The ROC has a favorable attitude towards FDI and welcomes U.S. investors. There is no discrimination against U.S. investment; however, there are some ownership limitations and licensing restrictions set by law on non-EU investment in certain sectors, such as private land ownership, media, and construction (see Limits on Foreign Control, below). The ROC promotes FDI through a dedicated agency, Invest Cyprus, which is tasked with attracting FDI in the key economic sectors of shipping, education, real estate, tourism and hospitality, energy, investment funds, filming, and innovation and startups. Invest Cyprus is the first point of contact for investors, and provides detailed information on the legal, tax, and business regulatory framework. The ROC and Invest Cyprus also promote an ongoing dialogue with investors through a series of promotion seminars each year. The Cyprus Chamber of Commerce and Industry (CCCI) is a robust organization with country-specific bilateral chambers, including the American Chamber (AmCham Cyprus), that is dedicated to promoting FDI and serving the business interests of foreign companies and trade partners operating in Cyprus.

For more information:

Invest Cyprus
9 Makariou III Avenue
Severis Building, 4th Floor
1965 Nicosia, Cyprus
Tel: +357 22 441133
Fax: +357 22 441134
Email: info@investcyprus.org.cy
Website: https://www.investcyprus.org.cy 

Cyprus Embassy Trade Center – New York
13 East 40th Street
New York, NY 10016
Phone: (212) 213-9100Fax: (212) 213-9100
Website: https://www.cyprustradeny.org/ 

AREA ADMINISTERED BY TURKISH CYPRIOTS

Turkish Cypriots welcome FDI and are eager to attract investments, particularly those that will lead to the transfer of advanced technology and technical skills. Priority is also given to investments in export-oriented industries. There are no laws or practices that discriminate against FDI. The “Turkish Cypriot Investment Development Agency (YAGA)” provides investment consultancy services, guidance on the legal framework, sector specific advice, and information about investor incentives.

“Turkish Cypriot Investment Development Agency” (“YAGA”)
Tel: +90 392 – 22 82317
Website: https://investnorthcyprus.gov.ct.tr/ 

REPUBLIC OF CYPRUS

The ROC does not currently have a mandatory foreign investment screening mechanism that grants approval to FDI other than sector-specific licenses granted by relevant ministries. Invest Cyprus does grant approvals for investment under the film production incentive scheme. Invest Cyprus often refers projects for review to other agencies.

The following restrictions apply to investing in the ROC:

• Non-EU entities (persons and companies) may purchase only two real estate properties for private use (two holiday homes or a holiday home and a shop or office). This restriction does not apply if the investment property is purchased through a domestic Cypriot company or a corporation elsewhere in the EU. U.S. investment in such companies is welcome.
• Non-EU entities cannot invest in the production, transfer, and provision of electrical energy. The Council of Ministers may refuse granting a license for investment in hydrocarbons prospecting, exploration, and exploitation to a third-country national or company if that third country does not allow similar investment by Cyprus or other EU member states. ROC hydrocarbon exploration is currently led by two U.S. companies.
• Individual non-EU investors may not own more than five percent of a local television or radio station, and total non-EU ownership of any single local TV or radio station is restricted to a maximum of 25 percent.
• The right to register as a building contractor in Cyprus is reserved for citizens of EU member states. Non-EU entities are not allowed to own a majority stake in a local construction company. Non-EU physical persons or legal entities may bid on specific construction projects but only after obtaining a special license from the Council of Ministers.
• Non-EU entities cannot invest directly in private tertiary education institutions but may do so through ownership of Cypriot or EU companies.
• The provision of healthcare services on the island is subject to certain restrictions, applying equally to all non-residents.
• The Central Bank of Cyprus’s prior approval is necessary before any individual person or entity, whether Cypriot or foreign, can acquire more than 9.99 percent of a bank incorporated in Cyprus.

AREA ADMINISTERED BY TURKISH CYPRIOTS

According to the “Registrar of Companies Office,” all non-Turkish Cypriot ownership of construction companies is capped at 49 percent. Currently, the travel agency sector is closed to foreign investment. Registered foreign investors may buy property for investment purposes but are limited to one parcel or property. Foreign natural persons also have the option of forming private liability companies, and foreign investors can form mutual partnerships with one or more foreign or domestic investors.

Nothing to report.

REPUBLIC OF CYPRUS

The Ministry of Energy, Commerce and Industry (MECI) provides a “One Stop Shop” business facilitation service; contact details below. The One-Stop-Shop offers assistance with the logistics of registering a business in Cyprus to all investors, regardless of origin and size. Additionally, since September 2020, MECI offers a Fast Track Business Activation mechanism to provide efficient business registration services to eligible foreign investors who want to establish a physical presence on the island. This program has already generated interest from abroad, attracting several firms in the technology, IT, and communications sectors.

