Cyprus has attracted formidable foreign investment from around the world with billions flowing into new projects in multiple sectors, proving the island nation continues to have a strong pull factor with global investors.
Cyprus has been a hive of activity in recent years, with several notable projects already implemented or in the pipeline, strengthening the country’s image and foreign direct investment (FDI) appeal. Large-scale real estate projects, luxury marinas and tourism infrastructure, coupled with developing opportunities in the energy, asset management and shipping sectors have all reinforced Cyprus’ status as an interesting investment destination.
An added benefit of Cyprus is its geostrategic location and secure and stable EU environment in an often-turbulent region. These factors coupled with the introduction of new incentives are encouraging increasing numbers of companies from across the world to set up headquarters on the island, solidifying its position as an attractive gateway to both established and developing markets. More recently, Cyprus has also started to gain serious traction in attracting more innovative high-tech organisations to set up on its shores – rebranding itself as an emerging tech hub.
Successive credit rating upgrades over the years and the continuous introduction of new incentives have attracted billions in foreign investment to Cyprus, with substantial inflows from the US, Asia, the Middle East and Eastern Europe. The sectors that have seen the most significant FDI so far are: finance, most notably in shipping; real estate in new luxury developments and infrastructure projects; information and communication; retail trade; and professional services, in particular head-office activities.
Although having faced some serious economic shocks over the last ten years, the resilience and growth performance of Cyprus has been exceptional and even exceeded international expectations. Real GDP growth averaged 5.3% in 2015-19, and while 2020 marked a critical downturn due to the Covid-19 pandemic, 2021 saw a strong rebound with growth bouncing back to 5.5%. Foreign investment flows have been significant. In the ten- year period 2012-2021, net inflows reached almost €18 billion. This investment was driven by equity, with the shipping/shipping finance and real estate sectors playing an important role.
Growing Tech Investment
The technology and communications sector in Cyprus has become fiercely competitive, with a number of players deploying cutting edge solutions to both increase their local market share and generate growth through the launch of new technology and products. 5G was rolled out in 2021, making Cyprus the first EU state to achieve 100% 5G coverage.
Cyprus is already home to a number of major tech firms, such as NCR, Amdocs, Wargaming, 3CX, Exness, Bolt, Thomson Reuters, Melsoft Games, and Nexters, and has gained ground in successfully attracting investment capital in blockchain. The country’s start- up community has also grown stronger with more than 200 enterprises and 4,000 entrepreneurs, fostering more opportunities for business angels and venture capitalists looking to invest risk capital in exchange for equity in promising business ideas. In addition, a key attraction for high-tech companies is the Cyprus Intellectual IP Box Regime, which provides a competitive maximum tax rate of 2.5% on income earned from IP assets. Cyprus’ regime also applies to a wider range of income compared to other European schemes, most of which restrict benefits to income from patents and supplementary patent certificates.
2022 saw more global names invest in Cyprus, with European digital neobanking platform Revolut, valued at US$33 billion, becoming the first entity to receive approval as a crypto-asset service provider from the Cyprus regulator. The authorisation will enable Revolut to offer crypto services to its 17 million customers in the EEA out of a new crypto-asset hub in Cyprus. Revolut said its choice was down to the sophisticated regulatory regime of the country, which has already attracted the likes of Crypto.com, eToro and BitPanda. A leading US consumer services and applications software provider, TangoMe, also announced plans to launch offices in Cyprus. The internationally renowned tech company, with an annual revenue of around US$350 million, will establish a strong presence in Limassol with a sizeable number of employees relocating to Cyprus.
Another project set to bolster Cyprus’ efforts to become a regional telecoms and data hub and attract more investment, was Cyprus’ leading telecoms provider Cyta signing a €850 million venture with Greece and Saudi Arabia for the construction of the East Med Corridor (EMC) for a global digital highway linking Europe with Asia. In addition, the modernisation of state infrastructure and speeding up the adoption of cloud services in Cyprus were key targets of the signing of a Memorandum of Understanding with Amazon Web Services (AWS) in 2022, a collaboration that will open up a new era of opportunities.
Investing In Education
Cyprus is developing into a regional education and knowledge hub with the rapid expansion of tertiary education and its universities steadily climbing up global rankings. The country has already established synergies with international universities, most notably the University of Nicosia launching the island’s first degree programme in medicine in collabo- ration with St George’s Medical School at the University of London, and University of Central Lancashire – Cyprus (UCLan), being the first British university to establish a campus on the island. This has since been followed by the announcement of the American University of Beirut (AUB) to establish a €29 million campus in Paphos in 2023 – branded the American University of Beirut-Mediterraneo. The aim is to accommodate over 2,000 students in the coming years.
