[12/04/2022] To what extent the Republic of Cyprus is considered as a “promising” jurisdiction for attracting Israeli Businesses?

To what extent the Republic of Cyprus is considered as a “promising” jurisdiction for attracting Israeli Businesses?

Home » Publications » [12/04/2022] To what extent the Republic of Cyprus is considered as a “promising” jurisdiction for attracting Israeli Businesses?

Written by Efthymia Lazaridou, Manager of the Corporate Department

Cyprus is considered as one of the most business-friendly jurisdictions since it is the “gateway” to the Eastern Mediterranean region. Its privileged geopolitical position is fundamental, especially for the investors who are keen to trade within the European Union. Cyprus as a member state of the European Union, has a lot to offer to foreign investors and particularly to the Israelis’ business segment. Beyond its advantageous geopolitical position and its favorable  proximity to Israel, Cyprus has a beneficial tax environment, flexible legal system, low set up incorporation costs and undoubtably it is an “attraction pole”, that suits the needs of hundreds of businesses across the international market. 

Benefits for Setting up Business Entities 

There are many reasons that Cyprus is fairly described as an “attraction pole” to the Israeli business world. The process of incorporating a company is simple and there are no singular technicalities. Among other privileges is that a Cyprus Company offers access to the EU and it is subject to all EU VAT and Tax Rules. Also, the fact that a Cyprus Company permits Israeli businesses to freely trade within the Eurozone and enjoy the benefits of the EU is a great advantage. Israeli investors are eligible to the “Non – Dom1 Special Tax Status. Furthermore, by incorporating a Company in Cyprus, an Israeli business may enjoy tax free benefits on dividends remuneration and disposal of shares. Cyprus Companies are subject to 12.5% Corporation Tax2 which is the most competitive corporate tax rate within the EU. In addition, the low costs of setting up a company in Cyprus constitute an additional benefit to consider for incorporating a Company in Cyprus. Furthermore, the new incentives announced last October by the Minister of Finance aiming at attracting new businesses and talent in Cyprus, make the Cyprus jurisdiction even more attractive.

Setting up a Business-Types of Business Entities: 

The following type of business entities may be registered in the Republic of Cyprus: 

  1. Limited Company 
  2. Public Company
  3. Sole proprietor or partnership
  4. Branch
  5. European Public Companies
  6. The re-domiciliation of foreign companies to Cyprus and vice-versa is possible provided that there are relevant provisions to their Articles of Association in respect to the transfer of their Company’s seat to a new jurisdiction. The re-domiciliation of a Company does not necessarily mean that the assets of the Company will be transferred/taken-over by another Company already registered in the destination country. 

Type of Companies set-ups

AIFs3, Funds & Forex Companies

Cypriot jurisdiction is considered as an international hub for doing business especially amongst the Israeli people who may enjoy business, tax advantages and regulatory benefits that Cyprus has to offer particularly for companies operating in the Investment or Forex industry. Amongst the benefits that Cyprus offers is the regulatory and legal framework. Cyprus has been classified as one of the most flexible jurisdictions in the EU and at the same time provides high level protection for investors. 

As an EU Member State, Cyprus complies with all EU Directives and Regulations concerning the provision of financial services. As such, the beneficial financial infrastructure of Cyprus, acts as an incentive for fund managers to establish alternative investment funds (“AIFs”) and/or register with the regulator (the Cyprus Securities and Exchange Commission) (“CySEC”) in order to enjoy the full range of their “EU passporting rights”. 