One-Stop-Shop & Point of Single Contact
Ministry of Energy, Commerce, and Industry (MECI)
13-15 Andreas Araouzos
1421 Nicosia, Cyprus
Tel. +357 22 409318 or 321
Fax: +357 22 409432
Email 1: onestopshop@meci.gov.cy
Email 2: psccyprus@meci.gov.cy 
Website: www.businessincyprus.gov.cy 

MECI’s Department of the Registrar of Companies and Official Receiver (DRCOR) provides the following services: Registration of domestic and overseas companies, partnerships, and business names; bankruptcies and liquidations; and trademarks, patents, and intellectual property matters.

Domestic and foreign investors may establish any of the following legal entities or businesses in the ROC:

• Companies (private or public);
• General or limited partnerships;
• Business/trade name;
• European Company (SE); and
• Branches of overseas companies.

The registration process takes approximately two working days and involves completing an application for approval/change of name, followed by the steps outlined in the following link: http://www.businessincyprus.gov.cy/mcit/psc/psc.nsf/All/A2E29870C32D7F17C2257857002E18C9?OpenDocument. 

At the end of 2021, there were a total of 203,545 companies registered in the ROC, 12,604 of which had been registered in 2021 (for more statistics on company registrations, please see: https://www.companies.gov.cy/en/ ).

In addition to registering a business, foreign investors, like domestic business owners, are required to obtain all permits that may be necessary under Cypriot law. At a minimum, they must obtain residence and employment permits, register for social insurance, and register with the tax authorities for both income tax and Valued Added Tax (VAT). In order to use any building or premises for business, including commerce, industry, or any other income-earning activity, one also needs to obtain a municipal license. Additionally, town planning or building permits are required for building new offices or converting existing buildings. There are many sector-specific procedures. Information on all the above procedures is available online at the link above.

The World Bank’s 2020 Doing Business report ( http://www.doingbusiness.org/rankings)  ranked Cyprus 54th out of 190 countries for ease of doing business. Among the ten sub-categories that make up this index, Cyprus performed best in the areas of protecting minority investors (21/190) and paying taxes (29/190), and worst in the areas of enforcing contracts (142/190) and dealing with construction permits (125/190). Cyprus has recorded small gains in almost all subcategories since the 2019 report, with a substantial improvement in the area of paying taxes, achieving a small overall climb in its ranking since last year. Using another metric, in the Global Competitiveness Index, issued by the World Economic Forum, Cyprus maintained its ranking of 44th out of 141 countries in the 2019 edition. The two areas where Cyprus performed the worst in this report were its small market size and relatively low innovation capability. Since 2020, the World Bank Group has discontinued the Doing Business project and is now formulating a new approach to assessing the business and investment climate in economies worldwide.

The ROC follows the EU definition of micro-, small- and medium-sized enterprises (MSMEs), and foreign-owned MSMEs are free to take advantage of programs in Cyprus designed to help such companies.

• https://www.fundingprogrammesportal.gov.cy/en/call/enabling-discovery-and-interoperability-of-federated-research-objects-across-scientific-communities/ 

Foreign investors can take advantage of the services and expertise of Invest Cyprus, an agency registered under the companies’ law and funded mainly by the state, dedicated to attracting investment.

Invest Cyprus
9A Makarios III Ave
Severis Bldg., 4th Flr.
1065 Nicosia
Tel. +357 22 441133
Fax: +357 22 441134
Email: info@investcyprus.org.cy 
Website: http://www.investcyprus.org.cy/ 

Additionally, the Association of Large Investment Projects, under the Cyprus Chamber of Commerce and Industry, can provide useful information on large ongoing investment projects:

Association of Large Investment Projects

38 Grivas Dhigenis Ave. & 3 Deligiorgis Str.,
P.O.Box 21455
1509 Nicosia
Tel: +357 22 889890
Fax: +357 22 667593
Email: bigprojects@ccci.org.cy 

Lastly, the Cyprus Country Profiler website offers some useful background on the ROC: https://www.cyprusprofile.com/ 

AREA ADMINISTERED BY TURKISH CYPRIOTS

Information available on the “Registrar of Companies’” website is available only in Turkish: http://www.rkmmd.gov.ct.tr/.   An online registration process for domestic or foreign companies does not exist and registration needs to be completed in person.

The “YAGA” website ( https://investnorthcyprus.gov.ct.tr /) provides explanations and guides in English on how to register a company in the area administrated by Turkish Cypriots.

As of March 2021, the “Registrar of Companies Office” statistics indicated there were 23,133 registered companies, 429 foreign companies; and 516 offshore companies.

The area administered by Turkish Cypriots defines MSMEs as entities having fewer than 250 employees. There are several grant programs financed through Turkish aid and EU aid targeting MSMEs.

