Cyprus

Market Overview

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Cyprus

Nestled in the eastern Mediterranean, Cyprus has long been a sought-after destination for investors seeking a strategic business foothold in Europe and beyond. With its rich history, favourable business infrastructure, strong economy, and appealing opportunities, Cyprus remains an attractive jurisdiction for both domestic and foreign entrepreneurs, organizations, and corporations.

Business environment

Changes in 2026 versus 2025 - What has changed in the last year that has impacted the way business is conducted?

Over the past year, Cyprus has experienced several significant developments that have impacted the business environment:

Political motivation

EU Council Presidency 2026: Cyprus holds the EU Council Presidency  in the first half of 2026, focusing on strengthening EU strategic autonomy, migration management, internal security, and economic competitiveness. During this period, Cyprus will coordinate Council work, facilitate legislative negotiations, and host key EU meetings, raising the island’s visibility in European policymaking.

Economic Indicators and Fiscal Policy

Inflation and Fiscal Surplus: Inflation continued to stabilise, remaining low at around 1.2% in January 2026 and 0.9% in February 2026, down from 2.2% in 2024 and 3.9% in 2023. Cyprus recorded one of the lowest inflation rates in the euro area,· (1) reflecting strong price stability driven partly by declining energy prices and modest increases in services and food. The country also maintained a strong fiscal surplus, contributing to overall economic stability. (2)

Tourism Sector

Record-Breaking Tourism Figures: In 2025, Cyprus’ tourism sector continued its strong performance, with over 4.5 million visitor arrivals in 2025,(3) and record tourism revenues of €3.69 billion,(4) representing a 15.2% increase from €3.2 billion in 2024. This sustained growth highlights the sector’s robust post-pandemic recovery and underscores its critical role in the national economy, contributing to roughly 14% of Cyprus’ GDP.

Tax reform

Cyprus implemented a comprehensive tax reform that came into effect on 1 January 2026, introducing a more modern, transparent and predictable tax framework aligned with EU standards.

Corporate Tax Adjustment: As part of the 2026 tax reform, Cyprus increased the corporate income tax rate from 12.5% to 15%, aligning with the global minimum tax framework while maintaining one of the most competitive corporate tax rates within the European Union.

Reduced Taxation on Dividends: To balance the corporate tax increase and enhance Cyprus’ attractiveness for investors, the Special Defence Contribution (SDC) on dividends has been significantly reduced from 17% to 5%. In addition, the deemed dividend distribution rules for profits generated after 1 January 2026 have been abolished, simplifying the tax system and improving predictability for businesses.

Attractive Intellectual Property (IP) Regime: The reform maintains Cyprus’ highly competitive Intellectual Property (IP) regime, which continues to provide substantial tax advantages for companies engaged in research, development and innovation, reinforcing the country’s position as a regional technology and innovation hub.

Introduction of Crypto-Asset Taxation: The reform also introduces clearer rules for digital investments through the implementation of an 8% flat tax on gains from the disposal of crypto-assets, with the ability to offset losses within the same tax year, providing greater certainty for investors in the rapidly growing digital asset market.

Abolition of Stamp Duty: The reform also provides for the full abolition of stamp duty, reducing transactional and administrative costs for businesses and individuals. This measure simplifies documentation requirements and improves the ease of doing business, particularly for commercial agreements and financial transactions.

 

What are the advantages of your country as a business location?

Cyprus boasts a strategic geographical position, situated at the crossroads of Europe, Asia, and Africa, making it a prime location for businesses seeking entry into these lucrative markets. This unique positioning presents a wealth of opportunities for international enterprises. Additionally, Cyprus offers an appealing tax system with one of Europe's lowest corporate tax rates at 15% and an extensive network of double tax treaties. Further, the country has introduced a favourable Intellectual Property (IP) regime that provides tax incentives for companies holding IP rights, reducing their effective tax rate to a very low level, resulting in one of the most competitive IP tax regimes in Europe for IP-related profits.Such tax advantages make Cyprus an enticing choice for foreign investors seeking to optimize their financial profiles.

Additionally, the country is included on the OECD’s whitelist of jurisdictions and has also received positive credit rankings in 2023 from Fitch (BBB), Moody’s (Baa2) and S&P (BBB). Cyprus also finds its long-term credit rating 3 grades above the minimum investment threshold, specifically at BBB High and BBB+ by DBRS Morningstar and the Germany-based agency Scope Ratings.

The island further stands out due to its well-developed infrastructure, including modern telecommunications, global ports, and international connectivity. A skilled and educated workforce, proficient in English, strengthens Cyprus's appeal for companies seeking to establish their operations. Beyond this, Cyprus diversifies its business sectors, extending well beyond traditional domains like tourism and real estate. Thriving in sectors such as ICT, fintech, shipping, renewable energy, entrepreneurship and innovation, investment funds, filming, and higher education, Cyprus's economic prospects remain robust.

Moreover, its straightforward legal system simplifies business establishment and operation. Furthermore, Cyprus offers accessible residency programs for foreign investors, allowing them to secure residency through varied investment opportunities. Lastly, Cyprus's European Union (EU) membership opens doors to the EU's market and free trade with other member states, enhancing its business attractiveness on a global scale.

