Cyprus - Country Commercial Guide
Market Challenges

Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.

Last published date: 2021-09-30

The Government of the Republic of Cyprus is the only internationally recognized government on the island, but since 1974 the northern third of Cyprus has been administered by Turkish Cypriots with the backing of Turkey and the Turkish military.  This area proclaimed itself the “Turkish Republic of Northern Cyprus” (“TRNC”) in 1983.  The United States does not recognize the “TRNC” as a government, nor does any country other than Turkey.  A substantial number of Turkish troops remain in the northern part of the island.  A buffer zone, or “green line,” patrolled by the UN Peacekeeping Force in Cyprus (UNFICYP), separates the two parts.  The Republic of Cyprus and the area administered by Turkish Cypriots are addressed separately below.

The continued de facto division of the island’s small population is a constraint on economic growth, investment, and trade.  Importers in the ROC typically do not directly serve the market in the area administered by Turkish Cypriots and vice versa.  The entire island of Cyprus is considered EU territory, but the EU acquis communautaire is suspended in the areas administered by Turkish Cypriots, and the north is not considered to be within the EU customs area.  Internal island trade remains limited despite the 2004 EU Green Line Regulation, which allows for the movement of certain domestically produced goods across the Buffer Zone provided they meet EU rule of origin and sanitary/phytosanitary requirements.  The Green Line Regulation also codifies movement of people across the Buffer Zone.  For more information please see the European Commission Website

U.S. citizens can travel to the north / Turkish Cypriot area, but COVID-19 restrictions have made transit between north and south difficult for non-residents.  U.S. companies can invest in the north but should be aware of legal complications and risks due to the lack of international recognition, tensions between the two communities, and isolation of the north from the eurozone.  

The ROC banking sector is still dealing with the effects of the 2013 ROC financial crisis.  Lending remains constrained due to de-leveraging, stricter lending criteria, and a heavy burden of non-performing loans (17.7 percent at the end of March 2021, second highest in the EU).  After several years of budget surpluses, Cyprus’ sovereign credit rating has improved but remains at low investment grade (BBB- by both S&P and Fitch) or just below investment grade (Ba1 by Moody’s).  

ROC governance is generally professional and honest, but often slow.  Court cases and public procurement tenders can drag on for years.  A recent EU report noted the “nearly complete lack of digitalization” of the justice system.  The e-Justice program has advanced since then, and COVID-19 has been the catalyst for more e-governance across all departments, though progress is uneven.  Corruption scandals and investigations against government and municipal officials have shaken public confidence in the transparency and accountability of important institutions.