled human resources, the favorable tax rates and the proximity to the Middle East and Africa markets, were some of the key factors that enabled NCR to decide to move its regional offices to Cyprus in the 80s. Gradually, NCR managed to expand the office in Cyprus to cover also all the African Countries.
Managing Director of NCR Cyprus, Mr. George Flouros
Cyprus Investment Promotion Agency Tel + 357 22 441133 Fax + 357 22 441134 www.cipa.org.cy info@cipa.org.cy
The Ministry of Commerce, Industry and Tourism Tel + 357 22 867100 Fax + 357 22 375120 www.mcit.gov.cy/ts perm.sec@mcit.gov.cy
Cyprus has developed into a bridge of cooperation and may be used not only as an effective jurisdiction for routing investments within the EU, but also as a portal for investment outside the EU, particularly into the rapidly growing economies of Russia, Central and Eastern Europe, India and China. By Mr. Christodoulos Angastinotis, Cyprus Investment Promotion Agency Chairman, Board of Directors
info@globalinvestmenti.com www.globalinvestmenti.com T: +44 (0)20 7125 0579 F: +44 (0)207 183 8393 Editor: Joseph Bove Country Consultant: Myron Edwards Design: Kuljit Kaler Third Floor, 207 Regent Street, London, W1B 3HH Registered in England & Wales Registration No: 06900033
The views expressed in Business in Cyprus Special Report 2012 are not necessarily those shared with the publisher, Global Investment I Limited. Wishing to reflect the true nature of Cyprus, the editor has included articles from a number of sources, and the views expressed are those of the individual contributors. No responsibility or liability is accepted by Global Investment I Limited for any loss to any person, legal or physical, as a result of any statement, fact or figure contained in Business in Cyprus Special Report 2012. This publication is not a substitute for advice on a specific transaction.
Those sectors are expected to grow in the future, though 2012 will
Costas Apostolides, renowned Cypriot Economist and Chairman of EMS Economic Management Ltd provides his perspective on the prospects for the Cypriot economy.
be a period of adjustment. The Government of Cyprus anticipates a period of stagnation in 2012 because the weakness anticipated in the world economy (IMF, EU assessments) and therefore external demand will limit the potential for growth. The Cyprus Stability Programme for 2011 2015 submitted to the EU estimates that there will be stabilization and adjustment in 2012, GDP growth in 2013 and stronger growth in 2014 (1%) and 2015 (1.5%). The programme also keeps the public sector budget deficit within the Maastricht Treaty requirements in 2012 (below 3%), balances the budget from 2014 onwards, and reduces the public debt. This programme is, however, conservative and does not allow for the recent changes that are taking place in the economy. Cruise ship port and tourist development by a German led group consortium is expected to begin this year, and a memorandum of understanding was signed in April with a Chinese Group to convert the old Larnaca Airport into a European and Middle East logistics, storage and assembly centre for Chinese products. Interest has also been shown in investments in Cyprus by the Canadian Triple Five Group and the sovereign funds of Qatar. The most important development however has been the discovery of Natural Gas within the EEZ of Cyprus by Noble Energy of
Prospects
The economic prospects are changing and a more positive environment for developing is emerging as a result of the following: Improvement in business and consumer confidence. Further development of Cyprus as a centre for shipping, financial, legal and business services, as well as a good geographical location offering good communications and a favourable lifestyle for ex patriots. The heightened interest shown by foreign companies for investment. The discovery of natural gas deposits in the Cyprus Exclusive Economic Zone (EEZ), and the opportunities this opens up for the energy sector and cooperation with other countries (Israel, Greece and possibly Egypt). According to recent surveys, business and consumer confidence is picking up, and will further improve in 2012 owing to the Cyprus EU Presidency which began in July for the six months term; with over a hundred meetings and around 20,000 overseas participants, plus the added importance given to Cyprus. At the same time the re-establishment of most of the electricity production lost, the reduction in energy costs, and the resulting consumer and business savings, will encourage further consumer confidence. Growth will also be facilitated by the stabilization and reorganization that is taking place in the construction sector, and by the reduction in interest rates that should result from restructuring in the banking sector. Further encouragement is given by the fact that registration of companies in Cyprus, many of which are foreign owned, continues to be strong at around 20,000 new applications a year, and ship management alone is expected to generate revenues of over a billion euros a year. In the banking sector deposits are stable and foreign deposits are increasing showing that the international business community still considers Cyprus a safe haven. A major impact is also being made by more than 50 FX companies operating from Cyprus, thereby turning it to an emerging international centre for foreign exchange transactions. There has been great interest in foreign investment in Cyprus over the past couple of years, with several projects coming into fruition in 2012. Construction has begun on a 220 mln storage and regional distribution facility for petroleum products by the VITOL/VTTI group with Malaysian interests, that will turn Cyprus into an energy hub. The transformation of Larnaca port into a major
the USA, which is estimated at about 7 trillion cubic feet cubic feet of gas with estimated value between 30 to 60 billion USD dollars. To put this into perspective, the value of the natural gas already found in the EEZ of the Republic of Cyprus is well in excess of the public sector debt of the country. This is the first confirmation of natural gas within the Cyprus EEZ, and it is expected that further finds will be made in some of the other 11 lots for which a call for proposals was completed in May. Given that in the nearby Israeli EEZ about 33 trillion cubic feet of natural gas have been found, negotiations have been taken place to examine the possibility of cooperation on processing, exploitation and exporting natural gas and energy. A memorandum of understanding has been signed for a feasibility study for an electricity cable linking Israel, Cyprus and Greece, while studies are taking place regarding doubling electricity production in Cyprus, establishment of a liquefaction plant on the island, and a pipeline for exporting natural gas. The prospect of Cyprus becoming an energy hub in the Eastern Mediterranean is being seriously examined, and already this is leading to considerable interest in investments and on the island in many sectors including energy, transport, logistics, financial services, universities, real estate and other sectors increasing the islands attraction as an international business centre. These developments combined with the probability of a recovery in local demand, and the anticipated reduction in interest rates, suggest that the Cyprus economy is on course for a return to growth and development.
