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Incentives - Invest in Cyprus

At a time of increasingly intensified international competition, the Government has taken several measures to enhance Cyprus’ competitiveness, both in the international and local market; to achieve steady and self-sustained growth; and to maximize the country's Gross Domestic Product. Specifically, having extensively considered ways for the development and reconstruction of the economy, the Government has introduced a framework of incentives within the EU harmonisation process and the acquis communautaire in general.

The basic goals, which form the central core of the government’s incentives framework, are:

  • attraction and development of new high-tech industries and skill-intensive products;
  • assistance and reconstruction of Cyprus traditional economic sectors;
  • improvement of productivity and labour skills;
  • attraction of capital-intensive foreign investment.

The main incentives and schemes are briefly described below. Please note that the various grant schemes may be subject to alterations.

Research, Technological Development and Innovation (RTDI)

The Research Promotion Foundation has as a major objective the promotion of Research, Technological Development and Innovation in Cyprus. The Foundation was established in 1996, as an initiative of the Government of the Republic of Cyprus, having identified the importance of RTDI for the development of fundamental conditions for economic development and social welfare.

The two major pillars of RPF’s activities are the following:

a) The development and administration of National Research, Technological Development and Innovation Programs, and

β) The promotion of Cypriot research originations, enterprises and researchers in European and other international Research and Innovation Programs.

Complementing the above, RPF activities include among others the organization of information, training and awareness raising activities on topics relating to the RTDI, the representation of Cyprus to European and other RTDI Committees, Working Groups, Networks and initiatives, the implementation of studies and submission of suggestions to the relevant authorities for the further development of RTDI policy initiatives.

A significantly large number of project and support activities are funded through RPF Programs. More particularly, the Research Promotion Foundation is currently in the process of designing the new Framework Program for Research, Technological Development and Innovation that will run through the period 2016-2020. The announcement of the new Framework Program is expected at the beginning of 2016.

For further information regarding the Research Promotion Foundation and RPF’s RTDI Funding Programs, you may visit the official RPF Website: www.research.org.cy.


Industry and Technology Service

Industrial development has been amongst the primary objectives of the Government, as it constitutes a vital component of the economy. Cyprus as an EU member provides to Cypriot enterprises the opportunity of participating in a number of grand schemes enhancing the process of restructuring through, innovation, technological advancement, product development, marketing, training, knowhow and expertise.

The Industrial and Technology Service of the Ministry of Energy, Commerce, Industry and Tourism aims at accelerating the rate of growth of entrepreneurship, giving emphasis to the manufacturing sector, by enhancing competitiveness under free market conditions. Within this context the Service introduced a framework of incentives mainly through targeted support Grant Schemes, brief description of which is provided below:

Scheme for the Enhancement of SMEs competitiveness in the Manufacturing Sector and other specific Economic Activities

The Scheme is co-financed by the European Regional Development Fund and the Republic of Cyprus and its main objective is to support, develop and promote competitiveness of existing and new established SMEs, targeting the manufacturing sector and a number of other economic activities, located in areas controlled by the Cyprus Government. The main objectives of the Scheme are implemented through:
• Expansion of existing business through investments that will improve technological level, production process and productivity.
• Creation of new units and reinforcement of entrepreneurship.
• New jobs creation.

Scheme for the Enhancement of SMEs competitiveness in the Manufacturing Sector and other specific Economic Activities in areas of the British Bases in Cyprus

The Scheme’s main objective is to support, develop and promote competitiveness of existing and new established SMEs, targeting the manufacturing sector and a number of other economic activities, located within the area of the British Bases in Cyprus. The main objectives of the Scheme are implemented through:
• Expansion of existing business through investments that will improve technological level, production process and productivity.
• Creation of new units and reinforcement of entrepreneurship.
• New jobs creation.

Women / Youth Entrepreneurship

The programme is co-financed by the European Regional Development Fund and the Republic of Cyprus and aims to develop, support and encourage the entrepreneurship of women and young people who use their knowledge, expertise and talent, to establish a new enterprise. The scheme covers new enterprises of the manufacturing and service sector or even tourist activities and e-commerce. However, it excludes trade and a number of other activities.

Emphasis is given in the development of new technologies, in the use of innovative methods of production and promotion of products and services, in the development of environmental friendly products and generally in modern entrepreneurial practises aiming at the creation of dynamic and competitive units.

Manufacturing /Marketing /Development of Agricultural Products

The Measure is included in the Agricultural Development Plan and is co-financed (50%) by the European Regional Development Fund. Among the programme's objectives is to support existing and newly established enterprises engaged in processing and marketing of agricultural products. The Measure also encourage the creation of new manufacturing units in rural areas and provides incentives for improving the quality of agricultural products, as well as trade and manufacturing procedures.

Encourage investment activity and enhance competitiveness in the wine industry

The measure aims at encouraging investment activity by providing economic support in the form of grant for tangible or intangible investments in winery infrastructure or/and marketing of wine, in modern equipment and machinery. Its main objective is to upgrade Cypriot wine industry and enhance competitiveness. The measure is included in the National Support Program for the Wine Sector and is fully financed by European funds.

