Republic of Cyprus

Geography

Cyprus is the third largest island in the Mediterranean Sea (after Sicily and Sardinia), with an area of 9.251 sq. km (3.572 sq. miles).   It is located at the northeastern corner of the Mediterranean, at the crossroads of Europe, the Middle East and Africa.

The population of Cyprus is estimated at 885.600 (December 2008) of whom 668.700 belong to the Greek Cypriot community (75,5%), 88.700 (10,0%) to the Turkish Cypriot community and 128.200 (14,5%) are foreign nationals residing in Cyprus.

Cyprus, officially known as the Republic of Cyprus, was founded in 1960 following independence from Great Britain. 

The capital of the island is Lefkosia (Nicosia), the last remaining divided capital city in the world, since Turkish military invasion in 1974, with a population of 234.200 in the sector controlled by the Cyprus government. It is situated roughly in the centre of the island and is the seat of government as well as the main business centre.

The second largest town is Lemesos (Limassol) on the south coast with a population of around 185.100. Since 1974 it has become the island’s chief sea port, an industrial centre and an important tourist resort.

Larnaka, also on the south coast of the island, has a population of 82.700 and is the country’s second commercial sea port and an important tourist resort. The Larnaka International Airport is located to the south of the city.

Finally, Pafos, on the south-west coast, with a population of 55.900, is a fast-developing tourist resort, home to the island’s second international airport and an attractive fishing harbour.

The towns of Ammochostos (Famagusta), Kyrenia and Morfou have been under military occupation by Turkey since the Turkish invasion of Cyprus in 1974. The Greek Cypriot inhabitants of these towns were forced to flee to the government-controlled area. In their homes and properties the Turkish authorities installed illegal settlers, mostly from Anatolia, Turkey.

The language of the Greek Cypriot community is Greek and the community adheres to the Autocephalous Greek Orthodox Church of Cyprus.  However, English is widely spoken in Cyprus and is regularly used in commerce and government. Under the Constitution of 1960, the Armenian, Maronite and Latin communities had to choose to belong either to the Greek Cypriot or Turkish Cypriot community. These groups, which belong to other Christian denominations and constitute 1% of the population, opted to be part of the Greek Cypriot community.

The language of the Turkish Cypriot community is Turkish and the community adheres to Islam.

Source:  Press and Information Office, Republic of Cyprus

History

The history of Cyprus is one of the oldest recorded in the world. From the earliest times Cyprus’ historical significance far outweighed its small size. Its strategic position at the crossroads of three continents as well as its considerable supplies of copper and timber combined to make it a highly desirable territorial acquisition.

The first signs of civilization go back to the 9th millennium BC, while the discovery of copper brought wealth and trade to the island. Around 12 BC a process began that was to mark the island with an identity that it still has today: the arrival of Mycenaean-Achaean Greeks as permanent settlers, who brought with them their language and culture.  Cyprus was subsequently conquered by various nations but, nevertheless, managed to retain its Greek identity, language and culture intact. The Turkish Cypriots came much later. They were descendants of the Ottoman Turks who occupied the island for more than 300 years between the 16th and 19th centuries, and have contributed their own heritage to the country.

Republic of Cyprus

On the basis of the Zurich – London agreements, Cyprus became an independent republic on 16 August 1960. As an independent country it became a member of the United Nations, the Council of Europe, the Commonwealth of Nations and the Non-Aligned Movement. According to the agreement, Britain retained two sovereign bases (158.5 sq. km) on the island, at Dekeleia and Akrotiri – Episkopi.

The Zurich – London agreements comprised the Treaty of Establishment, the Treaty of Guarantee and the Treaty of Alliance. Under the Treaty of Guarantee, Britain, Greece and Turkey pledged to ensure the independence and territorial integrity of Cyprus as well as respect for its Constitution. The Treaty of Alliance between Cyprus, Greece and Turkey was a military alliance agreed for defence purposes. These agreements also became the basis for the 1960 Constitution.
The 1960 Constitution incorporated a system of entrenched minority rights unparalleled in any other country. The 18% Turkish Cypriot community was offered cultural and religious autonomy and a privileged position in the state institutions of Cyprus (Turkish Cypriot Vice President, three out of the ten Ministers of the Government and 15 out of 50 seats in the House of Representatives). The frequent use by the Turkish Cypriot leadership of its extensive powers of veto, gave rise to deadlock and inertia in the functioning of the state. In November 1963, when Cyprus’ first President Makarios put forward proposals for amending the Constitution in order to facilitate the smooth functioning of the government and the state, the Turkish side promptly rejected them, arguing that the Constitution could not be amended without the entire independence agreement being revoked.