Cyprus hosts an impressive and fast-growing R&I ecosystem, featuring high quality academic and research institutions and six Centres of Excellence (CoE). The Cyprus Institute has established itself as a significant research institute with global networks of excellence supported by significant EU funding. The number of foreign students choosing Cyprus for their studies has almost tripled in the last five years, representing over 60 different countries and supporting the growth of Cyprus into a true global educational centre. This fact underlines the great opportunities that exist in Cyprus for the establishment of new universities, colleges and institutes.
Ports and Shipping
The 2017 commercialisation of the country’s largest port in Limassol marked a new era for Cyprus as a commercial hub. The port privatisation came in the context of the first discovery of natural gas in 2011, the launch of the €300 million VTTV oil trading terminal in 2014, and a dedicated Shipping Deputy Minister in 2018. The privatisation deal with Eurogate International GmbH and leading Emirati logistics giant DP World Limited is expected to boost state coffers with €2 billion over the next 25 years, while the new port operators have injected millions in upgrading services and infrastructure.
The more recent contract for the Larnaca port and marina was signed with a Cypriot-Israeli consortium, Eldeman Holding BV and Alexandrou Corporate Services Ltd, in late 2020 and is expected to attract around €1.2 billion in construction and real estate development – making it one of the biggest infrastructure in- vestments to date in Cyprus.
One of Cyprus’ most successful export services has been the maritime industry. The growth of Cyprus’ resident shipping sector over the past 50 years has developed a strong maritime cluster that caters to the needs of Cyprus-based companies, including banking, professional services, insurance, and IT. The cluster is consistently attracting more quality tonnage and shipping-related companies to its shores. Between 2010 – when the Cyprus tonnage tax system was approved by the European Commission – and 2021, there has been a fivefold increase in the number of shipping companies that have registered with Cyprus’ specialised shipping taxation system, boosting the sector’s revenue by around 25%.
Some examples include the decision in 2018 by leading London ship insurer P&I Club to open a post-Brexit EU subsidiary in Cyprus, reaffirming the island’s position as one of the top global hubs for shipping. Another triumph came in early 2019, when British shipping firm P&O Ferries decided to register its English Channel operating fleet under the Cyprus flag to take advantage of the benefits and security it provides. Two of the industry’s most highly respected privately-owned shipmanagement companies, Columbia Shipmanagement and Marlow Navigation – both based in Cyprus – merged in 2017 to form Columbia Marlow, creating one of the world’s largest ship and crew-management companies. Another transaction constituting FDI was the 2018 buyout of Limassol-based Songa Offshore SE by Transocean Ltd, the world’s largest offshore drilling contractor for oil and gas wells, in a deal worth US$3.4 billion. In addition, natural gas finds within Cyprus’ Exclusive Economic Zone (EEZ) and efforts to exploit it in cooperation with neighbouring countries have expanded opportunities for the island’s already thriving shipping sector.
Developing an Energy Hub
Cyprus’ hydrocarbons discoveries captured the attention of global energy heavyweights when US company Noble Energy, now acquired by US giant Chevron, made the first natural gas discovery in 2011 with estimated resources of 4.5 trillion cubic feet (tcf) in the Aphrodite field. ENI, Kogas, ExxonMobil, Royal Dutch Shell, and Total have all secured exploration licences and conducted exploratory drilling. ExxonMobil announced the discovery of an estimated 5 to 8 tcf in Block 10 in early 2019, while ENI confirmed a discovery in Block 6 – which it operates with Total – of around 2.5 tcf in August 2022. Further discoveries could be announced within the next year.
In 2019, Cyprus agreed to build a subsea pipeline connecting Aphrodite to Egypt’s liquefaction plants and concluded a production-sharing deal with Noble Energy (now Chevron) and its partners over the Aphrodite gas reservoir. The development of Aphrodite is now expected in 2026. Since the start of the pandemic, activity and works worth US$200 million have been completed in Cyprus’ EEZ by oil and gas companies, underlining their continued commitment to Cyprus.