The Turkish Cypriot Chamber of Commerce (KTTO) publishes an annual Competitiveness Report on the Turkish Cypriot economy, based on the World Economic Forum’s methodology. KTTO’s 2019-2020 report ranked Northern Cyprus 107 among 141 economies, dropping eighteen places from its ranking in 2019. KTTO has not published reports since 2020.

For more information and requirements on establishing a company, obtaining licenses, and doing business visit:

“Turkish Cypriot Investment Development Agency” (“YAGA”)
Tel: +90 392 – 22 82317
Website: https://investnorthcyprus.gov.ct.tr/ 

Turkish Cypriot Chamber of Commerce (KTTO)
https://www.ktto.net/en/ 
Tel: +90 392 – 228 37 60 / 228 36 45
Fax: +90 392 – 227 07 82

REPUBLIC OF CYPRUS

The ROC does not restrict outward investment, other than in compliance with international obligations such as specific UN Security Council Resolutions. In terms of programs to encourage investment, businesses in Cyprus have access to several EU programs promoting entrepreneurship, such as the European Commission’s Next Generation EU economic recovery package, or the Erasmus program for Young Entrepreneurs, in addition to the European Investment Bank’s guarantee facilities for SMEs for projects under USD 4.8 million (EUR 4 million).

AREA ADMINISTERED BY TURKISH CYPRIOTS

Turkish Cypriot “officials” do not incentivize or promote outward investment. The Turkish Cypriot authorities do not restrict domestic investors.

REPUBLIC OF CYPRUS

The ROC achieved a score of 4 out of 6 in the World Bank’s composite Global Indicators of Regulatory Governance score (based on data collected December 2015 to April 2016) designed to explore good regulatory practices in three core areas: publication of proposed regulations, consultation around their content, and the use of regulatory impact assessments. For more information, please see: http://rulemaking.worldbank.org/en/data/explorecountries/cyprus .

U.S. companies competing for ROC government tenders have noted concerns about opaque rules and possible bias by technical committees responsible for preparing specifications and reviewing tender submissions. Overall, however, procedures and regulations are transparent and applied in practice by the government without bias towards foreign investors. The ROC actively promotes good governance and transparency as part of its administrative reform action plan.

In line with the above plan and EU requirements, the ROC launched the National Open Data Portal ( https://www.data.gov.cy/ ) in 2016 to increase transparency in government services. Government agencies are now required to post publicly available information, data, and records, on the entire spectrum of their activities. The number of data sets available through this portal has been growing rapidly, although much of it is in Greek only.

Several agencies and non-governmental organizations (NGOs) share competency on fostering competition and transparency, including the ROC Commission for the Protection of Competition ( http://www.competition.gov.cy/competition/competition.nsf/index_en/index_en?OpenDocument ), the Competition and Consumer Protection Service, under MECI ( https://meci.gov.cy/en/departments-services/consumer-protection-service ), the Cyprus Consumers Association ( https://www.katanalotis.org.cy/ ), and the Cyprus Securities and Exchange Commission ( https://www.cysec.gov.cy/en-GB/home/ ).

Government and independent oversight agencies such as the Cyprus Securities and Exchange Commission actively promote companies’ environmental, social, and governance (ESG) disclosure to facilitate transparency. In 2017, the European Commission published guidelines to help companies disclose environmental and social information, which it supplemented in 2019 with guidelines on reporting climate-related information. These guidelines are not mandatory, but many progressive local companies are adopting them to secure their sustainability and long-term gains.

Most laws and regulations are published only in Greek and obtaining official English translations can be difficult, but expert analysis in English is generally available from local law and accounting firms when the regulation affects international investment or business activity. When passing new legislation or regulations, Cypriot authorities follow the EU acquis communautaire – the body of common rights and obligations that is binding on all EU members. A formal procedure of public notice and comment is not required in Cyprus, except for specific types of laws. In general, the ROC will seek stakeholder feedback directly. Draft legislation must be published in the Official Gazette before it is debated in the House to allow stakeholders an opportunity to submit comments. The ROC House of Representatives typically invites specific stakeholders to offer their feedback when debating bills. Draft regulations, on the other hand, need not be published in the Official Gazette prior to being approved.

In an effort to contribute to global tax transparency, the ROC has adopted the Standard of Automatic Exchange of Information developed by the Organization for Economic Co-Operation and Development (OECD) known as Common Reporting Standard (CRS). Since 2016, the ROC Tax Department requires all financial institutions to confirm their clients’ jurisdiction(s) of Tax Residence and Respective Tax Identification Number, if applicable. Additionally, the ROC has signed the U.S. Foreign Account Tax Compliance Act (FATCA), allowing Cypriot tax authorities to share information with U.S. counterparts.

Public finances and debt obligations are published as part of the annual budget process.