What are the business structures in your country?

Private limited liability company by shares

Such a company has share capital, and the liability of its members is limited by its memorandum of association to any unpaid amount for the shares they hold respectively. A private limited liability company by shares must have at least one (1) shareholder but no more than fifty (50), exclusive of any persons who are or have formerly been in the employment of the company and are or still continue to be members of the company. A private limited liability company cannot offer its shares for subscription to the public. This is the most common type of company.

Public limited liability company by shares

This company has share capital and the liability of its members is limited by its memorandum of association, to any unpaid amount for the shares they hold respectively. A public limited liability company may invite the public to subscribe for its shares and may be listed on the stock exchange. The number of members of a public company must be at least seven (7). The minimum authorized and issued capital of a public company, which is offered for subscription, must be twenty-five thousand, six hundred and twenty-nine euros (€25,629).

Limited liability company by guarantee without share capital

This type of company does not have share capital and its members act as guarantors rather than shareholders. The liability of its members is limited by its memorandum of association, up to the amount that the members have undertaken to contribute respectively to the assets of the company in case of dissolution.

Limited liability company by guarantee with a share capital

This company has share capital and the liability of its members is limited by its memorandum of association, on the one hand, up to any unpaid amount for the shares they hold, and on the other, up to the amount that its members have respectively undertaken to contribute to the assets of the company in case of dissolution. This type of company can be either private or public company. If it is a public company, it can invite the public to subscribe for its shares.

Variable capital investment company

This company is a limited liability company by shares. The main characteristic of this type is that, according to its memorandum of association and the rules governing its operation, its shares do not have a nominal value but rather a variable value. The company can be incorporated after it receives a relevant license from the Cyprus Securities and Exchange Commission (CySec) to operate as Collective Investment Funds (CIF).

A variable capital investment company (VCIC) can take the form of either a private or a public company, depending on the type of collective investment fund (CIF) that such variable investment company will take (UCITS, AIF, AIFLNP, RAIF). The number of members of a private company can range from one (1) to fifty (50) members while the number of members of a public company must be at least one (1).

General Partnership

In a general partnership, all partners are general partners and therefore every partner is jointly and severally liable with all the other partners for the debts and obligations of the partnership that arise while he/she is a partner. A general partnership must have at least two (2) partners.

Limited Partnership

A limited partnership must comprise of one (1) or more persons who will be the general partners and shall be responsible for all the debts and obligations of the partnership, as well as one (1) or more persons who shall be the limited partners who will contribute a certain amount or property, valued at a specific amount to the partnership and to which persons a specified number of shares may be assigned. Limited partners are not liable for the debts and obligations of the partnership beyond the amount they have contributed. A limited partnership may have a share capital and be limited by shares. Regardless of whether it has share capital or not, a limited partnership is not considered as a legal entity with an independent legal personality.

Economy

Currency strength

Cyprus adopted the Euro as its official currency on 1 January 2008. The Euro is one of the top 10 strongest currencies in the world and is the official currency of 20 out of the 27 countries that form the European Union. Euro coins and banknotes entered circulation in 2002, and the currency is free-floating.

Inflation rates

Inflation (HICP) in Cyprus has continued to moderate in recent years. Annual inflation declined to 2.2% in 2024, down from 3.9% in 2023, reflecting easing price pressures. More recent data show inflation remaining relatively low, with the Harmonised Index of Consumer Prices (HICP) rising by 1.2% in January 2026 compared with January 2025, before easing further to 0.9% in February 2026. These figures indicate a continued stabilisation of prices, supported in part by declining energy costs and moderate increases in services and food prices.

Main trade sectors

Tourism remains a cornerstone of Cyprus' economy, with 2025 marking a record-breaking year for visitor arrivals and revenue. The sector welcomed over 4.5 million tourists and generated approximately €3.69 billion in revenue, representing a significant increase compared with 2024. The government continues to promote Cyprus as a premier travel destination, leveraging its rich history, picturesque landscapes, and strategic Mediterranean location. Despite the sector’s strong performance, continued instability linked to the Middle East conflict involving Iran may pose potential risks to Cyprus’ tourism industry. However, bookings remain stable and there are currently no indications of widespread cancellations.

Real estate remains a strong driver of economic activity, attracting both domestic and foreign investment. Cyprus' property market showed resilience in 2025, with 19,304 property transfers worth €4.55 billion, slightly up from 19,155 transactions worth €4.12 billion in 2024.(5)Limassol, in particular, remains a hotspot for commercial and residential property development, with high-end projects catering to international buyers.

The financial services sector continues to thrive, with banks, insurance companies, and investment firms benefiting from Cyprus' favourable regulatory and tax environment. The funds industry has seen exponential growth, attracting a diverse range of international investors.