Subsequently, the Turkish Cypriot ministers withdrew from the Council of Ministers and Turkish Cypriot civil servants ceased attending their offices. The ensuing constitutional deadlock gave rise to intercommunal clashes and threats by Turkey to invade Cyprus.

Following the threats by Turkey against Cyprus, the government of the Republic brought the matter to the UN Security Council. The Security Council unanimously adopted resolution 186 of 4 March 1964, whose basic principles have guided international actions on Cyprus ever since.

This resolution:

 • Established the UN Secretary-General’s mission of good offices aiming at a
Peaceful solution on the basis of an agreed settlement in accordance with the UN Charter;
 • Created UNFICYP, the UN peacekeeping force on Cyprus;
 • Reaffirmed the sovereignty and continuing existence of the Republic of Cyprus;
 • Reaffirmed the continuity of the government of the Republic of Cyprus.

Despite calls by the Security Council to respect the sovereignty and territorial integrity of the Republic of Cyprus and to abstain from the threat or use of force against it, Turkey’s air force bombed Cypriot villages in August 1964.

On 26 March 1965, UN mediator Dr Galo Plaza issued one of the most significant reports ever to be prepared on Cyprus (S/6253). The Plaza report considered the 1959 arrangement as “a constitutional oddity;” questioned the functionality of federalism demanded by the Turkish side due to the hardship and inhumane nature inherent in population movements; was critical of disproportionate minority vetoes; and perceived the protection of the rights of minorities to be in international instruments such as the European Convention.

Arguing strongly against the geographical separation of the two communities advocated by the Turkish side, Dr Plaza stated that if the purpose of a settlement of the Cyprus question is to be the preservation rather than the destruction of the state and if it is to foster rather than to militate against the development of a peacefully united people, I cannot help wondering whether the physical division of the minority from the majority should not be considered a desperate step in the wrong direction.
Turkey instantly rejected the report and its recommendations and declared that it would not deal with the UN mediator. UN mediation came to an end, and thereafter the UN involvement in the Cyprus peace process has been conducted under the Secretary-General’s good offices.

The government of Cyprus took various measures to restore normalcy on the island. These steps resulted in the elimination of intercommunal violence and dramatic reduction of tensions between the two communities. The government also offered economic incentives to Turkish Cypriots, who had been forced by their leaders to move to Turkish controlled enclaves, to return to their homes. The Turkish side did not reciprocate, maintaining, instead, roadblocks in order to keep Greek Cypriots from Turkish enclaves.
In 1968, the government initiated talks with the Turkish Cypriot leadership under UN auspices for a negotiated agreement on a more functional constitutional system for the Republic of Cyprus. These talks had achieved considerable progress and, according to some reports, were close to success, when they were interrupted by the tragic events of 1974.

Source:  Press and Information Office, Republic of Cyprus

Cyprus in the World
Cyprus in the International Community

Soon after independence in 1960 the Republic of Cyprus became a member of the United Nations, the Commonwealth, the Non-Aligned Movement and the Council of Europe. Cyprus subsequently became a member of other international organizations, including the Organization on Security and Cooperation in Europe, and the World Bank.

In 1974, Turkey, in violation of international law and the United Nations Charter, invaded Cyprus and since then continues to illegally occupy by military force 36,2% of the Republic’s territory. The international community has stated categorically its support for the internationally recognized sovereignty of the Republic of Cyprus over the whole of its territory, including the occupied part. United Nations resolutions reaffirm, the right of the Republic of Cyprus and its people to full and effective control over the entire territory of Cyprus and natural and other resources and call upon all states to support and help the government of the Republic to exercise these rights (United Nations General Assembly resolution 37/253 of 13 May 1983).