The advantageous tax regime in Cyprus attracts foreign investors and Cyprus’ non-domiciled individuals enjoy no withholding tax on dividend distributions, interest and royalties. The Alternative Investment Funds (AIFs) may take advantage of the double tax treaties in Cyprus and at the same time the 12,5% corporation tax, places Cyprus into in an ideal position in the European investment map. Also, Cyprus-resident companies may enjoy benefits of the IP Box Regime4 where 80% of the profits are exempted from tax. This means that only 20% of IP income is taxed at a corporate tax rate of 12.5%. Therefore, Cyprus-resident companies can essentially benefit from an effective tax rate as low as 2.5% on the IP assets5 and 0% tax on capital nature transactions for disposal of intangible assets6. Furthermore, the lack of stamp duty on the issuance of units of AIFs is a great advantage. Lastly, the fund management and administration services provided to investment funds are not subject to VAT. 

Incorporation of Company in Cyprus

Pursuant to the Cyprus Company Law (Chapter 113), all the companies must be registered with the Department of Registrar of Companies and Official Receiver. Subject to deciding the type and name of the company, the address of the registered office, directors and secretary, members and share capital, the objects of the company, the Memorandum and Articles, the process of incorporating a company in Cyprus is fairly simple and relatively quick, usually taking between five and ten working days in total.

Strategy for attracting new businesses in Cyprus

Among other benefits that certainly attract potential Israeli businesses to establish a Company in Cyprus are the new incentives and benefits which the Cyprus government announced last October. Essentially, the Action Plan for Attracting Companies to Operate and Expand their Activities in Cyprus was set up in January 2022 with the aim to reinforce the role of Cyprus as an international business hub. They have hence created the Business Facilitation Unit7 which has a catalytical role and is the single point of contact for foreign companies. In other words, the Business Facilitation Unit8 aims to function as a central point of contact for international companies of foreign interest, either already operating or wishing to operate in Cyprus, and for Cyprus businesses in specific areas of economic activity, including shipping, high-tech or innovation, pharmaceutical or companies active in the fields of biogenetics and biotechnology. Moreover, the plan also aims at offering work permits for highly skilled employees from third countries such as Israel with a minimum gross salary of €2,500. 9

Who is entitled to the benefits of the new investment strategy for attracting new businesses in Cyprus?

All foreign companies that operate in Cyprus or any foreign companies wishing to establish a presence in Cyprus, are entitled to the benefits of the new investment strategy announced by the Cyprus Government last October. For these companies, a physical presence in Cyprus is required. Foreign companies are defined as companies whose majority shareholders are third-country nationals. In cases where the foreign participation in the company’s share capital is equal or less than 50%, then the foreign participation must match an amount equal or greater to amount of €200,000 as nominal capital. Other companies that may enjoy the benefits of this new strategy are public companies which are registered on any recognized stock exchange, Cyprus shipping companies, Cyprus tech/innovation companies and Cyprus pharmaceutical companies or Cyprus companies that are active in the field of biogenetics and biotechnology. 

If the majority of the shares of a Company are owned by individuals who have obtained a Cyprus citizenship, they and their families may also enjoy the benefits of employment under the Republic of Cyprus such as social insurance and access to the Cyprus national healthcare system. The criteria required to obtain such a working permit is that the potential third country employee has a university degree, equivalent qualifications and/or certificates of relevant experience. Furthermore, one of the great benefits offered by the Cyprus Government is that work permits will be issued within one month, have a three year validity and at the same time the employee’s spouse will also have access to the country’s labour market. 

Digital Nomad Visa

Covid-19 empowered the concept of trading as “digital nomad”. Digital Nomad is being interpreted as people who are location-independent and use technology to perform their job, living a nomadic lifestyle. This category of people prefer the idea of remote working and telecommunication instead of being physically present at a company’s headquarters or office. Cyprus offers the Digital Nomad Visa for people who wish to live in Cyprus but work remotely in companies operating abroad. 10

The visa will be granted for a period of twelve months, with the right to renew for another two years. The beneficiaries should have a salary of at least €3,500 euro per month, medical coverage and a clean criminal record. Last but not least, according to the government’s relatively new strategy, the citizenship by naturalization minimizes to 5 years. In other words, currently applicants who wish to obtain Cypriot citizenship by naturalization need to have resided and been employed in Cyprus for seven (7) years. Once the Immigration Law (Cap. 105) will be amended the required number of years will be changed to five (5), provided that the applicant proves with a certificate that he/she has “very good knowledge” of the Greek Language. 


