INVESTMENT OPPORTUNITIES IN CYPRUS

1. INVESTMENT OPPORTUNITIES IN CYPRUS

2. CYPRUS TELECOMMUNICATIONS AUTHORITY by Yiannis Koulias, Assistant Manager, CytaGlobal Acknowledgement: presentation prepared in co-operation with the Foreign Investors Service Centre, Ministry of Commerce, Industry & Tourism March, 2006

3. Republic of Cyprus ASIA • Positioned at a strategic location in the Eastern Mediterranean at the crossroads of Europe, Asia and Africa, Cyprus serves as a bridge between the European Union and the Middle East... EUROPE AFRICA

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5. Republic of Cyprus (contd…) • Established on 16/8/1960, full member of European Union on 1/5/2004 • Bilingual (Greek/English), highly qualified and skilledworkforce • Regional telecommunications, air-transport and services centre

6. Republic of Cyprus (contd…) • Modern and efficient legal, accounting and banking services • International Financial and Business Centre • 1,200 International Business Corporations (IBCs) • 6th leading maritime nation in the world • 30 foreign Banks

7. Main Social Economic Indicators Total area: 9,250 sq. km Population 2004 (est.): 837,300 Rate of growth 2004: 3.8% Unemployment 2004: 3.6% Inflation 2004: 2.3% Per Capita GDP 2004: EUR 17,239 Cyprus Economy Source: UNCTAD World Investment Report 2005 Sources: Statistical Service of Cyprus, Central Bank of Cyprus

8. Foreign Direct Investments • Sample Top Foreign Investors, 2003–2005 • Bank of Beirut, Lebanon (Financials) • Starbucks, USA (Restaurant) • GFI, UK (IT & Software) • Regus, UK (Consulting & Services) • DAT, United Arab Emirates (Energy) • Boutaris, Greece (Agri-food) • Lidl, Germany ( Retailer) • Scancom, Lebanon (Telecoms) Source: Central Bank of Cyprus

9. FDI Policy • Since 1/10/2004, FDI Policy is fully liberalized for both EU and non EU nationals, in most sectors of the economy • no limitations on foreigners’ participation percentage • no limitation on minimum level of investment • Simplification of administrative procedures • Companies can be established by direct application to the Registrar of Companies

10. Telecommunications in Cyprus • Telecommunications Market in Cyprus is fully liberalised as from 1/1/2003 • Cyprus Telecommunications Authority (CYTA): • the main telecommunications provider in Cyprus • provides the whole spectrum of electronic communication products, ranging from fixed and mobile telephony to internet service provision and broadband applications • offers probably the best telecommunications network in the Eastern Mediterranean region and the cheapest telecommunications in Europe

11. Telecommunications in Cyprus(contd…) • provides an impressive global submarine cable and satellite infrastructure • is committed to meeting the area's ever expanding needs and business goals via a portfolio of competitively priced and flexible products • CYTA’s key statistics (Dec., 2005) • Direct exchange lines (density): 53.71 % • Postpaid mobile telephone service (density): 45.29% • Prepaid mobile telephone service (density): 53.02% • Internet access customers: 47,189 • Broadband access customers: 35,433 • ISDN customers: 27,252

12. Fiscal Incentives • Tax reform(in effect as from 1/1/2003): • conforms with European Union regulations and OECD requirements • maintains Cyprus’ competitiveness as an International Business Centre • enhances Cyprus’ attractiveness as a suitable jurisdiction for holding companies

13. Fiscal Incentives (contd…) • Favourable tax regime: • no tax on dividends • no tax on profits from permanent establishment outside Cyprus • no tax on profits from reorganizations • no tax on capital gains from disposal of securities • tax free repatriation of profits and capital • favourable tax treatment of losses

14. Fiscal Incentives (contd…) • Uniform corporation tax rate at 10% • lowest corporation tax rate in the EU • 50% of interest income is exempt from tax • Personal income tax rate up to 30% • no tax on interest and dividends • Double taxation treaties with 40 countries

15. Investment Incentives • The Government has introduced various Grant Schemes as measures to: • enhance Cyprus’ competitiveness • achieve steady and self sustained growth • maximize GDP • special emphasis: on the manufacturing industry

16. Investment Incentives (contd…) • Basic objectives of the Industrial Development Policy: • to attract and develop new high-tech industries • to improve productivity • to restructure the Cypriot traditional manufacturing industry • to attract foreign investment

17. Investment Incentives (contd…) • Examples of Grant Schemes: • Technology-Incubating Program up to CYP120,000 for two-year period • Technological Upgrading Program covers 30% of investments • Protection against industrial pollution grant may reach up to CYP150,000

18. Investment Incentives (contd…) • National Framework Program for financing research and development projects • total Government’s contribution for 2003-2005, approximately CYP11.65 million • Strengthening laboratory infrastructure • maximum subsidy amount is CYP60,000 • Encouragement of Women & Youth Entrepreneurship • 50% of approved budget, up to CYP35,000 for manufacturing, up to CYP25,000 for other sectors

19. The Larnaca Free Zone • Established in 1980, to encourage external trade and international commerce • abolishment of custom duties and taxes • All kinds of enterprises are allowed (trade, transit trade, manufacture, services) • currently over 25% of total area has been leased

20. The Larnaca Free Zone (contd…) • Industrial sites in the Free Zone are leased for a period of up to 99 years (for the first 5 years a nominal rent of CYP1 per year applies) • Free-of-charge provision of electricity power (maximum demand) • Free-of-charge provision of unlimited number of direct telephone lines

21. Foreign Investors Service Centre • Based in Nicosia • Commenced operations in December 1999 • Under the auspices of the Ministry of Commerce, Industry & Tourism

22. Foreign Investors Service Centre, Scope • The Foreign Investors Service Centre was designed to provide total solutions and support… • acts as central agency for information, support and foreign investors’ relations • provides after-care development services • attracts FDIs in targeted industries and promotes Cyprus as an International Business and Investment Centre

23. Foreign Investors Service Centre, Mission • To attract foreign direct investments, thus contributing in the enhancement of the production capacity and competitiveness of Cyprus industry, and to serve the investors’ needs by providing total solutions and an after-care service program

24. Foreign Investors Service Centre, Services & Activities • Provides information regarding financial, legal and taxation matters • Provides advice regarding the various benefits on-offer (e.g. grant schemes) and after-care development services • Promotes Cyprus as an international business, investment and R&D centre

25. Foreign Investors Service Centre, Services & Activities (contd...) • Co-ordinates and acts as liaison with other appropriate government departments, and facilitates the acquisition of the required permits and licenses (e.g. work permits) • Member Euro-Mediterranean Network of Investment Promotion Agencies (ANIMA) • Member World Association of Investment Promotion Agencies (WAIPA)

26. Conclusions • Strategic geographic location • Availability of high-quality services and highly-skilled work force • Global telecommunications connectivity • Standardised and simple procedures • Favourable business envirornment • Low set-up and operation costs • Favourable tax regime • Grant Schemes

27. Conclusions (contd…) • Dynamic, liberalised FDI regimeand Industrial Development Policy • Availability of Free-Zone bonded factories • The Foreign Investors Service Centre provides total services and support • European standard of living • Dynamic free-market economy

28. …the end INVESTMENT OPPORTUNITIES IN CYPRUS …thank you