In 1983 the occupation regime, at the instigation of Turkey, arbitrarily and unilaterally declared “independence” in the occupied part of Cyprus. The Security Council of the United Nations by its resolution 541(1983) deplored this declaration, considered it as legally invalid and called for its withdrawal. Furthermore, by its resolution 550(1984), the Security Council condemned all secessionist actions and called upon all states not to recognize the purported entity, the so-called “Turkish Republic of Northern Cyprus” and not to facilitate or in any way assist the secessionist entity.
By the same resolutions as well as by a number of other resolutions the United Nations called upon the international community not to recognize any Cypriot state other than that of the Republic of Cyprus and to respect its sovereignty, independence, territorial integrity and unity.

The independence and sovereignty of the Republic of Cyprus as well as the legality of its internationally recognized government have been recognized repeatedly in numerous resolutions and decisions by other international bodies, such as the European Union, the Council of Europe, the Commonwealth and the Non-Aligned Movement. The international community, with the sole exception of Turkey, which promoted the purported secession of the occupied part, recognizes only one state in Cyprus, the Republic of Cyprus, and its legal government.

Cyprus in the European Union

On 1 May 2004 the Republic of Cyprus became a full member of the EU completing a long journey that lasted more than three decades. The President of the Republic of Cyprus signed the Accession Treaty on 16 April 2003 in Athens, Greece and on 14 July the House of Representatives ratified the Treaty of Accession unanimously. In a statement during celebrations marking Cyprus’ accession, the president of Cyprus said:
“This moment signals a momentous milestone in Cyprus’s history. It is the second most important historic landmark after the proclamation of the Republic of Cyprus 44 years ago.
This moment marks the successful conclusion of a long effort and the hopeful beginning of a new course and a new era for Cyprus.
As from this moment, the Republic of Cyprus formally becomes a Member of the European Union. It becomes a full, integral and inseparable member of the great European family.

Adoption of the Euro

On 1 January 2008, Cyprus and Malta became the 14th and 15th member states of the EU to join the Eurozone after fulfilling all the necessary criteria, following the decision of the European Council in June 2007. At the official celebration for Cyprus’ accession to the Euro zone, held in Nicosia on 18 January 2008, the President of the EU Commission praised the economic, monetary and fiscal policies of the Government of Cyprus that led to the complete alignment with the Maastricht and European Central Bank (ECB) criteria for adopting the euro.

EU Accession Benefits

Cyprus has always been a part of the European family of nations. Accession to the EU was a natural choice for Cyprus, one that was dictated by its culture and civilization, its history, its European outlook and its traditions of democracy and freedom.

Cyprus has a lot to benefit from EU membership. It also has a lot to offer as a member-state. The geographic position of the country, the healthy state of its economy, the devotion of the people to the ideals of the EU are all elements which enable Cyprus to contribute to the stability and welfare of the European family, regardless of its small size. Situated at the intersection of important transport and communications routes linking Europe to the Middle East and Asia, Cyprus aspires to become the region’s economic and financial operations centre, a major communications and transport hub, and a meeting place for peoples and cultures. With its advanced technical infrastructure and skilled human resources it can become a bridge from where European enterprises launch their activities. Moreover, it can act as a shield, protecting Europe from the threat of terrorism, the inflow of narcotics, illegal immigration, and money laundering and trafficking in human beings.

The process of EU enlargement is proof of the common determination of the peoples of Europe to come together in a Union that has become the driving force for the consolidation of stability, security, peace, democracy and sustainable growth in Europe and beyond. As a full member of the Union, Cyprus is working actively with all other member-states in shaping the future development of Europe and in completing the ambitious project of European reunification and integration.

The EU has taken a firm position in support to the Cyprus problem that respects the sovereignty, independence, territorial integrity and unity of the country, in accordance with the relevant UN resolutions and the high-level agreements between the two communities. While the UN Secretary-General’s mission of good offices has provided the framework for a negotiated settlement of the Cyprus problem, the EU is now expected to assume a central role in assuring that any proposed settlement conforms to its principles and legal norms from the beginning.