AREA ADMINISTERED BY TURKISH CYPRIOTS

The level of transparency for “lawmaking” and adoption of “regulations” in the “TRNC” lags behind U.S. and EU standards. There are no informal regulatory processes managed by nongovernmental organizations or private sector associations. Draft legislation or regulations are made available for public comment for 21 days after the legislation is sent to “parliament.” Almost all legislation and regulations are published only in Turkish.

REPUBLIC OF CYPRUS

As an EU member state since May 1, 2004, the Republic of Cyprus must ensure compliance with the acquis communautaire. The acquis is constantly evolving and comprises of Treaties, international agreements, legislation, declarations, resolutions, and other legal instruments. EU legislation, for its part, is subdivided into:

• Regulations, which are directly applicable to member states and require no further action to have legal effect;
• Directives, which are addressed to and are binding on member states, but the member state may choose the method by which to implement the directive. Generally, a member state must enact national legislation to comply with a directive;
• Decisions, which are binding on those parties to whom they are addressed; and
• Recommendations and opinions, which have no binding force.

When there is conflict between European law and the law of any member state, European law prevails; the norms of national law have to be set aside, under the principle of EU law primacy or supremacy. The ROC is often slow to transpose EU directives into local law, but transposition is generally consistent with EU intent when it happens.

AREA ADMINISTERED BY TURKISH CYPRIOTS

The entire island of Cyprus is considered EU territory, but the acquis communautaire is suspended in the areas administered by Turkish Cypriots and the north is not considered to be within the EU customs area.

REPUBLIC OF CYPRUS

Cyprus is a common law jurisdiction and its legal system is based on English Common Law for both substantive and procedural matters. Cyprus inherited many elements of its legal system from the United Kingdom, including the presumption of innocence, the right to due process, the right to appeal, and the right to a fair public trial. Courts in Cyprus possess the necessary powers to enforce compliance by parties who fail to obey judgments and orders made against them. Public confidence in the integrity of the Cypriot legal system remains strong, although long delays in courts, and the perceived failure of the system collectively to punish those responsible for the island’s financial troubles in 2013 have tended to undermine this trust in recent years.

International disputes are resolved through litigation in Cypriot courts or by alternative dispute resolution methods such as mediation or arbitration. Businesses often complain of court gridlock and judgments on cases generally taking years to be issued, particularly for claims involving property foreclosure.

AREA ADMINISTERED BY TURKISH CYPRIOTS

Investors should note the EU’s acquis communautaire is suspended in the area administered by the Turkish Cypriots.

The “TRNC” is a common law jurisdiction. Judicial power other than the “Supreme Court” is exercised by the “Heavy Penalty Courts,” “District Courts,” and “Family Courts.” Turkish Cypriots inherited many elements of their legal system from British colonial rule before 1960, including the right to appeal and the right to a fair public trial. There is a high level of public confidence in the judicial system in the area administrated by Turkish Cypriots. The judicial process is procedurally competent, fair, and reliable.

Foreign investors can make use of all the rights guaranteed to Turkish Cypriots. Commercial courts and alternative dispute resolution mechanisms are not available in the “TRNC.” The resolution of commercial or investment disputes through the “judicial system” can take several years. The Turkish Cypriot administration has trade and industry “law” and contractual “law.” The Turkish Cypriot administration has several trade and economic cooperation agreements with Turkey. For more information about “legislation,” visit https://investnorthcyprus.gov.ct.tr/ . Because the “TRNC” is not recognized internationally, “TRNC court” decisions and orders may be difficult to enforce outside of the area administered by Turkish Cypriots or Turkey.

REPUBLIC OF CYPRUS

For more information on laws affecting incoming foreign investment see https://www.investcyprus.org.cy/ 

AREA ADMINISTERED BY TURKISH CYPRIOTS

Visit the “YAGA” website, for more information about laws and regulations on FDI: https://investnorthcyprus.gov.ct.tr/ 

REPUBLIC OF CYPRUS

The oversight agency for competition is the Commission for the Protection of Competition: http://www.competition.gov.cy/competition/competition.nsf/index_en/index_en?OpenDocument 

AREA ADMINISTERED BY TURKISH CYPRIOTS

The oversight “agency” for competition is the “Competition Board:” http://www.rekabet.gov.ct.tr/ 

REPUBLIC OF CYPRUS

Private property may, in exceptional instances, be expropriated for public purposes, in a non-discriminatory manner, and in accordance with established principles of international law and consistent with EU law, rights, and directives. The expropriation process entitles investors to proper compensation, whether through mutual agreement, arbitration, or the local courts. Foreign investors may claim damages resulting from an act of illegal expropriation by means other than litigation. Investors and lenders to expropriated entities receive compensation in the currency in which the investment was made. In the event of any delay in the payment of compensation, the Government is also liable for the payment of interest based on the prevailing six-month interest rate for the relevant currency. Like most other jurisdictions, banks in Cyprus are expected to complete the switch from the London Inter-Bank Offered Rate (LIBOR) to the Secured Overnight Financing Rate (SOFR) by June 2023.

