Cyprus became an independent republic in 1960. The political system is modeled on Western democracies in which individual rights are respected and private enterprise is given every opportunity to develop. Under its Constitution, Cyprus has a presidential system of Government. The President is the head of State and is elected by universal suffrage for a 5 year term of office. The Council of Ministers, which is appointed by the President, is the executive organ of the Republic. Legislative power lies with the House of Representatives whose members hold office for a period of 5 years. There is a multi-party system of democracy based on proportional representation. The legal system is mainly based on the Anglo-Saxon legal system. The same principles as those applicable in the United Kingdom apply in Cyprus and all statutes regulating business matters and procedures are based essentially on English law. Most laws are translated into English. Cyprus is a member of the United Nations and its specialised agencies, the Council of Europe, the Organization for Security and Cooperation in Europe, and the British Commonwealth. In May 2004 Cyprus became a full member of the European Union.

Cyprus has an open free-market, services-based economy, with some light manufacturing. The Government’s role is limited to regulation, planning and the provision of public utilities. During the last fifteen years, the economy of Cyprus has demonstrated spectacular growth and its currency has enjoyed relative stability. Cyprus’ accession as a full member of the European Union as of 1st May 2004 has been an important milestone in the recent economic development. The island is often aptly referred to as a European country in the Middle East. Per capita GNP is approximately Euro 14.000, one of the highest in the Mediterranean. The cost of living is substantially lower than in most countries offering a comparable standard and quality of life.

The economy is driven by thriving tourist and service sectors and an export-oriented industry. In terms of their contribution to GNP the most important sectors of the economy are: trade, restaurants and hotels; community, social and government services; finance, insurance and business services; and manufacturing. The performance of the economy has been such that it has combined high real growth with low inflation and low unemployment. Moreover, the economy is characterised by a low external debt service to exports ratio and a high international reserves to imports ratio. Of the Euro 3,5 billion annual gross foreign exchange earnings, 38 percent originate from tourism, 22 percent from the export of goods, 9 percent from transportation and more than 9 percent from international business and shipping companies. Over 75 percent of tourist arrivals originate from the European Union.

Cyprus' main exports are potatoes, citrus fruit, clothing, chemicals and toiletries, machinery and transport equipment, cigarettes, wood and metal products, cement and footwear. Manufactured goods and agricultural products account for 75 and 20 percent of domestic exports, respectively. With regard to imports, intermediate inputs and consumer goods are the most important categories, each contributing more than 32 percent of total imports. Cyprus' main trading partner is the European Union accounting for about 55 percent of imports and 40 percent of exports.

The legal tender is Euro, which replaced the Cyprus Pound as Cyprus’ national currency as of 1st January, 2008. Joining the Euro zone was a major accomplishment for the Cypriot economy, resulting in such benefits as a higher degree of price stability, lower interest rates, reduction of currency conversion costs and exchange rate risk, and increased competition through greater price transparency.

Moreover, Cyprus ranks as the sixth leading maritime nation in the world with a merchant fleet exceeding 26 million gross tonnage.

Cyprus’s competitive advantages derive from its strategic geographical location, the favorable business climate and fiscal regime, stable macroeconomic environment, the high educational level of the labour force, in conjunction with the comparatively low level of graduates’ remuneration, the excellent infrastructural facilities, the advanced telecommunications’ network, and the widespread knowledge of English.

source: www.mof.gov.cy

The banking system in Cyprus closely follows the British pattern and is well developed and organized whilst being equipped with the latest technology in modern surroundings. The banking system consists of, 30 international banking units, 4 administered banking units, 3 specialised financial institutions and a number of leasing companies. Over 1,200 International Business Corporations currently maintain fully fledged offices in Cyprus.

The banking system also encompasses the co-operative credit institutions, which are supervised by the Co-operative Societies’ Supervision and Development Authority. Local banks have managed to develop strong correspondent networks around the work thus, enabling them to have easy access to the world banking network and being able to carry out traditional and specialized financial transactions. The banking system is sophisticated and well-equipped with modern technology. It is relatively easy to transfer salaries, pensions and income from abroad into Cyprus.

The Central Bank of Cyprus, by virtue of the powers conferred upon it by the Central Bank of Cyprus law, is the licensing authority for the conduct of banking business and for the supervision of banks. The Central Bank of Cyprus has always been guided in its supervisory role by the recommendations of the Basle Committee on Banking Supervision and implements the EU Directives on Banking regulation while following up closely new developments and having its prudential functions under constant review to take account of these developments and changing circumstances. Its main responsibility is to ensure a safe and stable financial system that would preserve public confidence and foster economic stability and growth. This objective is satisfied by maintaining an effective mechanism of bank regulation and supervision.

1 January - New Year's Day

6 January - Epiphany

2 March - Green Monday

25 March - Greek Independence Day

1 April - Greek Cypriot National Day

17 April - Greek Orthodox Good Friday

19 April – Orthodox Easter

20 April - Greek Orthodox Easter Monday

1 May - Labour Day

8 June – Pentecost Monday (Kataklysmos)

15 August - Assumption

1 October - Cyprus Independence Day

28 October - Greek National Day (Ochi Day)

24 December – Christmas Evening

25 December – Christmas Day

26 December – Second Day of Christmas

source: www.mof.gov.cy

• Corporate tax rate: Cyprus has a corporate income tax of 12.5%. This is the lowest corporate tax rate in the European Union.
• Exemption from tax on dividend income: dividend income is exempt from tax irrespective of its source provided that the company paying the dividend either engages directly or indirectly in more than 50% of activities that give raise to non-investment income or the burden on the dividend paying company’s income is not lower than 6.25%.
• No withholding tax is imposed in Cyprus on dividends paid to non-resident shareholders.
• No withholding tax is imposed on interest paid from Cyprus as well as on royalties paid form Cyprus in respect of intellectual property exploited outside Cyprus.
• No inheritance tax
• No income or capital gains tax is imposed on profits and gains derived from the sale of shares and securities, irrespective of whether the profits and gains are considered to be of a revenue or capital nature.
• Cyprus tax resident companies are exempt in respect of dividends received from other Cyprus resident companies
• Interest income arising from the ordinary activities or closely related to the ordinary activities of the company is taxed at the corporate rate of 12.5% as from 2013.
• Group losses relief without any time restrictions (under certain conditions)
• Transfers of assets and liabilities between the companies in the course of reorganization (mergers, demergers, transfer of activates or exchange of shares) are not subject to tax
• Profits derived from a permanent establishment maintained abroad are generally exempt from tax in Cyprus.
• Non-Cyprus residents are taxed only on income derived in Cyprus. Cyprus tax residents (those who spend 183 days or more in Cyprus) are taxed on income derived in Cyprus and abroad.
• Wide network of double tax treaties, currently with 58 countries. Generally, most treaties provide for reduced or nil rates of withholding tax on dividends, interest and royalties paid from 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.

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