The ship management industry also remains robust, contributing significantly to the economy. Cyprus’ shipping sector accounts for around 7% of the country’s GDP and employs more than 9,000 people onshore, as well as about 80,000 seafarers on vessels managed by Cyprus-based companies. The sector continues to strengthen Cyprus’ position as a global maritime hub, ranking 12th worldwide in fleet capacity and flag according to the United Nations Conference on Trade and Development (UNCTAD).(6)

The energy sector has continued to advance, with Cyprus strengthening its role in the Eastern Mediterranean’s evolving energy landscape. The government’s strategy focuses on expanding renewable energy, developing LNG import and regasification infrastructure, promoting regional electricity interconnections, and advancing the exploitation of offshore natural gas reserves. Cyprus has recorded six significant gas discoveries in its Exclusive Economic Zone, including Aphrodite, Calypso, Glaucus, Cronos, Zeus and the recent Pegasus discovery, with development plans for key fields progressing in cooperation with international partners. At the same time, investments in solar power, energy storage and grid upgrades are supporting the country’s transition toward a cleaner and more secure energy system in line with EU sustainability objectives.(7)

Technology and innovation have become major economic drivers, with Cyprus emerging as a regional hub for fintech, ICT services, and digital businesses. The sector has expanded rapidly in recent years, with international IT, fintech, and cybersecurity firms establishing operations on the island and creating a growing ecosystem of high-skilled employment.

According to industry estimates, the technology sector now represents a significant share of the economy, with ICT previously accounting for around 15% of GDP and generating approximately €4 billion in revenue. As Cyprus moves forward in 2026, these key sectors of tourism, real estate, financial services, shipping, energy, and technology are expected to continue shaping the country’s economic landscape. Strong growth in services,exports, rising foreign investment and the continued expansion of the technology ecosystem are reinforcing Cyprus’ role as a regional business and investment hub.

Legal system

How does the legal system operate? What should clients be mindful of when doing business in your jurisdiction?

Cyprus is primarily a common law jurisdiction with a justice system which is based on the adversarial model. This is a legacy from its period as a British colony.  Much of Cypriot legislation is based on the UK law in force at the time Cyprus ceased to be a colony.  It is updated and amended regularly to ensure alignment with all relevant EU Guidelines and Directives.

Where there is no applicable Cypriot legislation, English common law and equity are applicable, and English authorities have persuasive force.  The courts are bound by the doctrine of precedent according to which where the common law has been interpreted by the Supreme Court of Cyprus in a particular way, the subordinate courts will be bound by that interpretation. This offers the parties to a commercial action the advantages of consistency, predictability, and efficiency.

Foreign investment restrictions

Regulatory environment

Cyprus, as an EU member state, operates within a regulatory framework that encompasses various sectors, each designed to promote economic growth, protect the rights of consumers and investors, and ensure compliance with international standards. In the financial realm, the Cyprus Securities and Exchange Commission (CySEC) oversees banking, insurance, and investment services, aligning the country with EU directives to maintain financial stability.

The nation's competitive tax environment and the extensive double taxation treaties position Cyprus as an attractive hub for international businesses, and the government actively combats tax evasion and money laundering. Moreover, Cyprus upholds robust labor regulations and fosters fair working conditions, while consumer protection measures are in place to safeguard consumers' rights. The regulatory landscape here extends to environmental protections, legal systems, and data privacy, with an overarching commitment to EU standards.

Cyprus also ensures a conducive environment for business operations and investment. The Department of Registrar of Companies and Official Receiver facilitates the registration of various business entities, welcoming foreign investment. In the real estate and construction sectors, regulations maintain construction quality and safeguard buyer rights, while in the telecommunications and IT domains, regulatory bodies ensure competition, service quality, and data protection. These efforts are complemented by a robust legal system based on English common law principles, providing the legal foundation for contracts, property rights, and dispute resolution.

In response to global concerns, Cyprus has implemented comprehensive measures in areas such as anti-money laundering and counter-terrorism financing, aligning its regulations with international standards and EU directives.

Additionally, the country complies with the General Data Protection Regulation (GDPR), ensuring the privacy and security of personal data. In healthcare and pharmaceuticals, Cyprus adheres to EU standards in the delivery of healthcare services and the regulation of pharmaceutical products. Overall, Cyprus' regulatory environment reflects its commitment to maintaining a thriving economy, protecting individual rights, and adhering to international norms in various sectors of governance.

Direct Investment and Foreign Investment Screening

The Cyprus government has historically encouraged foreign direct investment (FDI) to diversify the economy. The tax regime has played a key role in making Cyprus one of the most attractive destinations in Europe for individuals, investors, and businesses. There are currently no general restrictions on ownership or investment in Cyprus, and no capital controls exist; travelers must only declare cash sums exceeding EUR 10,000 upon arrival, in line with EU rules.

On 2 April 2026, Cyprus formally implemented the EU FDI Regulation (2019/452), introducing a national FDI screening mechanism to monitor and control foreign investments in strategically important enterprises, particularly in sectors sensitive to national security, critical infrastructure, and key economic activities.

Key definitions under the law include:

Foreign Direct Investment (FDI): Any investment by a foreign investor aiming to establish or maintain lasting links with an entity in Cyprus, including investments enabling effective participation in management or control.

