More Greeks eye Cyprus for busi­ness

Low cor­po­rate tax rate and friend­lier en­vi­ron­ment are the clinch­ers

Financial Mirror (Cyprus) - - CYPRUS - By Kyr­i­a­cos Kil­iaris

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.”

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