Following a financial crisis in 2013, the ROC took extraordinary steps as part of the Memorandum of Understanding (MOU) between the Republic of Cyprus and international lenders (European Commission, European Central Bank, and the IMF – the “troika”). Depositors in two of the largest Cypriot banks were forced to take a cut on almost half of their deposits exceeding insured limits. This action sparked 3,000 lawsuits against the ROC and the banks, but the European Court of Justice ruled that the MOU with the troika was not an unlawful act and dismissed actions for compensation. The ROC has not taken any similar extraordinary actions since.

AREA ADMINISTERED BY TURKISH CYPRIOTS

Private property may be expropriated for public purposes. The expropriation process entitles investors to proper compensation. Foreign investors may claim damages resulting from an act of illegal expropriation by means other than litigation.

In expropriation cases involving private owners, they are first notified, the property is then inspected, and, if an agreement is reached regarding the amount, then the owner is compensated. In cases where the owner declines the compensation package, the case relegated to local “courts” for a final decision.

Because the “TRNC” is not recognized internationally, “TRNC court” decisions and orders may be difficult to enforce outside of the area administered by Turkish Cypriots or Turkey.

REPUBLIC OF CYPRUS

New insolvency legislation introduced in 2015 helped overhaul bankruptcy procedures, with a view to resolving the island’s high levels of non-performing loans (NPLs). Bankruptcy procedures can be initiated by a creditor through compulsory liquidation or by the debtor through voluntary liquidation. The court can impose debt rescheduling, in cases where aggregate liabilities do not exceed USD 409,500 (EUR 350,000) and individuals with minimal assets and income may apply to the court via the Insolvency Service for a debt relief order of up to USD 29,250 (EUR 25,000). Discharge from bankruptcy is automatic after three years, provided all debtor assets are sold and the proceeds distributed to creditors. Fraudulent alienation of assets prior to bankruptcy and non-disclosure of assets draws criminal sanctions under the new legislation. Cypriot authorities are closely monitoring implementation of the new insolvency framework. Despite concerted efforts by Cypriot authorities and the banks NPLs remained stubbornly high at 28.5 percent of total loans at the end of 2019, compared to 30.3 percent a year earlier, although two major banks are in the process of selling significant NPL portfolios to investors.

The World Bank’s 2020 Doing Business report ranked Cyprus 31st from the top among 190 countries in terms of the ease with which it resolves insolvency. For additional information, please see: https://www.doingbusiness.org/en/data/exploreeconomies/cyprus#DB_ri  .

AREA ADMINISTERED BY TURKISH CYPRIOTS

In 2013, the “TRNC” passed a debt restructuring “law” aimed at providing incentives to restructure debts and NPLs separately. Turkish Cypriots also have a bankruptcy “law” that defines “collecting power;” conditions under which a creditor can file a bankruptcy application; and the debtor’s bankruptcy application, and agreement plans.

As of the end of the third quarter of 2021, NPLs were 1.5 billion Turkish Lira (USD 10 million).

REPUBLIC OF CYPRUS

The ROC offers investors one of the lowest corporate tax rates in the EU at 12.5 percent, although this rate will likely increase to 15.0 percent in the foreseeable future, in line with global trends. Cyprus’ other tax advantages include:

• One of the EU’s lowest top statutory personal income tax rates at 35 percent;
• An extensive double tax treaties network with 67 countries, enabling lower withholding tax rates on dividend or other income received from the subsidiaries abroad;
• No withholding tax on dividend income received from subsidiary companies abroad under certain conditions.
• No withholding tax on dividends received from EU subsidiaries; and
• Low Tonnage Tax for shipping.

Effective November 1, 2020, the ROC abolished a program offering Cypriot citizenship through foreign investment, due to abuses. The abrupt abolition of the citizenship program has left a considerable number of high-end residential properties (each valued at around USD 2 million or more) up for sale. The ROC continues to offer a Residency by Investment program, requiring a minimum investment of USD 360,000 (EUR 300,000).

In recent years, the ROC has harmonized and enhanced its regulations regarding investment funds, becoming a more attractive jurisdiction for managing and home-basing investment funds. As a result, the number of financial services companies regulated by the Cyprus Securities and Exchange Commission (CySEC) has tripled in the last eight years, from 249 in 2012 to 746 in 2019, with total assets under management reaching USD 10.2 billion (EUR 9.1 billion) in 2019. Brexit, the withdrawal of the United Kingdom from the EU since January 31, 2020, has also prompted several financial services companies based in the UK to relocate to Cyprus over the past year – a trend ROC authorities are trying to encourage.

