The advantages and disadvantages of doing business in Cyprus according to the report of the World Bank.
Starting a business in Cyprus by incorporating a company is an attractive solution for many international entrepreneurs form many different reasons.
The strongest advantages are more or less known. The low corporate tax (12.5%), the attractive personal tax regime and various tax deductions and exemptions for tax residents.
In the meantime there are many other factors that encourage the businesses to operate under simplified procedures making the Cyprus company an attractive business solution.
The secure bank system, the legislations based on the Anglo-Saxon principles, the well-structured road network as well as the advanced trade port, are some important reasons businesses are incorporated or re-domicile to the country.
This is what the World Bank’s report 2018 renders. The report is presenting the basic advantages and disadvantages of Cyprus as a business center.
Cyprus is one of the best places in the world to form a corporation due to the very fast procedure that will take approximately 8 days to complete. Also the registration costs is low (12,4% of per capita income) as well as the annual fees (Levy).
Registration of real estate property.
Cyprus has a good advantage here as the procedure takes only 9 days to complete and the cost is the 10,4% of the property.
Getting Credit. Protection of loaners and borrowers.
The World Bank’s report states the level of information available for information related to creditors, and the rights of loaners and borrowers. The protection and the transparency is based on the compulsory submission of data to the official bank information systems that collect, maintain and make available information on a database concerning the economic behavior of businesses and individuals. Similar information can be exchanged with the Cyprus Central Bank, the Company Registrar, Tax department and financial institutions.
Protecting Minority Investors.
The transparency and the applied procedures to the board of the companies, support the micro-investors and attract new investments in the country. Procedure and directives secure minority shareholders against misuse of corporate assets by directors for their personal gain as well as shareholder rights. Governance safeguards and corporate transparency requirements are applied to reduce the risk of abuse.
The low tax and relatively easy submission of the tax obligations make Cyprus the number 44 in this section. The companies have to submit their contributions based on the 12,5% on their profits, 7,8% social insurance on salaries, 20% capital gains tax and 30% interest tax.
Cyprus is at the 21st place worldwide in the liquidation of companies since the whole procedure takes approximately in one and a half year, and the recovered amount paid to the creditors of the company is at 73.2%.
Construction permits in Cyprus are not so efficient and are considered in the disadvantages by the World Bank. The reason is because 8 different procedures are needed to get a construction permit. These procedures will take some time and in some case a construction permit and issuance of a license to operate (always depending from the sector) can take up to 500 days.
The installation of electricity in a new establishment in Cyprus can take some time. This procedure can take up to 137 days. The charges for the installation are high as well reaching up to the 133% per capita income. The good news though regarding the power provider in Cyprus (which is the only one and managed by government) is the solid power service and the trusty invoicing.
Although Cyprus’s port is a very important trade hub in the Mediterranean Sea, trading in Cyprus can be pricy and time consuming. Cyprus has the disadvantage of being and island and not directly connected with the rest of the Europe or Asia. This means higher import costs bus also time consuming procedure that will make imports and exports not so efficient. Preparation of the paperwork can take time and sometimes is expensive. Still trading is one of the most important sectors of the Cyprus economy.
Contracts and dispute resolution.
The local legislation can be very time consuming sometimes. A trade dispute for example can take 1100 days to complete with a relatively high cost. The report grades Cyprus on this section, below average.