Control of an Undertaking: The ability to exercise decisive influence through ownership of at least 25% of voting rights or assets, or via contracts or other means allowing control of management decisions.

Strategically Important Enterprise: Any entity engaged in particularly sensitive sectors as defined in the Regulation, including companies, partnerships, associations, foundations, trusts, or foreign-established entities operating or supplying goods/services in Cyprus.

Foreign Investor: Any natural person who is not an EU, EEA, or Swiss national, or any non-EU enterprise, making or intending to make an FDI.

The new law establishes a clear FDI review process, enhancing investor certainty and enabling proactive cooperation with EU institutions. While the legislation marks a significant step in regulatory clarity, caution remains. Retrospective EU reviews may still occur, and ongoing risk assessment and client advising are essential for foreign investors.

(1) (https://cyprus-mail.com/2026/03/03/cyprus-records-lowest-inflation-in-eurozone-as-prices-stay-flat)

(2) (https://cyprus-mail.com/2026/02/25/cyprus-inflation-slows-to-1-2-per-cent-as-energy-prices-fall)

(3) (https://cyprus-mail.com/2026/03/04/record-2025-for-eu-and-cyprus-tourism-shadowed-by-threat-of-regional-instability)

(4) (https://cyprus-mail.com/2026/03/02/cyprus-tourism-revenues-hit-record-e3-69bn-in-2025)

(5) (https://knews.kathimerini.com.cy/en/comment/opinion/cyprus-property-market-2025-more-cash-unexpected-winners)

(6) (https://knews.kathimerini.com.cy/en/business/cyprus-shipping-charts-a-course-for-growth)

(7) (https://www.gov.cy/en/speeches/keynote-address-by-the-minister-of-energy-commerce-and-industry-of-the-republic-of-cyprus-mr-george-papanastasiou-at-the-eastern-mediterranean-energy-conference-and-exhibition-emc-2025/#:~:text=1.,with%20more%20exploration%20to%20come.)

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Jenec: the limits of automatic de-risking in EU banking law

On 11 June 2026, the Court of Justice of the European Union (the “Court”) delivered its judgment in Case C-81/24, Jenec. The case concerned the relationship between the right of access to a payment account with basic features under Directive 2014/92/EU (the “Payment Accounts Directive”) and the AML/CFT obligations imposed on financial institutions under Directive (EU) 2015/849 (the “AML Directive”). The Court held that a bank may not refuse to open a payment account with basic features solely because the applicant appears on a sanctions list issued by a third country, such as the United States Office of Foreign Assets Control (OFAC). While such a designation may constitute a relevant risk factor, refusal must be based on an individual assessment demonstrating that the relevant AML/CFT or sanctions-related risks cannot be adequately managed through proportionate measures. The Court’s approach Jenec concerned a consumer legally resident in the European Union (EU) who applied to open a payment account with basic features. The Slovenian bank refused the application on the basis that the consumer appeared on an OFAC list, although he was not subject to United Nations (UN), EU or Slovenian sanctions and had not been convicted of the offence connected with the listing. The Court confirmed that EU law grants legally resident consumers the right to open and use a payment account with basic features. This right is connected to financial inclusion and access to essential payment services, but it remains subject to compliance with AML and counter-terrorist financing rules. Where opening the account would breach those rules, refusal may be justified. The central issue is the basis on which that conclusion is reached. The Court rejected the proposition that inclusion on a third-country sanctions list can automatically replace the bank’s risk assessment. The relevant assessment must consider the individual customer, the nature of the account requested, the intended use of the account, expected transactions, source of funds, customer explanations and the controls available to manage any identified risk. The legal question is therefore not simply whether the customer appears on a list, but whether, following an individual and documented assessment, the institution can manage the risk in a proportionate manner. The Advocate General’s opinion The Advocate General’s Opinion on Jenec, delivered on 04 September 2025 (the “Opinion”) assists in understanding the Court’s reasoning. The Payment Accounts Directive protects access to payment accounts with basic features and recognises that AML rules should not become a pretext for rejecting customers because the relationship is difficult or unattractive. The AML Directive, by contrast, establishes the AML framework around a holistic, risk-based approach. The Opinion also referred to the European Banking Authority’s risk factor guidance, under which