Since 2017, the ROC also offers a program to attract foreign investment to Cyprus through third country – i.e., non-European Union – innovative start-ups. The plan invites third-country nationals with start-up capital of at least USD 58,500 (EUR 50,000), undergraduate-level education, and fluent either in Greek or English, to set up their headquarters and tax residence in Cyprus, provided their proposed business is certifiably innovative. The plan made 150 visas available to eligible investors, valid for two years, provided the relevant business is successful. The program was renewed in February 2019 for two more years.

In May 2021, the European Commission approved the ROC’s Recovery and Resilience Plan (RRP), which forms part of the Next Generation EU recovery instrument, envisioning broad-reaching reforms from 2021-26 in exchange for $1.3 billion in EU funding ($1.1 billion in grants and $220 million in loans). Around 41 percent of this funding will go to green transition projects, and another 23 percent to digital transition, with residual funding for many other reforms, including encouraging innovation and advancing the role of women in business. More information on Cyprus’ RRP available at: https://ec.europa.eu/info/business-economy-euro/recovery-coronavirus/recovery-and-resilience-facility/cyprus-recovery-and-resilience-plan_en .

AREA ADMINISTERED BY TURKISH CYPRIOTS

There are incentives for tourism and industrial-related investments, including:

• 100 to 200 percent investment allowance on the initial fixed capital investment expenditure for certain regions and sectors;
• Exemption from corporate tax and income tax until the above-mentioned allowance percentages are met;
• Exemption from custom duties when importing machinery and equipment the projects;
• Exemption from construction license fees;
• Exemption from VAT for both imported and locally purchased machinery and equipment; and
• Reduction of stamp duty and mortgage procedure fees.

REPUBLIC OF CYPRUS

The lead government agency handling areas subject to a special customs regime is the Department of Customs and Excise. Specific rules for the two main areas, namely Customs Warehouses and Free Zones, are listed below and are fully harmonized with equivalent EU norms: https://www.mof.gov.cy/mof/customs/customs.nsf/All/6D61C14C3E95345CC22572A6003BCBD5?OpenDocument .

There are two types of Free Zones:

• Control Type I Free Zone, in which controls are principally based on the existence of a fence; and
• Control Type II Free Zone, in which controls are principally based on the formalities carried out in accordance with the requirements of the customs warehousing procedure.

Cyprus has two Control Type II Free Zones (FZs) located in the main seaports of Limassol and Larnaca, which are used for transit trade. These areas are treated as outside normal EU customs territory. Consequently, non-EU goods placed in FZs are not subject to import duties, VAT, or excise tax. FZs are governed under the provisions of relevant EU and ROC legislation. The Department of Customs has jurisdiction over both normal zones and FZs and can impose restrictions or prohibitions on certain activities, depending on the nature of the goods. Additionally, the MECI has management oversight over the Larnaca FZ.

A Customs Warehouse can be set up anywhere in the ROC, provided the right criteria are met and meet with the approval of the Department of Customs. For more information, interested parties may contact:

Department of Customs and ExciseMichali Karaoli Str.1096 NicosiaTel. +357 22 601754 or 55Fax: +357 22 302018Email: headquarters@customs.mof.gov.cy  Website: https://www.mof.gov.cy/mof/customs/customs.nsf/index_en/index_en?OpenDocument 

When larger projects are involved, potential investors interested in establishing their own customs warehouse or seeking to engage existing customs warehouses may also contact the One Stop Shop ( https://www.businessincyprus.gov.cy/ ) for guidance on identifying suitable locations.

Additional information on the Limassol and Larnaca FZs can be obtained from:

Cyprus Ports AuthorityP.O. Box 220071516 Nicosia23 Kritis Street1061 NicosiaTel. +357 22 817200, X-0Fax: +357 22 762050Email: cpa@cpa.gov.cy Website: https://www.cpa.gov.cy/ 

AREA ADMINISTERED BY TURKISH CYPRIOTS

Famagusta has a “free port and zone,” which is regulated by the Free Ports and Free Zones “Law.”

Operations and activities permitted there include:

• Engaging in all kinds of industry, manufacturing, and production;
• Storage and export of goods imported to the “Free Port and Zone”;
• Assembly and repair of goods imported to the “Free Port and Zone”;
• Building, repair, and assembly of ships; and
• Banking and insurance services.

REPUBLIC OF CYPRUS

There are no requirements for local sourcing, ownership, or employment. Hiring Cypriot and EU staff is quite easy, though a tight labor market prior to the COVID-19 pandemic strained labor supply in certain fields. Securing work permits for non-EU staff can be difficult, particularly in sectors where there is abundant local labor readily available. In order to overcome this problem, a foreign investor must explain to the satisfaction of ROC authorities why the non-EU staff in question is essential to the business. As with other such matters, Invest Cyprus can assist investors in overcoming hiring problems (see Section 2 on Business Facilitation, and Section 12 on Labor Policies and Practices.)