Scheme for Strengthening Business Innovation

The Scheme is co-financed by the European Regional Development Fund and the Republic of Cyprus and it aims to support and strengthen existing enterprises, start-ups and other companies investing in research and innovation to develop competitive innovative products and services which they plan to market and / or in innovative processes and procedures in the production of their products. It also aims to support newly created innovative firms (startup) who intend to develop innovative products, services and processes to market and promote cooperation between enterprises.

Promotion of Trade in Goods

Support Schemes

The Section's main responsibility is the promotion of agricultural products, included in Annex I to the Treaty on the European Union, as well as industrial products. The section implements the following seven Incentive Schemes concerning the provision of information, advertising and promotion of agricultural and industrial products in the internal market as well as in third countries.

· DE MINIMIS Scheme addressed to small & medium sized enterprises (SMEs) involved in the processing and marketing of agricultural products, for private participation in competitions, exhibitions and fairs that take place on the Internal Market and in Third Countries;

· State Aid Scheme for the Promotion and Advertising of Agricultural Products on the Internal Market and in Third Countries;

· Scheme 1 - Information Provision and Promotion Measures for Agricultural Products in the Internal Market, financed by the European Union;

· Scheme 2 - Information Provision and Promotion Measures for Agricultural Products in the Third Countries, financed by the European Union;

· DE MINIMIS Scheme to Cypriot enterprises participating at trade exhibitions abroad, within the national pavilion of the Ministry of Energy, Commerce, Industry and Tourism;

· DE MINIMIS Scheme to Cypriot enterprises of industrial products participating on their own expenses at trade exhibitions abroad;

· DE MINIMIS Scheme to Cypriot enterprises of industrial products for accessing/investigating foreign markets.

Promotion of Services

The Section for the Promotion of Trade in Services operates two subsidy schemes, under the “De Minimis” rule, through which financial assistance is granted as an incentive to Cypriot exporters of services to participate in specialized international services exhibitions.

These schemes are outlined below:

• “De Minimis” rule to exporters of services, who participate with their own expenses into exhibitions abroad. Beneficiaries are Cypriot service providing businesses and land developers;

• “De Minimis” rule to exporters of services who participate in exhibitions overseas organized by the Ministry of Energy, Commerce, Industry and Tourism. Beneficiaries are Cypriot services providing companies and land developers.

Quality Assurance

Within its efforts to contribute to the enhancement of product quality, the Government has introduced a number of schemes:

Testing of Products

The aim of the scheme is to assist existing or new SMEs in the manufacturing sector, to cover expenses for laboratory testing, products’ testing and/or analysis, calibration of measurement and testing instruments abroad. The scheme applies in the case where the above needs cannot be met by local laboratories.

Laboratory Infrastructure

The scheme's main objective is to strengthen the laboratory infrastructure through the provision of assistance to existing or new laboratories in order to meet their immediate needs for product testing equipment.

The HACCP System

The scheme intends to assist and motivate companies of the food and beverage industry to implement the HACCP system. It is a systematic approach to the risk assessment, as well as the control of microbiological, chemical, and physical hazards related to any food production procedure.

Energy and Environment

The mission of the Energy Service is to assist in the formulation and implementation of the government’s policy in the energy sector, with the aim to:

· ensuring the security of energy supply;
· promoting energy conservation as the most significant domestic energy resource;
· exploiting of the renewable energy sources in the most efficient manner;
· integration and supervision of the internal energy market ,ensuring the smooth and uninterrupted coverage of energy needs for consumers with good quality products and at affordable prices and in parallel protection of vulnerable consumers, as well as creating the necessary energy infrastructure;
· implementation of energy policy fully aligned with the European Union’s energy strategy.

The main goals of the Energy Service are:

1. Efficient Functioning of the Internal Energy Market

State of play

Cyprus’ energy system is small and isolated without interconnections with the trans-European gas and electricity networks. It relies almost exclusively on the imports of liquid fuels. The only available alternative form of energy is the Renewable Energy Sources (RES) at a 8.6% contribution on the gross final energy consumption, as recorded in 2014.

The energy isolation of Cyprus, in combination with other factors, significantly restricts competition. As a result, the cost of electricity is among the highest in the European Union. This hinders the recovery of the economy and reduces the country’s competitiveness, while at the same time worsens existing social problems such as energy poverty.

The lack of competition in the electricity sector is strengthened by the fact that the existing Trade and Settlement Rules adopted in 2004, have never been applied in practice and they do not address the participation of RES in the competitive market, even though today renewable electricity (mainly from PV systems) is able to compete with the electricity production from conventional fuels, without receiving any subsidies. Another factor influencing the operation of the competitive electricity market is the fact that the institutions involved in the operation of the market, such as the Transmission System Operator, are not fully independent from EAC.

With a view to diversifying the national energy mix, the Cyprus Government is examining the possibility for introducing natural gas, initially for electricity generation, either by importing natural gas through the procedure of the interim solution undertaken by DEFA or by utilizing the existing and/or future indigenous natural gas resources.