reputation, adverse information, government information and prior asset freezes may be relevant risk indicators. At the same time, an isolated risk factor does not automatically determine the final risk category, as firms are expected to take a holistic view of the relevant circumstances. On that basis, an OFAC listing may justify enhanced due diligence, escalation, further information requests, closer monitoring or restrictions on the use of an account. In some cases, it may support refusal where, following an individual assessment, the institution concludes that the relevant risks cannot be adequately managed through proportionate measures. The significance of the designation will depend on the nature of the sanctions programme, the activities of the customer, the services requested and the institution's own exposure through correspondent banking relationships, US dollar clearing arrangements, contractual obligations imposed by foreign banking partners, reputational considerations and potential secondary sanctions risk. What it cannot do, without more, is automatically determine the legal outcome under EU law. This is especially relevant where the requested product is a payment account with basic features, since the limited functionality of that product forms part of the proportionality analysis. Cyprus perspective For Cyprus practice, the judgment is relevant for two connected reasons. First, access to a payment account with basic features is not only an EU law concept. Cyprus transposed the Payment Accounts Directive through Law 64(I)/2017, with the Central Bank of Cyprus (CBC) acting as the competent authority for implementation. This means that account refusals fall within a Cyprus regulatory framework, and not merely within a bank’s commercial discretion. Second, Cyprus has recently strengthened its AML and sanctions framework. Law 150(I)/2025 established the National Sanctions Implementation Unit, Law 149(I)/2025 criminalises violations of EU restrictive measures, and the CBC AML/CFT Directive of 2025 reinforces the expectation that supervised institutions maintain effective systems for managing AML/CFT risk. Read together, these developments make the correct identification, classification and assessment of sanctions and AML/CFT risk particularly important. The approach adopted in Jenec is also consistent with the CBC AML/CFT Directive of 2025. The Directive expressly provides that institutions should not implement policies and controls in a manner that results in the general refusal or termination of business relationships with entire categories of customers perceived as presenting higher money laundering or terrorist financing risk. Instead, institutions are expected to assess each business relationship individually, document their decisions, consider alternative risk mitigation measures and ensure that any refusal or termination is proportionate and justified. This reflects the broader risk-based methodology embedded throughout the Directive, under which risk factors inform the assessment but do not automatically determine the outcome. The same approach applies where the concern arises from a third-country designation, such as an OFAC or UK sanctions listing: the designation may be highly relevant, but it does not remove the need for an individual and documented assessment. In practice, a Cyprus bank or payment institution should be able to explain why an account has been refused. A file that simply records that the customer is “OFAC listed” may not be sufficient where the requested product is a basic payment account and there is no EU, UN or Cyprus designation. The institution should be able to point to the customer-specific risk assessment, the expected account activity, the relevant geographic or sanctions exposure, the information obtained, the controls considered and the reasons why the risk could not be managed. Conclusion The Jenec judgment is best understood as a proportionality judgment within the EU framework for financial inclusion and financial crime compliance. For Cyprus, its importance lies in the discipline it brings to sanctions and AML decision-making at a time when the domestic framework has become more rigorous, particularly following the 2025 AML and sanctions developments and the criminalisation of EU sanctions breaches. Jenec confirms that third-country sanctions designations may be significant risk factors, but they do not automatically determine the outcome where EU law protects access to a basic payment account. Cyprus institutions should therefore ensure that any refusal is based on an individual, documented and proportionate assessment.   Disclaimer This publication is for general information only and does not constitute legal advice. Kyriaki Stinga – Advocate / Partner Adonis Zachariou – Advocate / Associate Dorina Mastora - Deputy Compliance Officer
Elias Neocleous & Co LLC - June 30 2026

