More Greeks eye Cyprus for business

Low corporate tax rate and friendlier environment are the clinchers

Cyprus has become an attractive destination for Greek firms seeking a friendlier business climate, with 77% more companies opting to register a subsidiary or relocate to the island since 2012.

Registrations of Greek companies rose from just over 1,000 in 2012 to 1,799 in 2016 and stabilised at 1,779 in 2017.

Most notably, companies like Hellenic Petroleum and betting giant OPAP have decided to set up subsidiaries on the island, with HP’s subsidiary EKO (Hellenic Petroleum Cyprus Ltd) being one of the biggest providers of fuel and OPAP Cyprus one of the biggest players in the betting sector. More recently, Vardis Vardinogiannis’ Motor Oil subsidiary Coral AE took over the Lukoil network in Cyprus and rebranded them as Shell stations,

Greece’s popular toy store Jumbo took the decision and moved its parent to Cyprus, leaving a subsidiary to run their business in Greece, while low-cost retailer Lidl is managed territorially by the Greek operations.

Joining the long list of thousands of companies of Greek origin active in Cyprus, are the Fourlis Group of companies franchisee of IKEA, Intersport stores and Leroy Merlin, ITC Publicworld set up by the Germanos group to run the Public Stores and cold cuts manufacturer Yfantis which has set up a Cyprus subsidiary in 2012 to import and distribute the company’s products. Other names on the list include the likes of Autohellas, the Derlicious chain of restaurants and Coffee Island.

Has-beens included the Marinopoulos chain that operated the Starbucks and Carrefour franchises in Cyprus, the latter replaced entirely by another Greek retailer, Sklavenitis.

According to the Department of the Registrar of Companies and Official Receiver (D.R.C.O.R.), in 2012, a year before the bailout programme, registration of Greek companies in Cyprus were 1,033 and made up 5.7% of the 17,999 new registrations.

With the implementation of the bailout programme in 2013, figures dropped dramatically, with just 661 Greek firms registering. In general, 2013 saw a steep decline in company registrations with just 10,847 new companies filed with the registrar.

In 2014, with Cyprus following an austerity programme, 678 Greek companies were registered, that is 6.1% of 11,269 total new registrations.

Things pick up in 2015, the year when Cyprus saw light at the end of the tunnel and was preparing to exit the bailout. Greek company registrations reached 1,012, accounting for 9% of the 11,270 new registrations in Cyprus.

The big bang came in 2016, when Greek company registrations record a 77.77% increase compared to the previous year, reaching 1,799.

Greek company registrations represent around 13.2% of the total number of registrations for 2016 and 2017.

A similar number are expected to be recorded for 2018 as in the first nine months of 2018, 1,225 companies with shareholders or directors of Greek nationality have registered. In total 8,187 Greek companies have enrolled with the Registrar between 2012 and the end of September 2018.

Business environment

Experts say that the exodus of companies from Greece is related to their search for a friendlier business and financial environment.

Confirming that their firm is handling an ever-increasing number of Greek companies, Georgia Pekri, Senior Manager of Ernst & Young’s Compliance and Reporting Department, told the Financial Mirror that Cyprus financial environment plays a significant role in attracting Greek firms to relocate or open subsidiaries.

“We have seen a significant increase over the past two years in clients from Greece wanting to set up a company in Cyprus with their own managerial staff, as their number has more than doubled. The majority of companies are active in the technology and information sector,” Pekri said.

“Greece has higher corporate tax than its immediate neighbours. With a rate of 29% and companies looking to expand their business, they are more than likely to look at corporate tax rates applied in other countries. Cyprus with its 12.5% is an attractive destination,” she added.

Greece’s neighbouring countries all have lower corporate tax rates, with Bulgaria’s rate standing at 10%, Albania at 15%, Romania at 16% and Turkey is 20%.

“Furthermore, dividend distribution in Greece is taxed with 15%, while the corresponding charge is 10% in Bulgaria and 0% for non-Cypriot shareholders residing in Cyprus,” said Pekri.

She added that Cyprus’ attractiveness for Greek companies has also to do with cultural reasons, as Cyprus more or less has the same culture and language.

Pekri also said that Greek companies are also attracted by the more stable financial climate found in Cyprus.

“Clients have told us that they find themselves far less tangled up in red tape in Cyprus than in Greece. Clients also find it easier to open up accounts for their companies in Cyprus banks”.

A Ministry of Commerce source told the Financial Mirror that a significant number of Greek mutual funds, shipping, investment and energy companies are making their way to Cyprus.

“Many of these companies are looking to expand their business eastwards, and what better place to set up a business hub than Cyprus?” he said. “Businesses can set up a headquarters for their business ventures in both Asia and Africa”.

Deloitte Cyprus, despite having a limited number of clients from Greece wishing to set up a company in the country, confirmed the general upward trend in foreign company registrations.

Nicholas Sofocleous, Senior Manager of the Business Solutions Department of Deloitte Cyprus said they have seen an increase in the number of companies from EU countries looking to create a business hub to facilitate their expansion towards the Middle East, as the location of the island is ideal.

“Of course, they are drawn by the low corporate tax rate, but they also find our judicial system attractive. European investors find it to be quite straightforward as it is based on British law,” said Sofocleous.

Asked whether he sees the trend reversing, Sofocleous said: “I do not see any reason for that to happen, as efforts to attract foreign capital are continuous and Cyprus is also considered to be an attractive market in its own right.”