Cyprus saw its highest increase in gross domestic product (GDP) in almost a decade in the first quarter of 2017 (just over 3%). The dark days of 2013 appear to be in the past, with traditional sectors like finance and shipping recovering well and newer ones like education and energy gaining more attention and making considerable progress. It is often said that some good comes out of bad and Cyprus has worked hard to get back on its feet since the 2013 financial crisis. It has toughened up its anti-money laundering regulations and been rewarded by being rated top for transparency in 2017 by Transparency International. This has restored Cyprus's reputation among private investors as an investment hub that offers a vast array of opportunities.
Foreign investment remains at the heart of government strategy, aided by factors such as the citizenship-by-investment programme, which will help to attract private investment in the property, retail and pharmaceutical sectors. These incentives are drivers that, by way of a knock-on effect, help to sustain real estate prices. Further, the citizenship-by-investment programme enables citizenship through naturalisation via private investment in commercial and property projects. Russian and Ukrainian magnates are reportedly among those who have taken advantage of such programmes over the past decade, while Chinese investments are also a factor. Over €4 billion has been invested in Cyprus over four years through the citizenship-by-investment programmes. The majority of investments under this programme concern real estate (€1.752 billion). The scope of investment in Cyprus companies is €464 million (€654 million in deposits). In addition, Cyprus has retained its attractive EU-approved tax regime and has made major efforts to attract further investors.
Cyprus has been an EU member state since 2004, which provides investors with full access to the EU market and all of the relevant privileges. In addition, Cyprus offers an attractive and favourable tax regime which fully complies with EU and international laws and regulations. Cyprus is considered to be a key jurisdiction which offers significant prospects for international tax planning (eg, through the use of a Cypriot company with advantages such as a number of double tax treaties and low tax rates). Further, Cyprus offers a strategic location at the crossroads of three continents (Europe, Africa and Asia) and is close to the busy shipping and air routes linking Europe with other regions. In addition, excellent weather, high living standards and a safe environment make Cyprus an attractive country for private investors.
Cyprus also provides a safe venue for private investments in real property. Investors can invest in commercial, residential and mixed-use property in city centres and coastal locations. The acquisition of residential and commercial property of a specific value under Cyprus's citizenship-by-investment programme grants an investor the possibility to obtain Cypriot citizenship in a relatively short period, which seems to be one the most beneficial advantages of investing in this sector. Investments in projects that are under construction (as well as investments in finished projects) generate sufficient profit when real estate assets are sold or let, as Cyprus is an attractive tourist region. As a result, Cyprus offers an ideal combination of lifestyle benefits and financial rewards for private investments of this type.
In addition, Cyprus is considered a reputable international shipping centre and a favourable location for the establishment of ship management companies and companies that conduct shipping-related activities. It offers many sufficient advantages in this sector, such as its:
- participation in the main international maritime conventions; and
- wide network of bilateral agreements concerning merchant shipping.
Due to the large number of ships and vessels (more than 1,000 vessels with 21 million gross tonnage) registered under the Cyprus flag, the country maintains the third-largest merchant fleet in Europe and the 10th largest in the world. Shipping amounts to 5% of Cyprus's GDP. For private investors interested in shipping, Cyprus offers a number of benefits, such as:
- a low fee for shipping registration;
- an open registry allowing foreign citizens to register ships under the Cyprus flag; and
- beneficial taxation for shipping companies.
While the shipping and financial sectors continue their recovery, the energy sector is also booming. Further, the education sector is continuing to develop and the real estate sector is growing steadily, as evidenced by the numerous developments and skyscrapers under construction in Limassol and the Limassol, Ayia Napa and Paralimni Marina developments, which include luxury villas and thousands of yacht berths.
Unsurprisingly, Cyprus is a popular place for private real estate investments and demand is rising dramatically. According to official data, during the first seven months of 2017, property sales in Cyprus rose by 19.6 %. The real estate property market is expected to continue improving over the next few months, leading to overall economic growth.
The energy sector is also booming at present and is attracting notable international investment. In this context, Cyprus recently completed its third round of licensing for three exploration blocks, granting drilling licences to four foreign operators. The energy sector offers the possibility of taking advantage of the recent natural gas finds in adjacent Egyptian and Israeli waters and Cyprus has its own gas reserves in the Levant basin. Renewable energy sources (solar and wind energy and biomass), the recent discovery of oil and gas within Cyprus's exclusive economic zone and hydrocarbon resources in the west of the country are the focus for international private investors attracted by the benefits that this sector offers. Despite some specific challenges, it appears that the energy sector offers a promising future to private investors.
Higher education is another avenue for attracting private investment in Cyprus. Foreigner nationals can avail of a wide range of private education institutions which provide students with a solid academic background. Cyprus has more university graduates per capita than most EU and other developed states. The authorities are investing even more in higher education and research and development in order to diversify the skills available. Despite the number of foreign students studying in Cyprus (mainly from Greece and developing countries) and a variety of related advantages, this category of investment is not comparable with investments in other sectors.
The tourist sector is also undergoing a resurgence. Tourist numbers hit an all-time high in 2016, prompting new projects to add to the facilities already on offer. One such example is an integrated casino resort which recently received planning permission for construction in Limassol, with investment topping €500 million.
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For further information on this topic please contact Angelos Paphitis at A G Paphitis & Co by telephone (+357 25 73 10 00) or by email ([email protected]). The A G Paphitis & Co website can be accessed at www.agplaw.com.