Additionally, regular market inspection and surveillance is carried out for (a) verifying the quality of fuels placed on the market in Cyprus, (b) ensuring the implementation of the legislation regarding the energy performance of buildings and (c) verifying the conformity of energy related products in relation to their labeling. In addition, an accredited laboratory is testing solar thermal technologies, aiming to assist the local industry in improving the quality of its products in promoting exports.

The achievement of the national energy targets is evaluated through the annual energy balance, based on which future energy policy is planned.

Actions / activities:

Activity 1: Establishment of the necessary energy infrastructure

Cyprus promotes the implementation of five projects selected by the European Commission as projects of common interest, three in the field of electricity and two in the field of natural gas. The electricity related projects (constituting the so called “Euro-Asia Interconnector”) establish the interconnection of Cyprus with Greece and Israel. This will facilitate the interconnection of Cyprus’ electricity system with the trans-European energy networks, which could lead to immediate reductions in electricity prices, contribute to the strengthening of competition and increase the share of renewable energy sources in electricity generation.
With regard to the conventional liquid fuel sector, the petroleum products storage installations are scheduled to be removed from Larnaca by 30/01/2017, giving priority to the removal of the storage installations of the liquefied petroleum gas (LPG). Within this framework, actions are in progress for the privatization of the Cyprus Petroleum Storage Company Ltd (KETAP) according to the relevant decision of the Council of Ministers. In the meantime, the Cyprus Organization for Storage and Management of Oil Stocks (KODAP) is undertaking all necessary actions for the creation of its own storage facilities for holding the national security oil stocks. This will reduce the cost of stock-holding and will give Cyprus an important strategic advantage, since these security oil stocks could be used immediately in the event of a sudden energy crisis.

Activity 2: Integration and supervision of the internal energy market

The existing market rules should immediately be amended and a new market model needs to be adopted, which will encourage competition and facilitate the participation of RES on the competitive electricity market. At the same time, existing legislation should be amended in order to comply with the new model of market functioning and ensure full independence of organizations involved in market operations.

Activity 3: Surveillance of the internal energy market

The petroleum products placed in the Cyprus market should comply with the defined standards set in the relevant EU Directives and the national legislation in order to ensure proper operation of vehicles and equipment, as well as the protection of human health and the environment. Furthermore, the energy-related products in the market should comply with the eco-design legislative requirements and bear proper energy labeling, in order to protect and inform consumers and ensure energy-efficiency.

2. Promotion of Energy Efficiency and Use of Domestic Renewable Energy Sources

State of play

The lack of a long-term strategy for the promotion of RES, in combination with the late launch of measures to address specific technical constraints faced by the electrical grid due to its isolated nature, are restricting the growth of RES in the electricity sector with the rate of penetration being limited to around 8.6 % in 2014 despite its much greater potential.

In order to face the technical challenges of the electricity system and maximize the utilization of RES within a long-term national strategy that will cover the period of 2014-2030, the Ministry is proceeding with the realization of a study in cooperation with the International Renewable Energy Agency IRENA and the Joint Research Center (JRC) of the European Commission, under an agreement for technical support.

In accordance with the requirements of the European Directive 2009/28/EC for the promotion of the use of energy from renewable sources, Cyprus has the obligation to increase the contribution of renewable energy sources to (a) 13% of the gross final energy consumption, and (b) 10% to the final consumption of energy in all forms of transport, by 2020.

Cyprus has adopted a national renewable energy action plan (NREAP). The NREAP describes all measures which need to be taken in order to achieve the above mandatory targets, including energy efficiency and energy saving measures.

The above National Action Plan is currently under revision in order to take into account all the new technologies and developments in the area of RES as well as the new challenges, such as the possibility of natural gas supply for power generation, the proposed interconnection project between Cyprus, Israel and Greece, as well as the potential contribution of the NER-300 program to the installed capacity (two CSP projects of 100MW total capacity have already been approved by the European Commission).
The national energy efficiency obligations are derived from the relevant European and National legislation and include, amongst others, obligations for energy efficiency measures in the energy supply and in the end use of energy, as well as obligations for informing the citizens and for the training of energy professionals. All the energy efficiency obligations and national plans that must be realized by 2020 are described in detail in the 3rd National Energy Efficiency Action Plan, which has been submitted to the European Commission on April 2014. Setting a national long-term strategy for energy efficiency for the period of 2020-2030 and beyond, is considered essential, since it will designate the post 2020 national energy efficiency potential and also identify the most cost-effective measures in order to harness this potential.

Actions/activities:

Activity 1: Implementation of the national energy efficiency action plan

Develop a long-term national strategy for energy efficiency up to 2030 and ensure that the national targets and legal commitments for energy efficiency as described in the 3rd National Action Plan for Energy Efficiency and as required by European and national legislation are met.

Activity 2: Implementation of the national plan for renewable energy

Develop a long-term national strategy for renewable energies up to 2030 and ensure the implementation of the National Action Plan and the achievement of the national targets set up to 2020 as well as for further penetration of renewables into the electricity network in a cost –effective manner.


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Last Update on: 04/12/2017 12:34:18 PM


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