As the Israel ambassador in Cyprus Mr. Shmuel Revel stated, “Israelis’ cultural affinity with Cypriots is growing and developing”. Inevitably, Cyprus and Israel have a close relationship. A good relationship and support are the key elements which lead to a good business cooperation. Undoubtably, an Israeli investor, who operates in any industry and especially in the investment funds area or in a fund-related company may find Cyprus as an excellent business destination, benefiting from its flexible legal system, low set-up and maintenance costs, attractive tax regime and easy access to the European Union. Cyprus, as a regional business and investment hub, has a lot to offer to Israel on the Corporate segment. 11

For further information or advice on this matter, please contact Efthymia Lazaridou, Manager of the Corporate Department (email: efthymia.l@yiangou.com.cy, telephone number: +357 22 653157)


1 An individual enjoys the Cyprus Non-Domiciled Status if he/she is a tax resident of Cyprus and has not been a tax resident of Cyprus as per the Income Tax Law for a period of 20 consecutive years prior to the introduction of the law (i.e. prior to 16 July 2015).
2 The Income Tax Law (L.118(I)/2002)
3 AIFs: Alternative Investment Funds as per The Alternative Investment Funds Law of 2018 L.124(I) of 2018 means: collective investment undertakings, including investment compartments thereof, which – (a) raise capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors∙ and – (b) do not require authorisation pursuant to article 9 of the Open Ended Undertakings for Collective Investment Law or pursuant to the legislation of another Member State which harmonises article 5 of Directive 2009/65/EC∙131(I) of 2014 11(I) of 2015.
4 IP Box Regime (known also as a patent box, innovation box or IP box) is a corporate tax regime used by many countries to incentivize research and development activities by taxing revenues deriving from licenses, royalties, patents, sale or transfer of qualified IP assets differently offering lower taxes compared to other commercial revenues. Intellectual Property (IP) is a commonly used term which includes mind creation results such as software programs, innovative algorithms and formulas, inventions, trade-secrets and know-how, manufacturing practices, marketing concepts, artistic works, designs, images, names and inventions used in commerce. It is one of the most valued assets a company can have. IP assets may not have a fixed geographical nexus and can be relocated without significant costs. 85% of multinational companies use this flexibility to reduce overall tax burden by allocating valuable IP to group companies resident in countries with advanced IP box regime.
5 Intellectual Property (IP) is a commonly used term which includes mind creation results such as software programs, innovative algorithms and formulas, inventions, trade-secrets and know-how, manufacturing practices, marketing concepts, artistic works, designs, images, names and inventions used in commerce.
6 Section 9(1)(l) of the Income Tax Law (L.118(I)/2002)
7 https://www.businessincyprus.gov.cy/business-facilitation-unit/ accessed 02/02/2022 Services of the Business Facilitation Unit: Ability to complete all registrations for the establishment of a business at the One-Stop Shop Section of the Business Facilitation Unit:
a) Approval of company name and registration (in collaboration with the Department of Registrar of Companies and Intellectual Property)
b) Registration in the Employers’ Register (Social Insurance Services)
c) Entry in the Tax Register for Indirect Taxation (VAT) and Direct Taxation (Tax Department)
8 http://mof.gov.cy/assets/modules/wnp/articles/202111/1012/docs/strategy_to_attract_business_and_talent.pdf
9 http://mof.gov.cy/assets/modules/wnp/articles/202111/1012/docs/presentation_business_attraction_strategy.pdf
10 http://www.moi.gov.cy/moi/crmd/crmd.nsf/All/FE2829CCA899862DC22587EA002E321F?OpenDocument
11 https://cyprus-mail.com/2021/06/13/cyprus-and-israel-have-a-close-relationship-that-leads-to-good-business-israeli-ambassador/