Cyprus as an Alternative for Greek Entrepreneurs

Cyprus as an Alternative for Greek Entrepreneurs

This article was originally published on LinkedIn by Vassilis Panayiotou, Managing Partner of Panayiotou Legal.

Since 2012, there has been a 77% increase in the number of Greek businesses that have either relocated to Cyprus or registered a subsidiary, whereas according to the Bulgarian Institute for Market Economics, in the last few years, Greek enterprises have injected approximately 5 billion euros in Bulgaria’s economy.

While it has become apparent that the country’s inconsistent and non-business-friendly taxation system is straggling local businesses, it comes as no surprise, that the country’s weak economic position and a number of fruitless attempts at reform by an ineffective bureaucracy, has forced Greek companies to seek alternative jurisdictions in which they can operate their businesses.

Tax-System

With its corporation tax rate standing at 29%, Greece has a much higher corporation tax than its immediate neighbors, with Bulgaria’s rate standing at 15%, and Cyprus at 12.5%. Similarly, dividend distribution in Greece is taxed with 15%, while the corresponding charge in Bulgaria is 10% and 0% for non-Cypriot shareholders residing in Cyprus.

Unsurprisingly, over the past few years, our firm has been regularly receiving requests from Greek entrepreneurs who wish to exploit the use of Cyprus registered entities, to mitigate or even completely eliminate the overall tax liability of their Greek companies. The extensive network of Cyprus’ double-taxation treaties, the existence of a tax sparing clause between the two countries, the lack of thin capitalization rules and the flexibility of structuring investments through a combination of equity & debt are some of the many tools at one’s disposal to achieve this. But it seems that the island’s beneficial tax system is not the only reason behind the exodus of companies from Greece and into Cyprus.

Retail and Distribution Sector

Greek Retail and Distribution Entrepreneurs moving to Cyprus

Companies in the Retail and Distribution sector have been flooding into the island as they wish to exploit the island’s favorable geographical location and utilize the country’s position as a trading point for the Mediterranean, North African, and Middle East areas. The ease and speed at which a company can be set up and have its operations up and running is also a critical factor. A company can be incorporated in Cyprus in approximately 10 working days, whereas acquiring an Economic Operators Registration and Identification (EORI) number, can be obtained in a matter of a few days. The EORI number is assigned to Cypriot importers and exporters and is used for processing entry and exit declarations with the Customs authorities for shipments in and outside the European Union.

It should also be noted that non-resident businesses are allowed to maintain, store, breakbulk, or re-package their own transit products in warehouses in Cyprus, as long as the handling does not involve any variations in the customs tariff classification.

Culture and Language

Another instrumental factor behind the inward trend is the fact that the two countries have, a similar culture and the same native language. Having spoken to a number of our Greek clients, the latter perceive the ability to communicate in their native language as a critical platform, which enables and facilitates problem-solving, as well as delineates boundaries that exclude those with a different vocabulary.

For the reasons mentioned above, Cyprus has been transformed into one of the most attractive solutions for Greek Entrepreneurs. If you are an entrepreneur yourself and are thinking of expanding or moving your business operations from Greece to Cyprus, feel free to send me a message on LinkedIn, and I would be happy to discuss your options.

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