Attracting foreign investment remains one of the key areas of development of the Cyprus economy. Such investments contribute to increased productivity, improved quality of goods and services, and increased competitiveness. In addition, international companies create new jobs, stimulate exports and bring in additional foreign currency.
However, for effective economic development, it is necessary to carry out comprehensive reforms aimed at creating a favorable business environment .
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Tax incentives and incentives for investors
Among the proposed measures, special attention is paid to reducing the tax burden and creating incentives for the long-term presence of foreign companies. The possibility of:
- reductions in VAT, capital gains tax and income tax;
- abolition of capital gains tax on the sale of real estate for a limited period (e.g. 3 years), provided that the property remains in the ownership for at least 2 years;
- increasing the period for carrying forward existing tax losses from 5 to 10 years.
Similar steps have been taken before, for example in 2016, and have proven effective in stimulating the market.
Support for strategic sectors of the economy
To strengthen Cyprus’s position, it is proposed to return or abolish VAT on capital expenditure in the areas of education, medicine and scientific research. This will allow companies to invest in the construction of new facilities, the renewal/modernization of existing equipment and the expansion of infrastructure.
At the same time, a reduction in VAT from 19% to 5% for repairs and renovation of common areas in residential complexes is being discussed, which will make property maintenance more affordable.
Solving the housing crisis and growing the real estate market
The serious shortage of affordable apartments and offices on the Cyprus market has already become an obstacle to attracting foreign companies. In order to stabilize the situation, the possibility of VAT refunds on purchased properties that are rented out is proposed, subject to the taxation of rental payments. This initiative will allow for more active involvement of empty houses and apartments in the rental market.
In addition, it is possible to rent properties purchased to obtain a permanent residence permit, subject to the adjustment of the VAT paid within 10 years. A similar practice is already used in Greece and shows positive results in solving housing problems.
Modernization of the tax system
Experts stress the need to reform the Cyprus tax system with an emphasis on :
- simplification of legislation and reduction of administrative barriers;
- support for innovation, research and development of the digital economy;
- reducing the shadow sector and combating tax evasion;
- redistribution of the tax burden from labor to consumption, which will stimulate employment.
This approach will not only increase the country’s attractiveness for investors, but will also ensure stable economic development.
Attracting foreign investment, combined with tax reforms, could significantly strengthen the economy of Cyprus, develop the residential property market and improve the standard of living of the population.
