Economy & International business
The economy of Cyprus is based on free enterprise, with most economic activity taking place in the private sector.
Tourism has been and still is the backbone of the economy while the agricultural and manufacturing sectors make up a progressively smaller proportion. Cyprus has developed into a commercial, financial and maritime centre and this has led to the growth of related service industries.
The service sector, which dominates the Cypriot economy, accounts for about half of employment and almost two-thirds of its GDP.
Having shown remarkable resilience following the financial crisis of 2013, Cyprus implemented tough austerity measures to restructure and diversify its economy and was able to exit the economic adjustment programme earlier than scheduled in 2016.
Latest economic indicators from December 2018 show a robust GDP growth of 3.9% (which is higher than EU average of 2.5%), low inflation (HCPI) of approximately 1% and falling unemployment decreased to 8.8% (seasonally adjusted).
Overcoming the challenges of recent years, Cyprus has continued on a solid growth path and maintained its status as one of the fastest growing Eurozone economies.
The extensive network of treaties which Cyprus has formed for the avoidance of double taxation makes the island very attractive to international investors.
There are a large number of International Business Companies (IBCs) i.e. companies incorporated in Cyprus whose beneficial ownership and business activities lie outside Cyprus. It is worth mentioning that Cyprus has amongst the lowest corporation tax rate in the EU at 12.5% on operating profits. Furthermore, as holding companies in Cyprus are in practice free of any tax both on their income from dividends and on their proceeds on disposal of their investments, without any restrictions in relation to the time for which the investment was held or in relation to thin capitalisation, the island has become a favourable location for establishing holding companies by international businesses.
Cyprus switched to the Euro on January 1st, 2008. Prior to that, it had been using the Cypriot Pound as its currency.