Cyprus Shipping
Reaping the benefits of the new tonnage tax system.
Cyprus continues to lead the international shipping regula- safety, pollution prevention, qualifications of the crew and the living tions by preparing legislation to fight unlawful acts against and working conditions on board. The DMS also closely monitors ships which are repeatedly detained by foreign port State control Cyprus Flag ships. The new tonnage tax system for Cyprus merchant shipping authorities due to deficiencies. Statutory surveys, inspections and was approved by the European Commission on 24th March 2010, certification services for ships flying the Cyprus flag are carried out as compatible with the requirements of the EU acquis, in accord- by recognised organizations (ROs). The DMS monitors the perforance with the relevant 2004 and 2009 Guidelines on State Aid mance of the ROs through extensive audits. to Maritime Transport. The new tonnage tax system extends the The DMS has very recently prepared comprehensive new nafavourable benefits applicable to owners of Cyprus flag vessels tional legislation to help counteract unlawful acts against Cyprus and to ship managers respectively, to owners of foreign flag ves- Flag ships. The Law, which was recently enacted, is a pioneering sels and charterers. It also extends the tax benefits, which previ- legislation establishing the required legislative framework allowing ously covered only profits from the operation of vessels in shipping the use of armed personnel on board Cyprus flagged vessels, in activities, to cover profits from the sale of vessels, interest earned a regulated manner, when these vessels are sailing through high on funds used other than for investment purposes and dividends risk areas. The Law allows the owner or manager of a Cyprus flagged ship to request permission to engage a private company paid directly or indirectly from shipping related profits. The shipping community in Cyprus welcomed with enthu- providing armed personnel services. The new Law incorposiasm the new tonnage tax rates the recommendations system which secures a stable and guidance developed by fiscal environment in the long the International Maritime term. Faced with aggressive Organization in relation to competition in the international privately contracted armed shipping arena, the shipping security personnel. Furtherindustry in Cyprus found a key more, the Law takes into acally in its effort to maintain high count the provisions of the competitiveness and attracUnited Nations Convention on tiveness. the Law of the Sea (UNCLOS). The response from The Law contains a number abroad is very encouraging of pioneering provisions with and it is the belief that, as a the intention to touch upon all response to the continuing main aspects pertaining to the promotional efforts of the Decomplexity of issues arising partment of Merchant Shipfrom the use of armed secuping (DMS) and the Cyprus Cyprus Flag Vessel provided courtesy of the Department of Shipping rity personnel on board ships. shipping industry, more companies will choose to enter the tonnage tax system due to its fa- Cyprus signed Bilateral Agreements for Cooperation on Mervourable provisions, thus contributing to the further development chant Shipping with 23 countries, among them many European countries, with the aim to promote friendly relations between Cyof the Cyprus maritime cluster. During the last few years, Cyprus managed to upgrade and prus and those countries and facilitate seaborne trade and emmodernise its fleet through a safety policy which focused on the ployment of seamen. These agreements contain -among otherseffective control of the ships and the improvement of the quality of provisions for most favoured nation treatment or same treatment its fleet. The establishment of a network of local inspectors of Cy- as afforded to their own vessels engaged in international voyages prus ships, covering important ports worldwide, in order to ensure in respect of free access to ports, use of ports for loading and efficient and effective control of our ships and to avoid detentions unloading of cargoes and for embarking and disembarking of pasby port State control, was only part of the measures taken. Cyprus sengers, payment of dues and taxes, exercising normal commeris a signatory to all international maritime conventions on maritime cial operations and use of services related to navigation. The Bilateral Agreements with Estonia, Germany and Hunsafety and pollution prevention. Ships applying for registration under the Cyprus flag are un- gary have been initialled and their signature is pending. The DMS dergoing extensive surveys by the Departments surveyors. The is not currently involved in negotiating a Bilateral Agreement with ships have to meet specific requirements and conditions which the UK, however, thats a possibility for the future as it is envisaged are deemed necessary for the achievement of safe, secure and that a Bilateral Shipping Agreement would be beneficial for both efficient shipping on clean oceans. Unscheduled inspections are nations. conducted by the surveyors and inspectors of the DMS for ships flying the Cyprus flag on a continuous basis. These are planned By Dr. Anthony Madella in terms of priority on the basis of the age, size and type of each Acting Director, vessel and their past safety record. Particular attention is given to Department of Merchant Shipping
To maximise after tax returns for investors Cyprus offers a competitive corporate tax rate combined with a wide network of double tax treaties.
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