Source:  Press and Information Office, Republic of Cyprus

The Cyprus Economy
Basic Characteristics

The Cypriot economy is a small, robust and fairly flexible economy, and has shown that it is capable of adapting to rapidly changing circumstances. Intertemporally, the Cypriot economy is characterized by a very satisfactory rate of growth (the average annual rate of growth of GDP amounted to 5,1%, in real terms, over the period 1961-2007), full employment and conditions of internal and external macroeconomic stability. As a result, Cyprus has achieved an enviable level of real convergence with the advanced economies, with a per capita GDP in 2008, expressed in PPS (Performance Presentation Standards), standing at 89,3% of the EU27 average, according to the latest Eurostat figures and exceeds that of the rest of the new member-states as well as Portugal.

The Banking System

Cyprus has a well-developed banking system which offers a wide range of services catering for the needs of businesses and individuals. Cyprus’s banking system comprises the Central Bank of Cyprus (CBC) and banks which offer the full range of banking services. It also encompasses the co-operative credit institutions, whose main activities are the collection of savings and the extension of loans to their members.  The latter are supervised by the Co-operative Societies’ Supervision and Development Authority.

The CBC is the competent authority for the licensing and supervision of banks. In the exercise of its supervisory role, the CBC applies the rules of the European Union (EU) and is guided by the recommendations of the Basel Committee on Banking Supervision as well as the guidelines of the Committee of European Banking Supervisors. The CBC monitors closely the regulatory developments and revises its regulatory framework accordingly.

Supervision takes the form of (a) off-site monitoring through various prudential returns submitted to the CBC; and (b) on-site examinations.  The ultimate objective in both cases is the prompt detection of potential problems and the taking of necessary corrective measures to maintain the stability and soundness of the banking system and to protect the interests of depositors.
There are currently 17 locally incorporated banks operating in Cyprus, 9 of which are subsidiaries of foreign banks.  In addition, there are 27 branches of foreign banks and two representative offices of foreign banks.

Tax Regime

The Cyprus tax legislation and its regulation are generally predictable and straight forward in nature. Relations between the business community and the tax authorities are excellent and ensure the efficient taxation of the commercial and financial sector. By providing a transparent and efficient environment, the tax system enhances Cyprus’ competitiveness and contributes to making Cyprus an attractive jurisdiction in which to structure international operations.
Cyprus has a corporate income tax rate of 10%, which is the lowest corporate tax rate in the European Union. The personal tax rates are progressive and reach a top marginal tax rate of 30% on income in excess of 36.300 per annum.
Cyprus also boasts of an extensive network of double tax treaties, currently with more than 40 countries, including countries in North America, Western and Eastern Europe as well as emerging markets such as China, India and Russia. Generally, most treaties provide for reduced or zero rates of withholding tax on dividends, interest and royalties paid out of the treaty country and the avoidance of double taxation in the case where a resident in one of the treaty countries derives income from the other treaty country.
The tax year for the purpose of the Income Tax Law coincides with the calendar year. Where an individual is a resident in the Republic, tax is imposed on income accruing or arising from sources both within and outside the Republic. Where an individual is not a resident in the Republic, tax is imposed on income accruing or arising only from sources within the Republic. Resident in the Republic is an individual who is present in the Republic for a period exceeding 183 days in a tax year.

For further details please refer to Inland Revenue Department: www.mof.gov.cy/ird

Legal Form of Entities
Companies

The laws of Cyprus – based on the 1948 Companies Act of the United Kingdom and the subsequent amendments – provide for two categories of companies:

A Private Company – requiring one or more founding members, is limited to 50 shareholders, but cannot offer shares for public subscription nor does it have the right to transfer shares.

A Public Company – The main feature of a public company is the power to extend an invitation to the public to subscribe to its shares and the existence of a minimum of seven members.

The two categories are obliged to register with the Registrar of Companies. The following information is required:

(a) To be supplied by all companies:
1. Application for the proposed name.
2. “Limited” or “Ltd” being the last word for private companies, L.L.C for private limited liability lawyers company, “Public Limited” or “Public Ltd.” or “Public Company Limited” or “Plc” or “Public Co. Limited” or “Public Co. Ltd.” or “Public Company Ltd.”, the last words for public companies and SE for European  Public Companies.
3. Memorandum and articles of association.
4. Statutory declaration by an advocate that all the requirements of the Law have been complied with.
5. Address of the company’s registered office.
6. Names, addresses and occupation of the company’s directors and secretary.
(b) To be supplied by public companies only:
1. Written consent of directors to act in that capacity.
2. The minimum capital must be at least CY£15.000 (subscription capital).