AREA ADMINISTERED BY TURKISH CYPRIOTS

In order to recruit foreign labor, companies or investors apply to the local labor authorities for “work permits.” Once they apply, the vacancy is announced locally. Priority is given to local “TRNC citizens” with the required expertise or skillset. If the skillset is not available locally, employers can recruit foreign labor.

In evaluating a foreign investment incentives application, the “State Planning Office” carries out a feasibility study regarding the type of investment. For more information on employment, visit the labor authorities’ website: http://csgb.gov.ct.tr/en-us/ .

REPUBLIC OF CYPRUS

EU nationals and companies domiciled in any EU country are not subject to any restrictions when buying property in the ROC. By contrast, Cypriot law imposes significant restrictions on direct foreign ownership of real estate by non-EU individuals. Non-EU persons and entities may purchase a maximum of two real estate properties for private use (defined as a holiday home built on land of up to 4,014 square meters; plus a second home or office of up to 250 square meters, or shop of up to 100 square meters). Exceptions can be made for projects requiring larger plots of land but are difficult to obtain and rarely granted. This restriction applies to non-EU citizens or non-EU companies. Foreign investment in Cypriot or EU companies is welcome, but a legal entity is deemed to be controlled by non-EU citizens if it meets any of the conditions listed below:

• 50 percent or more of its board members are non-EU citizens; or
• 50 percent or more of its share capital belongs to non-EU citizens; or
• Control (50 percent or more) belongs to non-EU citizens; or
• Either the company’s Memorandum or Articles of Association provides authority to a non-EU citizen securing the company’s activities are conducted based on his/her will during the real estate acquisition period. In the case that the authority is provided to two or more persons, a legal entity is considered to be controlled by non-EU citizens if 50 percent or more of the people granted such authority are non-EU citizens.

Legal requirements and procedures for acquiring and disposing of property in Cyprus are complex, but professional help from real estate agents and developers to ease the burden is readily available. The ROC Department of Lands and Surveys keeps excellent records and follows internationally accepted procedures. Non-residents are allowed to sell their property and transfer abroad the amount originally paid, plus interest or profits, without restriction.

Additionally, there are restrictions on investing in Turkish Cypriot property located in the ROC. The Turkish Cypriot Property Management Service (TCPMS), established in 1991, administers properties of Turkish Cypriots who are not ordinarily residents of the government-controlled area. This service acts as the temporary custodian for such properties until a comprehensive political settlement is reached. The TCPMS is mandated to administer properties under its custodianship “in the manner most beneficial for the owner.” Ownership of Turkish Cypriot properties cannot change (except for inheritance purposes) except in exceptional cases when this is deemed beneficial for the owner or necessary for the public interest.

The World Bank’s 2020 Doing Business report ranked Cyprus 71st among 190 countries in terms of efficiency and quality for registering property.

AREA ADMINISTERED BY TURKISH CYPRIOTS

Special Note: Investors are advised to consider the risks associated with investing in immovable property in the area administered by Turkish Cypriots. Potential investors are strongly advised to obtain independent legal advice prior to purchasing or leasing property there. Purchase or use of property in the area administered by Turkish Cypriots is a contentious issue in Cyprus, as per the following note posted on the Republic of Cyprus Ministry of Foreign Affairs website: http://www.mfa.gov.cy/mfa/properties/occupiedarea_properties.nsf/index_en/index_en?OpenDocument .

For property in the Turkish Cypriot-administered areas, only pre-1974 title deeds are uncontested. In response to the European Court of Human Rights’ (ECHR) 2005 ruling that Turkey’s “subordinate local authorities” in Cyprus had not provided an adequate local remedy for property disputes, Turkish Cypriot authorities established an Immovable Property Commission (IPC) to handle property claimed by Greek Cypriots. In a March 2010 ruling, the ECHR recognized the IPC as a domestic remedy, but the ROC does not consider the IPC to be a legitimate body. As of March 9, 2022, the IPC had received 7,085 applications, of which 1, 311 have been concluded through friendly settlements, and 34 through formal hearings.

On January 19, 2010, the UK Court of Appeal enforced an earlier court decision taken in the ROC in support of a Greek Cypriot person’s trespassing claim effectively voiding the transfers of Greek Cypriot property in the Turkish Cypriot-administered areas. This landmark decision also establishes precedent in cases where foreign investors purchasing disputed properties outside of the ROC-controlled area can be found liable for damages.

There are significant restrictions on the foreign ownership of real estate. A 2008 “law” requires non- “TRNC” residents to apply to the “Council of Ministers” for permission to purchase real estate, and non-residents are limited to a single small property. Foreigners can, however, own or control more real estate through a “TRNC” registered company.

REPUBLIC OF CYPRUS

ROC intellectual property rights (IPR) law is harmonized with EU directives and the ROC is party to major international IPR instruments. The country promotes itself as a low-tax, high protection (i.e., EU standards) destination for IPR.

