Spotlight on Cyprus: Here’s why this European destination is ideal for investors

As the easternmost European country, Cyprus is in a rather unique position. It takes just over three hours to fly from Dubai, Riyadh, Doha, Manama, or Kuwait City and an hour from Amman, Beirut, or Cairo. Beyond the clear advantage of its location, Cyprus’ strong economy and response to the Covid-19 pandemic have cemented the island country as an attractive investment opportunity for investors from the Gulf region.

To illuminate the strength of the Cyprus economy, consider its impressive growth over the past few years, especially when compared to the rest of the European Union.

In 2021, just a year after the onset of the pandemic, the real GDP in Cyprus grew 5.7 per cent, compared to 4.1 per cent in the EU. In the third quarter of 2022, the real GDP in Cyprus rose 5.5 per cent, while that figure in the EU was just 2.1 per cent. Overall, the economy in Cyprus is expected to grow more than 6 per cent in 2022. This uptrend is a direct result of the attractiveness of Cyprus to foreign investors.

“It’s like a blue chip during bad times, and in good times it’s like a unicorn,” said George Campanellas, chief executive of Invest Cyprus.

A resilient economy

While many countries continue to struggle to recover in the wake of the pandemic, the economy of Cyprus has proved resilient over the past few years, particularly as it relates to foreign direct investment (FDI). According to the Greenfield FDI Performance Index 2021, Cyprus ranks 18th worldwide, up 50 places from the prior year. When it came to post-Covid FDI recovery for the first half of 2022, Cyprus ranks third in the entire world.

“This is the result of a combination of several factors, such as new incentives that have resulted in a lot of international arrivals to the country as companies are coming here to set up operations,” said Campanellas.

On top of its strong economy, its common law principles-based legal system and attractive tax system also make it a desirable locale for international companies, institutional investors, and high-net-worth individuals. There is a 12.5 per cent corporate income tax rate, one of the lowest in Europe, and tax deductions and exemptions such as no withholding of taxes and no tax on profits for the disposal of securities or capital gains. There is also a flat tax rate of 8 per cent on carried interest and performance fees for fund managers, no wealth and inheritance tax, an 80 percent exemption on IP and new equity injected to local entities, and a 50 per cent exemption on personal tax for new non-domiciled employees.

When it comes to the cost of living, Cyprus stands out compared to its European Union counterparts. In 2022, Nicosia’s cost of living index has been up to 35 per cent lower than other EU capitals, while the country maintains the 5th lowest inflation rate within the EU27 area.

In line with its 2035 Vision to become one of the most incredible locations in Europe to live, work and do business, the country has positioned itself as a top destination for international companies within the EU.

Building on its reputation as a leading maritime cluster and Europe’s largest cluster of trading platforms for financial products, the country has recently embarked on a new journey to become home to some of the biggest names in international technology.

An attractive hub for new companies and talent

This strategy’s success has significantly increased the flow of new companies and talent, boosting local demand and making greenfield and brownfield projects more attractive to equity investors. As the country continues to grow as an international business centre, the economy is ready to welcome new investments into residential and commercial projects, including office space, private education, healthcare, and thematic tourism and entertainment.

For investors around the globe, Cyprus is emerging as a locale that has it all. It does not matter which sector; the country has demonstrated the ability to attract high-skill industries due to its strong economy, strategic location, attractive framework, and high quality of living. Ultimately, for investors in the Gulf region, Cyprus is poised to be an attractive option for years and years to come.

“Cyprus is the gateway to European Union,” added Campanellas. “We are a destination for investments, and we aim to attract more investors from the Gulf region because of the opportunities in the country.”