Many people turn to self-employment or start their own business when they start a new life abroad, although this can be very risky indeed in a foreign country.
If you’re thinking of doing this in Cyprus, you must do plenty of research into the country and its history, people, culture and of course business environment. In theory, now that Cyprus has joined the EU, other EU citizens can work as a self-employed person or start a business in Cyprus without restriction. For example, EU citizens are now able to start a business without needing a local Cypriot partner and there’s no minimum investment required. The exception to this relaxation of regulations is businesses related to financial services, which are subject to strict criteria.
The majority of businesses established by foreigners in Cyprus are linked to the leisure and catering industries, followed by property investment and development. The most common include holiday accommodation, e.g. bed & breakfast, villas, apartments and cottages, catering, e.g. bars, cafés and restaurants, shops, property agencies, translation bureaux, language schools, and holiday and sports centres, e.g. tennis, golf and water sports.
Whichever kind of business plans you have, establish the infrastructure first, including a bank account, accountant and lawyer. The advice of a good local lawyer, who understands the business climate in Cyprus and is experienced in company incorporation, is vital. That way you can always ensure that you’re operating within the law and the lawyer will take you through the preparation of a brief financial report so that you can present your proposal to a financial institution. He will also help you apply for a company name and complete all the necessary paperwork for incorporation. It’s worth paying a lawyer to complete the application on your behalf. There are severe penalties for anyone who ignores the regulations and legal requirements.
You can obtain help, advice and business information from a number of organisations in Cyprus, such as the Central Bank of Cyprus (www.centralbank.gov.cy ), the Cyprus Chamber of Commerce (www.ccci.org.cy ) and the Employers’ and Industrialists’ Federation (www.oeb-eif.org ).
As with starting a business in any country, it’s important to keep your plans small and manageable and work well within your budget, especially in the early days, rather than undertaking some grandiose scheme that’s impossible to see through. You should have a contingency plan and sufficient funds to last until you’re established (this also applies to employees).
As in many countries, most people are self-employed for the lifestyle and freedom it affords (no clocks or bosses!) rather than for the financial rewards (which can be non-existent). Generally speaking, you shouldn’t consider running a business in Cyprus in a field in which you don’t have previous experience, and it’s often wise to work for someone else in the same line of business in order to gain experience, rather than jump in at the deep end.
Most people are far too optimistic about the prospects for a new business and over-estimate income levels (it often takes years to make a profit) and under-estimate costs. You must be realistic or even pessimistic when calculating your income and over-estimate the costs and under-estimate the revenue (then reduce it by 50 per cent!).
New projects are rarely, if ever, completed within budget, and you need to ensure that you have sufficient working capital and can survive until a business takes off. Cypriot banks are very conservative and extremely wary of lending to new businesses, especially businesses run by foreigners. If you wish to borrow money to buy property or for a business venture, you should also carefully consider where and in what currency to raise the necessary finance.
The majority of businesses established by foreigners in Cyprus are linked to the leisure and catering industries, followed by property investment and development. In Cyprus certain businesses are termed ‘saturated activities’ and applications for investment in such businesses are rejected outright. Check with the Central Bank of Cyprus (see above) for up to date information.
It’s sometimes easier to buy an established business than to start a new one, and it’s less of a risk. The paperwork for taking over an existing business is also simpler, although still complex. If you plan to buy a business, always obtain an independent valuation (or two) and employ an accountant to audit the books. Never sign anything you don’t understand completely even if you think you understand it.
Since Cyprus’ EU accession in May 2004, there have been no offshore companies in Cyprus. Previously there were some 40,000 registered offshore companies, taking advantage of the tax benefits. All companies must now pay 10 per cent corporation tax on their profits, but this is still the lowest rate in the EU.
This article is an extract from Buying a Home in Cyprus from Survival Books.