In addition to offshore discoveries in the last decade, a range of other new energy opportunities have come to the fore. In December 2019, Cyprus signed a landmark deal with a Chinese-led consortium to build a €290 million LNG import terminal at Vassilikos. The consortium constructing the project includes China Petroleum Pipeline Engineering CO LTD, Metron SA, Hudong-Zhonghua Shipbuilding and Wilhelmsen Ship Management.
The terminal will include a floating storage and regasification unit (FSRU), a jetty for mooring the FSRU and related infrastructure at Vassilikos. The FSRU, expected to be completed in 2023, attracted €150 million in finance from the European Investment Bank (EIB), €80 million from the European Bank for Reconstruction and Development (EBRD), €101 million from the EU’s Connecting Europe Facility as well as an equity contribution of €43 million from the Electricity Authority of Cyprus (EAC).
Parallel to this, Cyprus has been ramping up its renewables capacity, with support from the EU’s €1.2 billion Recovery and Resilience Facility (RFF). The renewable energy sector could be one of the most attractive areas for investment and joint ventures with other countries. For example, Israel has been interested in cooperating with its Cypriot counterparts in establishing pilot projects where new Israeli tech could be tested in Cyprus. Also, the UAE and Saudi Arabia have been pioneers in clean energy, especially in the field of hydrogen, and are keen to export its RES know-how and create synergies. For example, Saudi Arabia – dubbed to become one of the biggest producers of clean energy – could support the EU’s hydrogen strategy through Cyprus as an interconnector to Saudi’s biggest hydrogen production plant currently under construction.
The long-awaited full liberalisation of the electricity production market in Cyprus has seen many delays, but once this materialises it would allow a fresh inflow of new private players operating in both renewables and gas to compete in the local market – and in a broader regional market thanks to the EuroAsia Interconnector project to connect Cyprus, Israel and Greece via submarine electricity cable and the related EuroAfrica Interconnector to connect Egypt.
Stable Banking Sector and Growing Investment Funds
Today, Cyprus banks maintain high levels of capital adequacy and liquidity but continue to grapple with managing their non-performing loan (NPL) portfolios. The restructuring of the banking sector after 2013 attracted important international institutional investors and fresh foreign capital and encouraged accelerated sales of NPLs. These developments substantially reduced risk and enabled the financial system to operate on a healthier basis.
The island also hosts a thriving forex industry with many global giants basing their operational headquarters in Cyprus. In addition, the investment funds sector has grown exponentially in the last few years with Assets under Management (AuM) seeing a staggering increase from €2.7 billion in 2016 to €11.1 billion in the first quarter of 2022, proving Cyprus is being recognised by the global asset management community. Investment funds have already invested more than €2 billion in several sectors of the Cypriot economy, such as shipping, hospitality, education, healthcare, and renewable energy.
Luxury Tourism and High-End Real Estate
Cyprus continues to be on the top of the list for investors, holiday-home seekers, expats and retirees. Tourism and real estate have always been robust sectors of the Cypriot economy, and a concerted effort to diversify Cyprus offering in recent years has paid off. The number of foreign investors closing multimillion-euro deals in the last several years underlines the fact that tourism-related real estate and infrastructure continues to be one of the most attractive investment opportunities in Cyprus. Pre-pandemic years of record-breaking tourism numbers saw the island attract new interest in conference, sports, health and wellness tourism. The construction and investment in multipurpose projects and mixed-use developments such as luxury marinas, golf courses and more recently the island’s first-ever and only integrated luxury casino resort, are all part of the ongoing strategy to upgrade Cyprus’ tourism product. The new casino resort, City of Dreams Mediterranean, will have extensive facilities and five-star status. The casino resort is Hong Kong-based Melco’s first expansion outside of Asia and will be the biggest casino of its kind in Europe, with the investment for this mega project at €600 million.
Spurred by this unique development, Cyprus garnered another landmark investment deal in 2022 with Israeli business magnate Gilad Shabtai investing in over 130,000 m2 of land for development surrounding the new integrated casino resort in Limassol. The destination and value of the area are set to be elevated by this key real estate investment.
Proposals include the development of exclusive seven-star facilities providing bespoke services for owners and investors. Plans are also in place for additional investment by the former majority shareholder of telecoms start-up Viber into the further expansion of the area in the future – which is a solid vote of confidence in the vast growth potential of Cyprus.
