Economy of Cyprus

The economy of Cyprus is a high-income economy as classified by the World Bank, and was included by the International Monetary Fund in its list of advanced economies in 2001. The Cypriot government reached an agreement with its eurozone partners to split the country's second biggest bank, the Cyprus Popular Bank into a bad bank which would be wound down over time and a "good" bank which would be absorbed by the larger Bank of Cyprus. In return for a â‚¬10 billion bailout from the European Commission, the European Central Bank and the International Monetary Fund, the Cypriot government would be required to impose a significant haircut on uninsured deposits. Cyprus successfully concluded its three-year financial assistance programme at the end of March 2016, having borrowed a total of â‚¬6.3 billion from the European Stability Mechanism and â‚¬1 billion from the IMF. The remaining â‚¬2.7 billion of the ESM bailout was never dispensed, due to the Cypriot government's better than expected finances over the course of the programme.

Top Sectors in Cyprus

Finance in Cyprus

the Soviet Union it gained great popularity as a portal for investment from the West into Russia and Eastern Europe,becoming for companies of that origin the most common tax haven. More recently, there have been increasing investment flows from the West through Cyprus into Asia, particularly China and India, South America and the Middle East. In addition, businesses from outside the EU use Cyprus as their entry-point for investment into Europe. The business services sector remains the fastest growing sector of the economy, and had overtaken all other sectors in importance. CIPA has been fundamental towards this trend.

Oil and Gas in Cyprus

Cyprus holds significant potential in the oil and gas sector, with surveys indicating substantial untapped reserves in the eastern Mediterranean basin between Cyprus and Israel. The estimated reserves are nearly equivalent to the world's total annual consumption of natural gas. Various international companies, including Noble Energy, Shell, Delek, Avner, Eni, KOGAS, TotalEnergies, ExxonMobil, and QatarEnergy, have shown interest and invested in exploration and production sharing contracts. However, infrastructure development for gas landing and liquefaction for export is necessary to fully leverage this potential.

Shipping Hub in Cyprus

Cyprus has emerged as one of the largest ship management centers globally, with around 50 ship management companies and marine-related foreign enterprises conducting international activities on the island. Its strategic geographical position at the crossroads of three continents and proximity to the Suez Canal have promoted merchant shipping as a vital industry. Cyprus boasts the tenth-largest registered fleet globally, with 1,030 vessels accounting for 31,706,000 dwt as of 1 January 2013.

Tourism in Cyprus

Tourism plays a crucial role in Cyprus' economy, culture, and overall brand development. With over 2 million tourist arrivals annually, Cyprus ranks 40th globally as a tourist destination. Despite its relatively small population, it ranks 17th per capita in terms of tourist arrivals. The island has received numerous international awards for its sustainable tourism efforts and boasts 57 Blue Flag beaches. Cyprus Tourism Organization oversees industry practices and promotes the island worldwide, contributing to its competitiveness in the global tourism market.

Trade in Cyprus

In 2008 fiscal aggregate value of goods and services exported by Cyprus was in the region of $1.53 billion. It primarily exported goods and services such as citrus fruits, cement, potatoes, clothing and pharmaceuticals. At that same period total financial value of goods and services imported by Cyprus was about $8.689 billion. Prominent goods and services imported by Cyprus in 2008 were consumer goods, machinery, petroleum and other lubricants, transport equipment and intermediate goods.

Cyprus - Key Economic Indicators

Exports and Imports

In 2022, Cyprus exported around $4.3 billion worth of goods, while imports reached $12 billion. Ships, boats, and mineral fuels were Cyprus's top exports, while consumer and capital goods dominated imports. This significant gap between import and export values contributes to a negative trade balance.

Balance of Trade

a trade deficit exceeding $7.7 billion in 2022, Cyprus imports more than it exports. This could be due to a reliance on imported goods for domestic consumption and a focus on specific export sectors like maritime.

Infrastructure Development

As of 2023, Cyprus boasts a well-developed road network exceeding 11,000 kilometers. The government continues to invest in infrastructure projects, including upgrades to ports and airports, alongside the development of renewable energy facilities.

Fiscal Policy

The Cypriot government strives for a balanced budget through managing spending and taxation. However, past economic challenges led to periods of increased spending and government debt.

Monetary Policy

Since Cyprus is part of the Eurozone, it doesn't have its own central bank. The European Central Bank (ECB) dictates monetary policy, focusing on controlling inflation and maintaining financial stability across the Eurozone.

Trade Agreements

Cyprus leverages trade agreements with the European Union and other countries. These agreements, by reducing trade barriers and promoting economic cooperation, play a vital role in Cypriot trade.

Environmental Regulations

Cyprus has adopted various environmental regulations to align with EU standards and protect its natural resources. These regulations address air and water pollution, waste management, and nature conservation.

Tax System in Cyprus

Capital gains tax: In Cyprus, capital gains are generally taxed at a rate of 20%. However, there are some exceptions, such as for gains on the sale of a primary residence.
Corporate tax rate: Cyprus boasts one of the lowest corporate tax rates in Europe, at a flat 12.5%. This makes it an attractive location for businesses looking to incorporate.
Sales tax (VAT): The standard Value Added Tax (VAT) rate in Cyprus is 19%. However, there are also reduced rates of 5% and 9% for certain goods and services, and some items are exempt altogether.
Property tax: Property tax in Cyprus varies depending on the value and location of the property. Generally, rates are fairly low.
Payroll tax: Both employers and employees contribute to social security in Cyprus. The employer contribution rate is 6.8%, and the employee contribution rate is 7.8%.
Tax deductions and credits: Cyprus offers a number of tax deductions and credits that can help reduce your tax liability. These include deductions for medical expenses, charitable donations, and interest payments on mortgages.
Tax compliance: Cyprus is considered to have a relatively efficient tax collection system.
Tax burden: Compared to other European countries, the overall tax burden in Cyprus is considered moderate. This is due to the low corporate tax rate and relatively few taxes on individuals.

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