What Ultimately Determines Whether a Compliance Programme Succeeds or Fails?

Most professionals would point to effective controls, robust governance, adequate resources, regulatory expertise, or technological sophistication. All of these are important. They also share a common characteristic: they can be designed, implemented, measured, and improved through structured processes. Yet organizations with similar policies, comparable controls, and access to the same regulatory guidance often achieve remarkably different outcomes. The difference often lies not in what organizations have, but in who they are. The answer, more often than not, is culture. In the fields of anti-money laundering, sanctions compliance, and financial crime prevention, culture has become one of the most frequently discussed concepts and perhaps one of the least understood. Regulators encourage it, boards discuss it, and organizations invest significant resources in strengthening it. Yet there is often surprisingly little agreement on what culture actually means. Too often, compliance culture is reduced to a culture of regulatory adherence. Policies are implemented, training is delivered, controls are strengthened, and awareness campaigns are launched. While these initiatives are valuable, they do not constitute culture in themselves. This misunderstanding stems from a tendency to view culture through a regulatory lens. Compliance professionals are trained to think in terms of frameworks, procedures, controls, and measurable outcomes. Culture, however, does not fit neatly into any of those categories. Culture is not the existence of rules. It is the collective attitude towards those rules. Understanding culture therefore requires us to look beyond regulation and consider insights from psychology, sociology, leadership, and organizational behaviour. Compliance, after all, is not merely concerned with rules; it is concerned with the people expected to apply them. Looking Beyond Compliance From a sociological perspective, culture consists of the shared values, norms, beliefs, and assumptions that shape behaviour within a group. From a psychological perspective, culture influences how individuals interpret situations, assess risk, exercise judgment, and respond to challenges. When discussing culture in the context of compliance, it is important to clarify that we are referring to positive culture. Every organization has a culture, but not every culture promotes integrity, accountability, responsibility, and ethical decision-making. A positive culture extends beyond compliance with rules and procedures. It reflects a shared commitment to doing the right thing, not merely because regulations require it, but because individuals genuinely believe it is the right thing to do. This is where culture becomes deeply human. It involves conviction rather than obligation. Purpose rather than mere compliance. Responsibility rather than supervision. And perhaps most importantly, it requires the courage to remain faithful to one's principles when doing so is difficult, inconvenient, or commercially uncomfortable. The true test of culture is therefore not what people do when expectations are clear. It is what they do when competing priorities create uncertainty and difficult choices must be made. Why Culture Is So Difficult to Build One of the reasons culture remains misunderstood is that organizations frequently attempt to manage it using the same tools they use to manage compliance programmes. Values statements are published. Awareness campaigns are launched. Training sessions are conducted. Leadership messages are distributed. These initiatives undoubtedly have value, but they do not create culture on their own. Culture is shaped less by what organizations communicate formally and more by what people experience consistently in practice. Human beings learn socially. They observe those around them. They pay attention to how leaders behave under pressure, how mistakes are addressed, how success is rewarded, and how difficult decisions are made. Over time, these observations create shared expectations regarding what is genuinely valued within the organization. This explains why culture cannot simply be implemented. It can be encouraged. It can be nurtured. It can be reinforced. But ultimately, it must be experienced and reinforced through everyday actions. Employees quickly distinguish between values that are communicated and values that are genuinely practiced. When there is a disconnect between the two, trust begins to erode. When words and actions consistently align, culture gains credibility and becomes self-sustaining. This is why culture often proves more challenging than competence. Organizations can successfully teach technical knowledge, regulatory requirements, and operational processes. Yet attitudes, beliefs, and convictions are shaped through a far more complex combination of experience, relationships, and shared purpose. Culture as Collective Energy Much has been written about leadership and leading by example. While leadership undoubtedly plays a critical role, culture is influenced by something even more subtle. It is influenced by energy. Every organization possesses a distinctive emotional and behavioral climate. Some environments generate trust, curiosity, accountability, and purpose. Others foster fear, disengagement, complacency, or indifference. Employees sense this long before they fully understand the organizational structure or internal policies. For this reason, culture should not be viewed merely as a governance concept or a compliance objective. It is the living identity of an organization. It reflects not only what an organization says it values, but also what people experience every day. Over time, those shared experiences shape identity. Rethinking Compliance Culture Perhaps it is time to reconsider what compliance culture truly means. For many organizations, culture is still viewed through the lens of compliance itself: adherence to policies, observance of procedures, and respect for regulatory obligations. While these elements are important, they capture only part of the picture. A positive culture is not created when employees simply understand what the rules require of them. Nor is it created through training sessions, awareness campaigns, or periodic reminders about expected conduct. At its core, culture is about belonging. It is about whether individuals feel connected to a purpose, a set of values, and an identity greater than themselves. It is about whether they see their role as extending beyond the completion of tasks and the observance of rules. People rarely become passionate about policies. They become passionate about purpose. And when people genuinely believe in what an organization stands for, they begin to protect it, strengthen it, and uphold its values, not because they are instructed to do so, but because they want to. This is where culture begins. Culture begins when people stop seeing themselves as individuals following rules and start seeing themselves as custodians of a shared identity. Culture: The Collective Oxygen Perhaps the most useful way to think about culture is not as a framework, but as the collective oxygen of an organization. Like oxygen, culture is largely invisible, yet its presence is felt everywhere. Employees breathe it. Leaders breathe it. Clients and business partners experience it through every interaction. It influences how people communicate, how they respond to challenges, how they exercise judgment, and ultimately how they define success. A healthy culture fosters trust, accountability, purpose, collaboration, and a genuine commitment to doing the right thing. An unhealthy culture can just as easily normalize complacency, silence, fear, or indifference. Most importantly, culture is contagious. It spreads through behaviours, emotions, expectations, and shared experiences. People absorb it, often unconsciously, and then transmit it to others. For this reason, culture cannot be confined to a policy document or a corporate value statement. It ultimately reaches employees, clients, business partners, regulators, and the wider community. Organizations should therefore protect culture with the same seriousness that they protect their financial, operational, and reputational assets. Nurtured carefully, it can inspire individuals, strengthen institutions, and create a shared sense of purpose. Neglected, it can undermine trust, weaken integrity, and erode even the most sophisticated compliance framework. And perhaps this is precisely why culture remains the most critical element of any compliance programme. Everything else can be designed, implemented, measured, and improved. Culture must be lived. You can teach a regulation in a month. You cannot teach an attitude in a month. The difference between the two is culture. Because culture is not something people learn. It is something they breathe.   Kyriaki Stinga – Advocate / Parter Dorina Mastora – Deputy Compliance Officer
Elias Neocleous & Co LLC - June 10 2026

