New tax measures will strengthen Cyprus’ international competitiveness as a location of choice for multinational companies focusing on the EMEA region, says EY Managing Partner Stavros Pantzaris.
EY is a truly global firm, with its staff collaborating as partners across all its international offices while catering to large multinational groups as well as local family-owned firms. The audit firm recently refreshed its presence in Cyprus by moving into the Jean Nouvel Tower, a landmark architectural building in the heart of Nicosia, and by welcoming a dynamic new Managing Partner Stavros Pantzaris, who specialises in shipping and the energy sector.
You have a strong background in the shipping sector and EY recently published a report on the future of the industry in Cyprus, what were your main conclusions?
We spent four months on the study with an EY team of shipping experts from Cyprus and Greece sharing their insights on the sector. As part of our study, we gathered numerous data in connection with the shipping sector not only in Cyprus but also in other competing countries such as the UK, Greece, Netherlands, Singapore and Norway. Going through the data, a number of points came up that reaffirmed the key role shipping plays in the Cypriot economy, along with tourism, real estate and financial and corporate services. The direct contribution of shipping to the economy is around 4%, but if you include all the auxiliary maritime services in Cyprus the figure accumulates to over 7%. We made a number of recommendations to further develop the sector and to help maintain its position internationally. The biggest issue for Cyprus continues to be the Turkish embargo, which is becoming increasingly pressing in the current global economic situation. The solution of the Cyprus problem would provide a significant boost to the growth of the sector.
What other opportunities for growth and investment do you see in Cyprus at the moment?
With fresh capital injections and deposits picking up, the banking sector continues to be an area of opportunity and in fact has seen much foreign investment since 2013, with US investment in Bank of Cyprus and most recently the European Bank for Reconstruction and Development (EBRD) buying a stake in Hellenic Bank. These are positive moves showing the confidence global investors have in Cyprus and its future potential. There has also already been much investment from international energy giants in the oil and gas sector following the discovery of natural gas in Cyprus’ EEZ. In their wake, a number of global players are coming to Cyprus providing auxiliary services to the energy industry, with the prospect of also servicing the wider region through their operations on the island. The current climate also provides for interesting opportunities in the real estate and hospitality sector. The privatisation of the Limassol port has also garnered the interest of key international players, which will further boost foreign investor confidence in Cyprus and other port and marina projects that are in the pipeline.
What non-traditional areas could be interesting in terms of attracting FDI to Cyprus?
In order to support growth, Cyprus should seek to diversify its economy further to attract FDI from a wider range of sectors. There is still much untapped potential in further developing areas such as information technology, education, research and development, medical tourism and other more niche segments. These could provide important support also to the existing business landscape.
How would you describe the current economic situation in Cyprus?
Cyprus has turned the page. Despite the challenges Cyprus faced following the financial crisis, the overall performance of the economy has exceeded expectations, with the country seeing continuous upgrades from rating agencies. After three years of decline, GDP is forecast to show marginal growth in 2015 and economic growth is set to resume in 2016 sparking hope that Cyprus will be in a position to exit the bailout programme and return to market-based financing early next year. The speed at which Cyprus has been able to turn its economy around has been formidable, but what is important now is sustainable development of the economy and that planned reforms are implemented. The non-performing loans (NPLs) are still a key challenge for the banks, but hopefully we shall see these numbers reduced in 2016 so that banks can fully focus on their core business.
Cyprus has an ambitious agenda of reforms and incentives, what advantages do these measures offer international business and foreign investors?
Cyprus has introduced new tax measures to further complement its already comprehensive and advantageous tax framework. The aim of the new incentives is to encourage the creation of business substance by offering compelling advantages to individuals from a personal tax perspective, in a bid to attract top-tier fund and asset managers and other professionals to the island. Cyprus has also introduced a Notional Interest Deduction regime on equity as an alternative to excessive debt financing. The changes, which are fully aligned with EU and global corporate taxation developments, will strengthen the country’s international competitiveness as a location of choice for multinational companies – especially those with a focus on the EMEA region.
Do you see the increasing volume of international regulation changing the way your industry operates or the services you provide?
We welcome regulation, but both the increasing workload and cost burden is changing the industry in that many companies are looking to outsource various activities that they would traditionally do internally. At EY, we have recognised this trend and have established new specialised teams to meet the needs of our clients. We recently set up an advisory department and have brought in experts to head these teams, such as specialised expertise in financial services, fraud investigations and dispute resolution. We have also set up transactional advisory services dealing with valuations, mergers and acquisitions, as well as due diligence projects, because of the growing demand for these types of services. We are also seeing much more transactional business. We invest in people and are trying to attract professional Cypriot talent currently based abroad in places like London to come back home with their knowledge to further develop and strengthen Cyprus’ business environment.
Are you seeing any trends of business flowing to Cyprus from competing jurisdictions?
Yes, to some extent. We are seeing setups in other jurisdictions bringing more business to Cyprus, which is a sign that they trust the stability and potential of the economy. They recognise the efficiency and cost advantages that Cyprus has to offer. EY has the advantage over other big professional firms in the sense that we are not a franchise, but truly collaborate as partners across all the jurisdictions where we have a presence. We literally live the globalised lifestyle through our work every day. Cyprus continues to be a safe and advantageous jurisdictionand the flow of international business moving in this direction will grow stronger in the coming years.
What are your expectations for Cyprus in 2016?
We are optimistic and see great potential for Cyprus, and will be doing our part in rebuilding and restoring trust in the local economy. EY has also set its own vision for 2020, which sets out aggressive targets to meet by this deadline.
Stavros Pantzaris is the Country Managing Partner and Assurance Leader for EY Cyprus. He has been involved in Assurance Services for over 25 years, focusing on the provision of IFRS audit services to local and multinational groups. He is also leading the services provided to clients engaged in the Energy and Shipping sectors in Cyprus. He has substantial experience in leading buy-side due diligence projects and other advisory projects. He recently led a study on the future of shipping in Cyprus, a project which was commissioned by the Department of Merchant Shipping of the Ministry of Transport, Communications and Works and which aimed at developing a national strategy for promoting Cyprus’ shipping industry and strengthening cooperation within the country’s maritime cluster. He has also acted as the Independence and Quality & Risk Management Leader/Coordinator for EY Cyprus, advising on local independence/conflict issues and ensuring compliance with local/global policies and procedures. Stavros has a degree in Engineering with Industrial Management (B.Eng) and in 1992 he qualified in London as a Chartered Accountant. He is a Fellow of the Institute of Chartered Accountants in England & Wales (FCA), a member of the Institute of Certified Public Accountants of Cyprus and a member of the Cyprus Institute of Internal Auditors. He is fluent in both Greek and English and has basic knowledge in French. He joined the EY partnership in January 1998. Stavros is currently a member of the Board of Directors of the Institute of Certified Public Accountants of Cyprus. He has also been an active member of the Stock Exchange Committee of the Institute of Certified Public Accountants of Cyprus for more than 10 years, serving as chairman during the period 2003-2005.