Partnerships and Business Names

There are two kinds of partnerships:
1. General Partnership in which every partner is liable jointly with the other partners for all debts and obligations of the firm incurred while he is a partner.
2. Limited Partnership in which one or more general partners are individually and collectively accountable for the liabilities of the partnership and one or more limited partners whose accountability for such liabilities is limited to their contribution to the partnership.

Business Names

Every person (individual or legal person) having a place of business in Cyprus and carrying out business under a name which is not his name or the company’s registered name must be registered.

Overseas Companies

Overseas companies may establish a place of business in Cyprus, provided that they file with the Registrar within 30 days of such establishment the following for registration:
(a) Certified copy of the charter, statutes or memorandum and articles of the company and also of any amendments with a certified translation in Greek.
(b) List of names and addresses of company directors and the secretary of the company.
(c) Name and address of Cyprus resident or residents with power to accept service of documents on behalf of the company.
(d) A written report, showing the following:
 (i) the name and the legal form of the foreign company, and also the name of the place of business, if this is different from the name of the foreign company,
 (ii) the registered office and the address (postal or other) of the foreign company and also the address (postal or other) of the place of business,
 (iii) the purpose and the object of the business of the foreign company and of the place of business,
 (iv)  where this is the case, the register overseas (with the particular registration    number) of the foreign company, where its basic particulars were filed,
 (v) its issued capital, where this exists,
 (vi) where this is the case, relevant particulars to the winding up of the foreign company, the appointment, the personal particulars and the powers of the liquidators, as well as the completion of the liquidation, the bankruptcy, the bankruptcy arrangement or other appropriate procedure which the foreign company is subject to,
 (vii) where it is a foreign company of a non EU member-state, in addition to the law of the state by which the company is governed.

A European Public Limited Liability Company (SE)

This kind of company can be registered in Cyprus either by merger between two Public Companies which are registered at least in two different European countries, or by formation as a new company, under certain circumstances or by transformation of an existing Public Company into European Company.
Redomiciliation of Companies
A company registered in Cyprus may redomicile to another country provided that the jurisdiction of this country authorizes or allows that companies registered in that other country may redomicile in Cyprus.
Cross-Border Mergers
As from the end of 2007, it is possible to have a merger of a Cyprus company with one or more companies from the European Union and the resulting company may register in Cyprus or in an EU country or alternatively two or more companies from the EU can merge and register the resulting company in Cyprus.

For more details please refer to:
Department of Registrar of Companies and Official Receiver: www.mcit.gov.cy/drcor

Establishing a Business in Cyprus

Foreign investors can register a company directly with the Registrar of Companies, and obtain any license, if needed, from the appropriate authority according to the nature of investment.

The procedure for the formation of a company is:

 • Initially, an application for the approval of the name of the company is submitted.

 • After securing the company's name, the relevant documents for the company's registration (Memorandum of Understanding, Articles of Association, etc.) must be submitted through a lawyer. In the case of a partnership registration, the involvement of a lawyer is not mandatory.

• In order to facilitate, accelerate and simplify the process of setting up a business and reducing the level of bureaucratic intervention, the Government operates a One-Stop Shop under the auspices of the Ministry of Commerce, Industry and Tourism, for both local and foreign based companies.

A wide range of services are offered to the investors including the following:

 • Provision of information/guidance to potential investors
 • Company registration
 • Vat registration
 • Income tax registration
 • Social Insurance Fund and Employers Registration
 • Application for the issue of residence and work permits

The Government of Cyprus has decided to upgrade and expand the above mentioned One-Stop Shop so that it will operate as the Point of Single Contact in accordance with the Services Directive 2006/123/EC of the European Parliament.  The objective of setting up the Point of Single Contact is to have one single interlocutor from the perspective of the service provider, so that it is not necessary to contact several competent authorities or bodies to collect relevant information and to complete all necessary steps related to the service activities.  Through the Point of Single Contact, service providers can complete, electronically, all procedures and formalities needed for access to and exercise of their service activities.

Investors may apply to:
One-Stop Shop, Ministry of Commerce, Industry and Tourism
E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
Website: www.mcit.gov.cy

Source:  Press and Information Office, Republic of Cyprus