articleposted 29 December 2021

A Hidden Gem For Tech Startups: Why You Should Consider Moving To Cyprus

quote 2.jpg

The new reality turned the usual business world upside down. Zoom meetings are the new black. Most offices have switched to remote or hybrid mode. Investors no longer look for startups within 30 minutes of drive. And entrepreneurs can run their startups as far from the target market as they want. 

But then, since you have a choice, where would you prefer to operate your digital business?

Definitely, it’s a place with a favorable business environment. Tax incentives. Multilingual workforce. Inspirational lifestyle. It’s a hub for innovation, entrepreneurship, and startups. It’s a state where instead of hitting the economy, the pandemic boosts innovation in the IT industry and digital transformation in government processes.

Definitely, it’s a country like Cyprus.

In March 2020, when the first wave of COVID-19 was already conquering Europe, Cyprus established the New Deputy Ministry for Research, Innovation, and Digital Policy. 

Within only 18 months of operations, it has already pushed the innovational agenda forward and accelerated digitalization. Together with PwC, they came up with a National Digital Strategy, developed studies on artificial intelligence and the Blockchain Bill, and implemented a number of gov tech solutions concerning social welfare, health records, and payments. All of that is done to help the country cope with COVID-19 and adopt the new digital era of remote communications.

Currently, the Deputy Ministry is focused on increasing the quantity and quality of incentives for startups, investors, scientific projects, and big tech companies. Tech visas for IT professionals, work permits for their spouses, and employment cost subsidies for digital and innovation centers in Cyprus are already underway. With this approach, the country expects to harbor multiple institutional investors and R&D centers of a few world’s biggest tech companies within the next few years.

Yet Cyprus is also committed to creating an innovative startup-friendly environment. The corporate tax rate here is just 12.5%. And if the company owns IP, they’re eligible for an 80% tax exemption. Is there an EU country offering better taxation?  

Yet, no matter how small the taxes are, most startups don’t generate enough profit in their early stages to keep up with the expenses. To help with that, Cyprus allows its tax resident companies to carry forward the tax year debt over the next five years and pay it out with future income.

In 2017, Cyprus introduced startup visas to invite digital businesses with high growth potential. Upon arrival, founders are issued with one-year residence permits available for later renewal. If the venture succeeds, founders get permanent residence and family reunification permits.

The Cyprus government’s interest in attracting and funding innovative startups to boost the economy has been steadily growing. Currently, the state’s Research and Innovation Foundation offers three Entrepreneurial Innovation programs for startups:

  1. The ‘Pre-seed program granting €100,000 to early-stage startups

  2. The ‘Seed’ program granting €500,000 to existing startups aiming to advance towards commercialization and internationalization of their project

  3. The ‘Innovate’ program granting €1,000,000 to existing companies already active in the market or having innovative products/services in a pilot phase.

At least 40 local startups registered in Cyprus will have got financed through these programs by the end of 2021.

And then there are European funds, grants, incentive programs, and a newly-established Fund of Funds. To help invest in innovative businesses with it, the government of Cyprus allocated €20,000,000 to this fund. The local venture capital market also blossoms with new VC funds and angel clubs having CIS roots. In this way, readily available funding is supplemented with priceless knowledge sharing from strengthening local angel investors networks.

Businesses in Cyprus are also protected. The country’s comprehensive and robust legal and regulatory framework is based on English Common Law principles and conferred through EU member states. That makes it so business-friendly, transparent, and reliable in commercial practices that it attracts more and more investors to Cyprus every year. 

And then there’s TechIsland, an association of technology companies working to further perfect the laws for entrepreneurs, simplify employee relocation procedures, voice the industry’s pains and suggest better tax incentives for it. All to accelerate the innovation ecosystem in the country.

To help businesses grow as fast as possible, Cyprus offers a plethora of highly educated and skilled professionals. Having the second-highest tertiary educational attainment rate in the EU, Cypriots speak English with fluency and usually know two more languages. Because of that, companies going global often launch sales and operational departments in Cyprus first. 

At the same time, a wider pool of European talent is also open and available here. And thanks to a set of relocation programs, international tech professionals find it easy to move to Cyprus. 

The tech skills on the island are yet in short supply. But with the help of the Recovery and Resilience Facility of the European Commission, the country’s government recently got a grant of nearly €20,000,000. This money will help the local workforce learn or get upskilled in modern digital and technology competencies.

The country also aims to create new employment opportunities for researchers and high-level scientists and thus advance innovation and entrepreneurship. To connect academia and business, it will be  awarding 30 million euros to six Centres of Excellence (funded by the Horizon 2020 Teaming program) within the next 15 years. 

Finally, with its geographical location at the crossroads of three continents, Cyprus is the perfect gateway to Europe and the Middle East. 

The island has a pleasant Mediterranean climate, one of the lowest crime rates in the region, and enjoys year-round sunshine with mild winters. A combination of island life with a holistic business environment provides the highest rate of work-life balance. No wonder it’s the ultimate selling point in recruiting and retaining high-skill professionals.

Cyprus is fast becoming a tech island of the Mediterranean by boosting innovation, accelerating the digital transformation, adjusting the policy, launching new startup programs, and providing extra tax incentives. And that’s what makes the business climate of Cyprus so appealing for entrepreneurs seeking to develop, validate, and launch their ideas with a follow-on scale on the global markets.

by Tetyana Romanyukha - Head of Operations at TechIsland

from the blog