When rules change, it’s never just about the rules

Whenever a new legislation is introduced, it is easy to assume that everything in business will suddenly change. In Cyprus, the first months of this year have brought two significant developments: a tax reform that came into force in January, and new foreign direct investment legislation that began applying in April. At first glance, these may appear to be technical updates, but the bigger story is about trust, stability, and the certainty businesses require to invest on the island. While some rules have become stricter to align with global standards, many of Cyprus’ tax advantages remain, preserving its appeal as a business hub. These reforms are not just compliance developments, they reflect a broader shift towards a more transparent and predictable investment environment, where companies can operate with confidence. From tax haven to trusted hub Cyprus has long been associated with a favourable tax environment. Recent legal reforms, however, demonstrate a deliberate shift toward positioning the island as a transparent and stable business hub. While some rules have become stricter and certain corporate tax advantages have been recalibrated in line with international practices, such as anti-money laundering measures and corporate taxation, many of Cyprus’ attractive business features remain in place, notably the well-established IP box regime and the non-domiciled regime. For investors, the significance lies less in the technical amendments themselves and more in the clearer framework they create.  They are not simply rules to be complied with but part of a broader framework that contributes to a trusted and stable operating environment for businesses. This means that the island is not merely open to investment but offers a legal and commercial environment in which operations can be planned with greater certainty. The rules, in other words, are not just rules, they are signals of regulatory maturity and long-term policy direction. The Tax Reform The tax reform that came into effect in January exemplifies how legal change can simplify, clarify, and enhance certainty without fundamentally altering the system. The reform addressed key areas where uncertainty had previously existed, particularly in relation to corporate tax treatment and compliance expectations, providing clarity on grey areas that could create doubt for companies operating on the island. Rather than overhauling the entire tax system, the reform focuses on certainty and reliability. At the same time, some adjustments were introduced in line with global practice, particularly around corporate tax rules and anti-money laundering obligations. These changes reflect the growing expectation for transparency and alignment with international standards. For investors, the effect is significant. A clear and predictable tax framework allows companies to make more informed decisions. The reform demonstrates that Cyprus is committed to a system in which the rules are transparent, manageable, and dependable. It signals that the island values stability, and that planning can be undertaken with greater clarity rather than concern.   The FDI Legislation The legislation on foreign direct investment, which came into force on 2 April 2026, builds on Cyprus’ long-standing policy of encouraging FDI to diversify the economy. Historically, Cyprus has been an attractive destination for individuals, investors, and businesses, with no general restrictions on ownership or investment and no capital controls beyond standard EU requirements. The new law implements the EU FDI Regulation (2019/452) and introduces a national screening mechanism to review investments in strategically important sectors, particularly those linked to national security or critical infrastructure.  The legislation does not seek to close the market to foreign capital, but to subject certain investments to a clearer review framework, ensuring that Cyprus can welcome capital while maintaining a secure business environment. Together with the tax reform, this legislation illustrates Cyprus’ holistic approach to legal change, where stricter standards coexist with simplifications and retained advantages, creating an ecosystem where serious investors can operate effectively. Why legal rules do not operate in isolation Legal reforms rarely operate in isolation. Even changes that appear minor can ripple across corporate structures, financing arrangements, and contractual obligations.  Those effects are not necessarily negative, they are often part of what makes a legal framework more coherent and easier to assess. Businesses and investors notice them. Stability and legal certainty often outweigh the significance of any single tax rate or procedural requirement. The combination of tax reform and FDI legislation shows that Cyprus is thinking strategically about its business environment. The rules themselves become a mechanism to signal confidence, transparency, and reliability to those considering investment and long-term jurisdictional commitment. Rules as Signals, Not Just Requirements While each of these reforms carries its own pros and cons, their true significance lies in the broader strategic direction they reflect, positioning Cyprus as a credible and forward-looking international business hub, strengthened by both regulatory maturity and its strategic geographic location, aimed not merely at attracting investment, but at drawing serious investors committed to building long-term value. Legal change is about more than a list of obligations, it is about shaping perceptions and guiding behaviour. Cyprus’ recent reforms demonstrate that serious investors can rely on the island’s legal framework. Planning is simplified and uncertainty is reduced, but the system is not oversimplified or loophole-driven. The tax reforms clarify previously uncertain areas, while the FDI legislation ensures that serious investment is supported by a predictable and structured legal framework. At the same time, stricter requirements and increased alignment with global standards show that Cyprus is serious about maintaining a trusted, stable environment. The combination of simplifications and stricter standards ensures that the island remains attractive, but in a responsible, internationally aligned way. Investors may need to review their structures, but the broader significance lies not simply in the fact that the rules have changed. It is that the overall direction appears to be towards greater clarity, structure, and regulatory maturity. That is why legal change is rarely just about the rules themselves. Alexandros Neofytou - Associate    
Elias Neocleous & Co LLC - May 27 2026

