Following the collapse of the discredited Citizenship for Investment Scheme, and the consequent loss of foreign funds in real estate, Cyprus has turned to tech firms as the next big thing.
Stakeholders in promoting Cyprus’ economy abroad say that, with the Citizenship for Investment Scheme dead in the water, they are now turning their efforts to convincing big tech and fintech companies to move their headquarters to the island.
Talking to the Financial Mirror, stakeholders said that their money is on “head-quartering”, spearheaded by the Cyprus Investment Promotion Agency (Invest Cyprus).
“Three large technology and Fintech companies have not only been eyeing a move to Cyprus but are a few steps away from making the actual move,” said George Campanellas the Chief Executive Officer of Invest Cyprus.
He said the three firms are big names in their home country of Lebanon, Belarus, and the USA.
Campanellas said Invest Cyprus is not in a position to announce the names of the firms involved as, according to the law, this has to be done by the companies themselves.
“We are very pleased, as we are witnessing the effort, we launched last year, in the framework of our five-year Strategic Plan, starting to pay off.
“Benefits for the Cypriot economy are significant and horizontal and include, among other things, an increase in the tax base, an increase in consumption and indirect taxes, support in the professional services and real estate sectors, as well as the creation of new jobs,” said Campanellas.
To promote Cyprus abroad and draw in foreign investments, Invest Cyprus launched a five-year action plan in 2019 focusing on three pillars.
“Acknowledging the need to diversify foreign investments made in Cyprus, we focused on bringing in Tech and Fintech companies and their executives.
“To do this we needed to spend time and energy on setting up an effective campaign marketing Cyprus as an ideal place for third country companies to set up headquarters, or an alternative EU base.“
He argued that bringing in such companies would push unemployment down, as they are expected to create jobs for Cypriots.
“Take AMDOCS for example, they set up shop with just 15 employees and now employee some 1,000 people,” said Campanellas.
He was referring to the Israeli NASDAQ-listed company specialising in software and services for communications, media and financial services providers and digital enterprises.
The second pillar of the plan is to get ministries on board to improve the financial ecosystem making it more attractive for foreign companies.
“It is worth noting the Cyprus tax regime is one of the most attractive and transparent tax systems in Europe, which fully complies with EU laws and regulations.”
Parliament approved the extension of the two incentives already in place for attracting people to relocate (or return in case of Cypriots studying/living abroad) to Cyprus and obtain employment.
Cyprus has recently added to the benefits of companies setting up offices or headquarters in the country.
A 50% tax exemption on employment income provided that this exceeds €100,000 per annum – applicable for 10 years, was voted in earlier this month.
Obstacles were also removed for the employment of skilled personnel from third countries in technology-related fields.
“Thirdly we are focusing on getting the private sector, from lawyers to tax advisors, onboard as the whole ecosystem will need to function as one to pull off the ultimate goal which is making Cyprus a technology hub in the coming decade,” said Campanellas.
He is working on bringing Mutual Fund management companies to headquarter in Cyprus or have their funds domiciled on the island.
Alternative to the UK
In comments to the Financial Mirror, Institute of Certified Public Accountants (ICPAC) president Demetris Vakis said: “We found Brexit to be a first-class opportunity to start promoting Cyprus as an alternative EU base for companies headquartered in the UK”.
He argued that efforts have paid off, as a number of firms, mainly insurance companies, formerly headquartered in the UK have moved to Cyprus.
“It is important to attract investments which will not just pass by and leave, but investments which will create wealth and benefit society.
“When a company relocates, it does not just relocate its offices, but also a number of its executives,” said Vakis.
He said this would spark movement in the market as these people will be renting houses, cars, spending at restaurants and shops.
Listing the comparative advantages that make Cyprus an ideal destination for multinational companies, he stated the geographical location, wide access to large markets, the favourable business environment, strong European legal framework, attractive tax regime, and the low operating cost.
“Firms relocating here will not only benefit from incentives the island has to offer but they will be able to find skilled manpower and quality support services, as well as other more specialized incentives, such as the attractive intellectual property regime, an important parameter for technology and IT companies.”
“In time, these people will become ambassadors for Cyprus and its business ecosystem, helping to do away with the stain left by errors of the past.”
Vakis argued that apart from eyeing big Fintech companies, Cyprus should also aim to enhance its reputation as a destination for financial services and investment funds.
“We have already succeeded in recent years to attract International Mutual and Pension Investment Funds to register in Cyprus. Currently, funds registered have a portfolio worth €7.2 mln.”
“Although way off Luxembourg’s €10 trillion market, it is still a great steppingstone for Cyprus to build the industry.”
“There are lessons to be drawn from studying how Luxembourg and Singapore were able to become successful financial centres.”
Vakis said Cyprus was stained by the passports-or-cash scandal and needed to win back investor trust.
“The coronavirus crisis may have pushed businesses to look inwards, in an attempt to acquire liquidity to survive, but this is the time to push forward.
“The government needs to pull together resources to support the private sector, and together start looking beyond the borders of our island for new opportunities to put Cyprus back on the map with firmer foundations.”