Following the success of Limassol Marina, more investment has flowed into marina developments on the Cypriot coast. The €300 million luxury Ayia Napa Marina is under construction with berthing facilities and a commercial village now fully operational. The marina offers capacity for 600 yachts of up to 60 metres, a shipyard, and a range of luxury villas, apartments and facilities. With significant Egyptian investment backing the innovative project and the seafront residences are expected to be completed by 2023. In addition, the €110 million Paralimni Marina project is set to be completed in 2024, while a tender was signed in August 2021 with Deloitte Ltd and Triton Consulting Engineers SA for a luxury marina in Paphos.
Major investments have also been made in the hospitality industry with acquisitions and the construction of new luxury hotels by renowned hotel management chains. The Radisson Hotel Group, one of the largest and most dynamic hotel groups in the world, has big plans to grow its existing portfolio in the country to six hotels and almost 1,000 rooms by 2025, one of which is the Radisson Larnaca Beach Resort, the very first beach resort by the Radisson Hotel Group worldwide.
In 2019, the Luxury Collection, part of Marriott International, opened the Parklane Luxury Collection Resort & Spa resort in Limassol, marking Marriott International’s entry into Cyprus. In July 2020, Hyatt Hotels Corporation announced a management agreement with Anolia Holdings Limited for the launch of the first Hyatt hotel in Cyprus. The 300-room luxury resort Grand Hyatt Limassol is expected to open in 2025. The new beachfront resort will also be a key element of Zaria Resort, a mixed-use luxury development, comprised of residential apartments and private villas totalling more than 80,000 m2. One of the latest projects is the Sofitel Resort & Spa, a joint venture between Singapore-headquartered Oxley Holdings and Planetvision on the Limassol beachfront. The project will be the first Sofitel Resort with branded residences in Europe and is expected to be completed by 2023.
Following global trends and faced with an aging population, investing in health and wellness developments as well as rehabilitation and bespoke retirement villages has enormous potential. An early example of this is the Eden Seniors Resort in Larnaca which opened its doors in 2018. Paphos is due to see the first dedicated retirement village in Cyprus. The €16 million retirement village, branded Lazaris Mill, will consist of 82 individual apartments, ranging from studios to larger flats and a small 24-room hotel, and provide bespoke facilities. The first residents are expected in spring 2023. Another upcoming project in Paphos is Cypress Park, a new luxury residential development turning retirement into a five-star resort stay.
Focus on Investor Support
Not one to rest on its laurels, Cyprus has been steadily sharpening its competitive edge by streamlining processes to better cater to investors and by strengthening new sectors to support its already more established industries.
Investment opportunities in Cyprus’ large-scale projects span various sectors, including high-value tourism and housing developments, projects with a special focus on golf courses and luxury marinas, as well as education, energy, and more lately, the international film sector.
Special schemes and incentives are in place to facilitate headquartering, which covers the sectors of technology, asset management, investment funds, shipping and higher education, and ‘Olivewood’ for the international film industry. A new government Action Plan launched in 2021 also provides new incentives to attract non-EU talent and companies to establish operations in Cyprus. The recent introduction of a Business Facilitation Unit (BFU) promises to be a gamechanger for ease of setting up in Cyprus. The BFU specialises in fast-tracking business setup, permitting and licensing for companies, their employees and families, and in less than two years of operation, the BFU has catered to more than 1,200 companies that have relocated or expanded their activities in Cyprus.
To better facilitate FDI, the country’s investment promotion agency, Invest Cyprus, has also developed an online investment matchmaking platform branded the Project Bank, to help investors identify the right market opportunities for projects based in Cyprus. In addition, Invest Cyprus hosts the annual International Investment Awards, where it honoured seven companies in 2022 for their contributions to Cyprus, namely BrainRocket, ECOMMBX, CVC, TheSoul Publishing, Murex, Medicover and SYKES.
Location, Location, Location
Cyprus’ liberalised FDI Policy, both for EU citizens and investors from third countries, along with its favourable tax regime makes it one of the most attractive investment targets in Europe. At 12.5% Cyprus’ corporate tax rate is one of the most competitive in the EU and new tax-neutral reforms that are on the way will simplify and modernise the tax system further. The country’s extensive network of double taxation treaties with 67 countries have strengthened its position as a business gateway and a preferred location for corporate headquarters. The country’s skilled talent, low cost of doing business, top-tier professional services, and high quality of life renders Cyprus not only a wise business and investment choice but also a great relocation destination.
→ For more information, contact Cyprus' investment promotion agency, Invest Cyprus.
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