Public Procurement in Cyprus: 10 Common Misconceptions under Cypriot and EU Law

Public procurement procedures are often surrounded by persistent misconceptions such as the perception that they are strictly formal processes where “the lowest price always wins” and where even minor errors automatically lead to exclusion. In practice, the legal framework governing public procurement is significantly more nuanced. From infrastructure and road construction projects to the procurement of medical equipment, school supplies and the construction of hospitals or educational facilities, public procurement in Cyprus operates within a complex legal environment. This framework combines national legislation with European Union directives and the jurisprudence of the Court of Justice of the European Union (CJEU). Although the Cypriot legal system has fully transposed the EU public procurement directives, practical application continues to give rise to misunderstandings, sometimes due to the complexity of procurement procedures and sometimes due to an incomplete understanding of the underlying legal principles. This article highlights some of the most common misconceptions encountered in practice and clarifies what applies under Cypriot and EU public procurement law. Does the lowest price always win? No. Since the adoption of Directive 2014/24/EU, contracting authorities are encouraged to apply award criteria that enable them to obtain works, goods and services of appropriate quality that meet their actual needs. The “most economically advantageous tender” (MEAT) may be identified on the basis of price, cost, or the best price-quality ratio. Consequently, the lowest price is no longer necessarily the decisive factor but rather one of several possible evaluation parameters, depending on the nature and characteristics of the specific contract. If a document is missing, is exclusion automatic? Not necessarily. The Court of Justice of the European Union clarified in Case C-599/10, SAG ELV Slovensko, that EU law does not preclude contracting authorities from requesting clarifications or allowing the correction of obvious clerical errors in a tender, provided that such intervention does not in substance amount to the submission of a new tender. Can contracting authorities impose any requirements they wish in tender documents? No. The principles of proportionality, transparency and equal treatment are fundamental pillars of EU public procurement law. The CJEU has emphasised, among others in Case C-76/16, Ingsteel and Metrostav, that minimum capability requirements must be linked to and proportionate to the subject matter of the contract. Financial and economic capacity requirements must therefore be suitable for assessing the financial and economic standing of the economic operator and proportionate to the importance of the contract. Requirements that exceed the actual needs of the contract may be considered disproportionate and may unjustifiably restrict competition. Do review procedures merely delay procurement processes? This perception does not reflect their actual function. In Cyprus, review procedures before the national review body (Tenders Review Authority) allow procurement errors or disputes to be addressed within relatively short timeframes. The availability of interim measures aims to safeguard the effectiveness of remedies without unnecessarily disrupting procurement procedures, unless such disruption is justified after balancing the interests involved, including the public interest. Can a public contract be freely modified like a private contract? No. Although the signature of a public contract creates a contractual relationship between the contracting authority and the contractor, the contract does not lose its public law dimension. Public contracts remain subject to principles of legality, transparency and competition. From an EU law perspective, contract modifications are particularly sensitive because they may affect the outcome of the original competitive procedure. The CJEU has consistently held that a modification which substantially alters the original terms of the contract may amount to a new award if it changes the economic balance of the contract in favour of the contractor, significantly extends the scope of the contract or introduces conditions that could have influenced the outcome of the original tender procedure. The rationale is clear: a contract awarded through a competitive process cannot be transformed during its performance into a substantially different contract without reopening competition. Are exclusion grounds applied automatically? No. Article 57(6) of Directive 2014/24/EU introduces the concept of “self-cleaning”. Even where a mandatory or discretionary ground for exclusion exists, an economic operator may demonstrate that it has taken sufficient remedial measures to restore its reliability. Such measures may include compensation for damage caused by active cooperation with investigative authorities and the implementation of effective compliance and internal control mechanisms to prevent future misconduct. Contracting authorities must assess these measures before deciding on exclusion and must provide adequate reasoning, considering the seriousness of the infringement and the principle of proportionality. Is the contract performance stage merely a formal phase? Not at all. Contracting authorities have a duty to monitor the performance of the contract, verify compliance with contractual obligations and properly document any modifications. Deviations from contractual terms without proper approval may lead to liability or even invalidate certain contractual arrangements. Are public procurement procedures unsuitable for small and medium-sized enterprises? On the contrary. EU public procurement law actively promotes the participation of SMEs. This is reflected in measures such as the encouragement of contract division into lots, restrictions on disproportionate turnover or experience requirements and the possibility for economic operators to participate as groups or consortia without a predefined legal structure. SMEs are not only able to participate; the system is designed to encourage their involvement. Must abnormally low tenders always be rejected? No. An abnormally low tender is one that raises doubts regarding its seriousness or the ability of the tenderer to properly perform the contract. In such cases, the contracting authority must first request explanations from the tenderer. Exclusion may only follow where the explanations provided are deemed unsatisfactory. Public procurement law does not penalise low prices as such; it addresses the inability to justify them. Can contracting authorities require a specific legal form for a consortium before submission of a tender? Generally, no. EU public procurement law seeks to maximise participation in competition. Economic operators may participate individually or as groups without being required to adopt a specific legal form at the tender submission stage. The CJEU has indicated that requiring a specific legal form in advance may infringe the principles of proportionality and equal treatment, particularly where it unnecessarily restricts participation by SMEs or groups of economic operators. Under Article 19 of Directive 2014/24/EU, contracting authorities may not require groups of economic operators to adopt a specific legal form to submit a tender or request to participate. However, they may require a particular legal form after the contract has been awarded, where this is necessary for the proper performance of the contract and objectively justified. Conclusion Public procurement is not merely an administrative process. It is a legal and economic mechanism that significantly affects competition, public spending and the functioning of markets. Misinterpretations, however minor they may appear can lead to distortions, disputes and unnecessary delays. A proper understanding of the applicable rules, combined with transparency and good faith between contracting authorities and economic operators, remains essential for ensuring a modern and reliable public procurement system that effectively serves the public interest. Maria Christofi – Senior Associate
Elias Neocleous & Co LLC - May 27 2026
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