Cyprus is arguably the most “russified” EU member state these days: the Russians’ share of the island’s population exceeds 6%, and in major cities, it reaches up to 1/3. Unlike most EU nations, Cyprus has been developing for decades as a semi-offshore tax jurisdiction, making itself attractive for international businesses. Over the past 20 years, it has also become a major center for IT entrepreneurship. Since the mid-2010s, both Russians and Belarusians have been relocating major internet companies there, which has also attracted their skillful employees. From 2016 to 2022, the number of Russians with Cypriot permanent residency permits increased by 4.6 times and of Belarusians by 3.8 times (with an increase of 63% and 76% in 2022 alone), resulting in Russians and Belarusians accounting for 26.4% of all valid residency permits. It is beyond doubt that these proportions grew further in 2023. According to Cypriot statistics, migrants from Russia and Belarus are employed in the most advanced sectors of the local economy. For example, in the Information and Communication sector, which includes “Computer programming, consultancy and related activities” and “Information service activities”, 42% of all Russians and 48% of all Belarusians are employed, making them the highest-paid ethnic groups in the island (according to 2022 data, their average salary reached €5,482 and €5,278 per month, respectively, exceeding the average Cypriot remuneration by almost 2.5 times) 17. The IT sector has become one of the drivers of the Cypriot economy in recent years; its share of exports of goods and services from the island rose from 8.4% in 2012 to over 19% in 2023. As of January 1, 2024, Russians and Belarusians have registered up to 10,500 companies in the country, where they own more than 50% of the capital 18. It is worth noting that developments over the past two years indicate an extremely important trend: if Cyprus was previously a jurisdiction where Russians registered companies, even without intending to do business in the country but only for accumulating profits and dividends received in Russia, many of them have now left the island (including FixPrice and United Medical Group, which moved to Kazakhstan, and Sbermarket, TCS Group Holding, and Etalon Group, which became incorporated in Russia’s offshore zones), while companies in the IT sector that are actually operating in the country are becoming new drivers for growth, helping to mitigate the collapse in tourism revenue from Russia, Belarus and Ukraine following the start of the war and the suspension of flights by both European and national airlines from Russia, Belarus and Ukraine to all these countries.
17 — Ibid.18 — Ibid.
The success of Cyprus in recent years, in our view, could be attributed to several factors. First, starting from the early 2000s, the island’s authorities consistently implemented a policy of increasing transparency, focusing not on selling “golden passports” (this program was halted in 2020, and the passports of several Russians, who became targets for European sanctions after the start of the war, were revoked), but on facilitating the immigration of professionals willing to develop their own businesses on the island. Secondly, the government prioritized key business sectors: fintech, gaming, video content production, CRM systems, cryptocurrency projects, and software development, all benefiting from favorable tax conditions. For example, a special tax regime called IP Box was introduced with a rate of 2.5% of income for companies earning profits from software rights. Thirdly, a work visa can be obtained based on a company’s willingness to hire a foreigner in just three weeks, valid for one year with the possibility of extension – a revolutionary experience within the EU, where not even every residence permit allows employment. Additionally, a new citizenship law provides an accelerated path to citizenship in just four years for those permanently residing on the island and employed in high-tech sectors of the economy 19. Essentially, Cyprus, in recent years, has been implementing a system that encourages the relocation of professionals capable of earning through their own projects, creating job opportunities, including for local people, contributing taxes to the budget, and generating additional demand for goods and services produced by the islanders. This model is yielding results: in 2022, the country’s GDP rose by 5.1% and in 2023 by 2.5% (higher than the Eurozone averages for these years of 3.4% and 0.4%, respectively). In our view, this is an optimal strategy for leveraging the human capital of Russian relocants.
19 — Ibid.