Cyprus: Foreign Investment Protection In Cyprus

Last Updated: 4 October 2019
Article by Anastasios Antoniou and Christina McCollum

The Jurisdiction

Cyprus is a member of the European Union and the Eurozone. A common law jurisdiction, Cyprus provides an established, stable and solid legislative framework.

Cypriot corporate law has evolved over time, from its origins as a replica of the English Companies Act of 1948 into a sophisticated corporate legal framework that encapsulates international commercial realities, while adhering to the principles of common law and equity.

Cyprus has fully transposed applicable EU Directives into its legal order and features sophisticated, yet simple and business-friendly, corporate law mechanics. The jurisdiction features on the 'white list' of the OECD and is committed to the highest standards of transparency.


Cyprus is considered one of the most tax-efficient jurisdictions in the European Union, for the following reasons:

  • it features one of the most attractive corporate tax rates in the EU, at 12.5% on profit
  • there is no taxation on the acquisition or disposal of shares and no withholding tax on dividends
  • it features an intra-group financing regime which is fully aligned with the OECD's BEPS
  • it affords one of the largest networks of double tax treaties, including the UK, the US, the UAE, India, China and Jersey
  • its tax system is fully aligned with EU state aid rules and no tax rulings have been challenged by the European Commission
  • reorganisations, such as mergers, demergers, exchanges of shares and transfers of assets can be effected in a tax-neutral manner.

Double Tax Treaties

Cyprus has concluded over 50 agreements for the avoidance of double taxation and has one of the largest collections of treaties globally, including with the UK, the US, Canada, India, China, Switzerland, the UAE and Jersey.

The 2018 double tax treaty between Cyprus and the UK is in force, providing for zero withholding tax on payments of dividends, interest and royalties (subject to exceptions). Under the said treaty, the disposal of shares made by Cyprus tax resident companies is taxed in Cyprus, except where, inter alia, the shares derive more than 50% of their value (directly or indirectly) from immovable property situated in the UK.

EU law

At an EU level, a comprehensive EU investment policy allows the EU to negotiate investment protection agreements itself. The Treaty on the Functioning of the EU explicitly mentions foreign direct investment as forming part of the common commercial policy, while the Treaty itself establishes the EU's exclusive competence on foreign direct investment.

Regulation (EU) No 1219/2012 establishing transitional arrangements for bilateral investment agreements between EU Member States and third countries, grants legal certainty to existing BITs between EU Member States and third countries until they are replaced by EU-wide investment deals.

Regulation (EU) No 2019/452 establishing a framework for the screening of foreign direct investments into the Union also applies in Cyprus. Whether foreign investment poses a risk to security or public order will be determined by taking into account, inter alia, the impact of the investment on:

  • critical infrastructure, whether physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, and land and real estate that is crucial for the use of such infrastructure
  • critical technologies, such as energy storage, artificial intelligence, robotics, semiconductors, cybersecurity, quantum, aerospace, defence, nanotechnologies, biotechnologies and nuclear technologies
  • the supply of critical inputs (such as energy, raw materials and food security)
  • access to, and ability to control, sensitive information including personal data
  • the freedom and pluralism of the media.

International law

As a widely recognized international business center, Cyprus is a signatory to many international conventions and treaties and has incorporated international investment best practices into its national legal order.

The safeguards relating to the protection for foreign investment and proprietary rights afforded by international investment law comprise the requirement of non-discrimination, the prohibition of confiscatory taxation, the standard treatment of foreign investors, and the doctrine of abuse of rights.

The most common protections found in bilateral investment treaties (BIT) and multilateral investment treaties (MIT) are:

  • Most favoured nation provisions
  • National treatment provisions
  • Fair and equitable treatment
  • Full protection and security
  • Free transfer of investment returns
  • Protection from expropriation.

Multilateral instruments

The Energy Charter Treaty establishes a multilateral framework for cross-border co-operation. Its provisions protect investors and their investments from a broad range of political risk, including discrimination, expropriation, nationalization, breach of contract and damages due to war.

The Multilateral Investment Guarantee Agency (MIGA), offers insurance to cover five types of non-commercial risks: currency inconvertibility and transfer restriction; government expropriation; war, terrorism, and civil disturbance; breaches of contract; and the breach of sovereign financial obligations.

The International Center for Settlement of Investment Disputes (ICSID), is an impartial international forum providing facilities for the resolution of legal disputes between eligible parties, through conciliation or arbitration procedures.

Bilateral Instruments

BITs govern issues relating to investments carried out by nationals of one contracting state in another contracting state. They guarantee protection for such investments and provide regulations for settling any disputes which may arise therefrom.

Cyprus is a party to a wide range of Bilateral Investment Treaties with third countries, including Armenia, Belarus, China, Egypt, India, Iran, Israel, Jordan, Lebanon, Montenegro, Qatar, Serbia and Seychelles.

Cyprus law

Foreign investors enjoy the same constitutional protection of fundamental rights as that provided to local investors. The Constitution of Cyprus guarantees equality between all persons, irrespective of nationality.

The right to own property is one of the fundamental constitutional rights protected by Article 23 of the Constitution. A foreign investor is entitled to seek remedies in the Cyprus courts for any violation of these rights.

There is no exchange control legislation in Cyprus. Resident and non-resident persons and entities may hold and manage assets and liabilities in any foreign currency in and in any jurisdiction, including freely convertible and transferable balances on the island.

Investors can benefit from tailored rights through classes of shares as well as private shareholders agreements to regulate their affairs, which need not be disclosed to any authority or third party. Such rights and agreements are fully enforceable in Cyprus courts, including through injunctive relief.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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