With 2022 coming to an end, it’s a great time to reflect on everything that has happened in the past year and start thinking about the business trends that are about to take off in 2023.
A few words about Cyprus
Cyprus (Greek: Kípros) is the third largest island in the Mediterranean and has historically been an attractive destination to live and work.
Our beautiful Mediterranean island boasts more than 60 blue flag beaches and enjoys more than 300 days of sunshine. The welcoming people and the laid-back lifestyle make living in Cyprus an absolute dream.
Strategically located at the crossroads of three continents — Europe, the Middle East, and Africa —Cyprus is a key destination for businesses of all types. On the same note, Cyprus has been an EU member state since 2004, offering access to European markets and EU trade agreements.
Apart from its strategic location and EU access, the island also offers an advantageous tax regime, a robust regulatory legal framework, and a highly skilled workforce.
Growing trends for 2023
The booming investment fund industry
Cyprus is one of the fastest-growing fund management destinations, with Assets under Management reaching €11.1 billion in Q1 2022.
The success of the Cyprus fund industry lies in its ecosystem. The legislative framework, the high-calibre service providers, and the double tax treaty network give massive impetus to the investment fund industry in Cyprus. Moreover, the low costs compared to other European markets make the island an attractive destination for foreign investors and asset managers.
But what does the future hold for the Cyprus fund industry? Based on what we’ve seen so far, it seems that the fund industry shows no signs of slowing down. Even during the turbulent times of the COVID-19 crisis, the Cyprus fund industry remained resilient, with assets under management growing with double-digit numbers.
Moreover, the recent agreement between Cyprus and the European Investment Fund sets out another significant milestone for the nascent venture capital market. Under this agreement, the European Investment Fund will manage the Cyprus Equity Fund — the first equity fund in Cyprus to be supported by public resources — raising our expectations for the fund industry even further for 2023.
The rise of blockchain technology
Over the past decade, we’ve seen a growing interest in blockchain technology across different sectors and industries, and it’s not without reason.
Based on a shared infrastructure, blockchain can provide tools for increased transparency and traceability of transactions. At the same time, blockchain can also improve the efficiency of cross-border payments while facilitating market-wide access.
Cyprus has already started to understand the implications of blockchain technology. Back in 2015, Cyprus was the first country in the world to offer a Master’s degree in Blockchain and Digital Currency, showing its strong interest in pioneering digital technologies.
Moreover, a private hospital in Cyprus has also introduced blockchain technology to store vaccination records and provide vaccination certificates through the E-HCert application and the VeChainThor public blockchain.
The Cyprus government has taken a positive stance toward this pioneering technology by investigating the technical, legal, and managerial applications of DLT technologies. On this note, Cyprus has also signed the ‘European Blockchain Partnership’ and the ‘Declaration of the Southern Mediterranean Countries on Distributed Ledger Technologies’.
As we move into 2023, I expect businesses across various industries to start materialising the benefits of blockchain technology and taking advantage of the opportunities at an operational level.
Digital transformation and growth of e-commerce
- Given that the Cyprus e-commerce market is expected to grow around 13.87% during the period 2022-2027, e-commerce growth and digital transformation are significant trends to consider for the following year.
- Without a doubt, the COVID-19 outbreak has accelerated the adoption of digital technologies, with businesses of all sizes looking at various digital tools to improve their processes and expand their operations at an international level through the internet.
- The Cyprus government is also taking steps towards digitisation. More specifically, the National Digital Strategy, sets forth the aspirational vision of Cyprus to become a fit-for-the-future society and a knowledge-based economy. This includes the digitisation of government services, cyber security, and the introduction of digital IDs and online signatures.
- Based on the above, I believe that digital transformation will be prevalent in 2023, with both private and public sectors adopting new digital technologies to optimise processes and improve the efficiency of operations.
Our team at CX Financia has extensive experience in helping international businesses set their headquarters in Cyprus while managing legal and compliance risks.
Becoming a headquartering base for tech giants
Over the past two decades, more and more global organisations specialising in Information Technology Communication (IT) have been choosing Cyprus as home for their operations.
Cyprus offers an advantageous tax regime with a corporate tax rate as low as 12.5%. Moreover, dividends, profits from trading, and royalty payments are exempt from withholding tax, which propounds a strong incentive for companies to move their headquarters to our beautiful Mediterranean island.
Considering the post-pandemic crisis and the high turbulence resulting from the world situation, particularly during the current tumultuous economic environment, I expect Cyprus to continue growing as a headquartering base in the next year.
In response to the rising interest from investors, the Cyprus government has already implemented a new Business Facilitation Unit (BFU) which aims for faster and more effective registration processes such as company name approvals, VAT and Direct Taxation registrations.
Since the pandemic hit the world, remote work has been gaining increasing attention, with the number of global remote job listings soaring.
More and more international companies are adopting remote work policies, in which they allow their employees to work from around the world. Thanks to technology and communication tools, this is possible to the point that many businesses thrive with remote-only teams.
But what does this mean for Cyprus? Cyprus is undeniably a key destination when it comes to quality of life, and it’s undoubtedly a top relocation destination for remote employees. In fact, Cyprus ranks 36th in the Numbeo Cost of Living Index, offering an attractive destination at an affordable cost for education, leisure, healthcare, and housing.
In response to the increase of remote workers on the island, the Cyprus government has introduced a Digital Nomad Visa to accommodate the location-independent lifestyle. With this new type of residence permit, third-country nationals can stay in the country with their family members while working for a company abroad.
Based on our insights so far, I expect the remote work trend to continue to grow in 2023. That’s why our experienced team of advisors at CX Financia remains constantly updated on the legislative updates and requirements in order to help our clients around the world acquire and renew their Digital Nomad Visa.
A rise in women's entrepreneurship
Women entrepreneurship is on the rise globally. After two years of disruption caused by the coronavirus outbreak, Women in business 2022: Global and regional findings show an increase in the proportion of mid-market senior management positions held by women globally. This worldwide trend is also evident in Cyprus, with more and more female professionals entering the entrepreneurial world.
As a female Managing Director of CX Financia, I am happy to see this positive trend, and I strongly believe that female entrepreneurship will continue to grow in 2023.
Recently, I had the opportunity to participate in the Blockchain Fest 2022 through a panel discussion on women in crypto and blockchain. It was a great opportunity to show that the crypto market is no longer a men-only business, and the same is true for many other industries. I am excited to see what the future holds for female entrepreneurs in Cyprus.
The future is bright for Cyprus
Situated at the heart of the Mediterranean, Cyprus is undeniably a key destination for life and business.
Despite the difficulties that the pandemic has brought to the world, the island has enjoyed significant growth over the past years, with key sectors enjoying double-digit growth — investment funds, real estate, and e-commerce, just to name a few.
The significant increase in foreign investments (FDI), particularly those concerning new projects, is of great importance to the Cypriot economy. This performance is also reflected in the economy’s strong recovery in 2021, with a GDP growth rate of 5.5 per cent. In addition, FDI Intelligence included Cyprus in the top 10 countries for its recovery of investments after the pandemic and ranked the island in 18th place in the seventh edition of the Greenfield FDI Performance Index, climbing 50 places compared to the previous year.
On the same note, there have been exciting projects and developments on the island, such as the City of Dreams, Larnaca Marina, and Trilogy, which open up even more business opportunities for the future.
Looking into 2023, I believe these trends will continue to drive sustainable growth for the island. At the same time, though, digital transformation and new technologies are expected to accelerate the business landscape, even more, attracting more and more companies to set their headquarters in Cyprus.