Cypriot law (Law 207(I) (2012)) places the burden of proof on the defendant in cases of IPR infringement. The law also allows the police to assess samples of pirated articles in lieu of the whole shipment and introduces the alternative for out-of-court settlement in some cases. Other important IPR laws include Law 103 (2007) on unfair commercial practices and Law 133(I) (2006) strengthening earlier legislation targeting copyright infringement. The Department of Customs and the Police confiscate thousands of counterfeit items every year, including articles of clothing, luggage, accessories, and pirated optical media.

Primary responsibility for enforcing ROC IPR legislation rests with the Cyprus Police and the Department of Customs. The Competition and Consumer Protection Service of the Ministry of Energy, Commerce, and Industry (MECI) also plays a supportive role, while the Registrar of Companies and Official Receiver handles administration of patents and copyrights.

For additional information about treaty obligations and points of contact at local IPR offices, please see WIPO’s country profiles at: http://www.wipo.int/directory/en/ .

REPUBLIC OF CYPRUS

The Cyprus Stock Exchange (CSE), launched in 1996, is one of the EU’s smallest stock exchanges, with a capitalization of USD 3.7 billion (EUR 3.4 billion) as of March 2022. The CSE and the Athens Stock Exchange (ASE) have operated from a joint trading platform since 2006, allowing capital to move more freely from one exchange to the other, even though both exchanges retain their autonomy and independence. The joint platform has increased capital available to Cypriot firms and improved the CSE’s liquidity, although its small size remains a constraint. The private sector has access to a variety of credit instruments, which has been enhanced through the operation of private venture capital firms. Credit is allocated on market terms to foreign and local investors alike. Foreign investors may acquire up to 100 percent of the share capital of Cypriot companies listed on the CSE with the notable exception of companies in the banking sector.

AREA ADMINISTERED BY TURKISH CYPRIOTS

There is no stock exchange in the area administrated by Turkish Cypriots and no foreign portfolio investment. Foreign investors are able to get credit from the local market, provided they have established domestic legal presence, majority-owned (at least 51 percent) by domestic companies or persons.

REPUBLIC OF CYPRUS

At the end of November 2021, the value of total deposits in ROC banks was USD 56.3 billion (EUR 51.2 billion), and the value of total loans was USD 32.6 billion (EUR 29.6 billion). Currently, there are seven local banks in Cyprus offering a full range of retail and corporate banking services – the largest two of which are the Bank of Cyprus and Hellenic Bank – plus another two dozen or so subsidiaries or branches of foreign banks offering more specialized services. The full list of authorized credit institutions in Cyprus is available on the Central bank of Cyprus website: https://www.centralbank.cy/en/licensing-supervision/banks/register-of-credit-institutions-operating-in-cyprus .

The banking sector has made significant progress since the 2013 financial crisis resulted in a “haircut” of uninsured deposits, followed by numerous bankruptcies and consolidation. The island’s two largest banks – Bank of Cyprus and Hellenic – are now adequately capitalized and have returned to profitability. However, the profitability of the banking sector as a whole is challenged by low interest margins, a high level of liquidity, and a still-elevated volume of NPLs. NPLs in Cyprus are the second-highest in the EU at 15.1 percent of total loans at the end of November 2021, compared to 19.1 percent a year earlier, albeit considerably lower than in 2014, when they reached 47.8 percent. Banks continue striving to reduce NPLs further, either by selling off portfolios of NPLs or using recently amended insolvency and foreclosure frameworks. The economic impacts of the COVID-19 pandemic and political pressure to protect citizens under the current extraordinary circumstances makes reducing NPLs difficult. Aggregate banking sector data is available here: https://www.centralbank.cy/en/licensing-supervision/banks/aggregate-cyprus-banking-sector-data .

Cyprus has a central bank – the Central Bank of Cyprus – which forms part of the European Central Bank. Foreign banks or branches are allowed to establish operations in Cyprus. They are subject to Central Bank of Cyprus supervision, just like domestic banks. JPMorgan, Citibank, Bank of New York Mellon, and HSBC currently provide U.S. dollar correspondent banking services to ROC banks.

Opening a personal or corporate bank account in Cyprus is straightforward, requiring routine documents. But because of a history of money-laundering concerns, banks now carefully scrutinize these documents and can conduct extensive due diligence checks on sources of wealth and income. A local bank account is not necessary for personal household expenses. Opening a corporate bank account is mandatory when registering a company in Cyprus.

Since 2018, Cyprus has taken steps to address recognized regulatory shortcomings in combatting illicit finance in its international banking and financial services sector, tightening controls over non-resident shell companies and bank accounts. Cyprus’ first National Risk Assessment (NRA) of money laundering and terrorist financing, released in November 2018, is available at: http://mof.gov.cy/en/press-office/announcements/national-risk-assessment-of-money-laundering-and-terrorist-financing-risks-cyprus . Cyprus is a member of the Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a FATF-style regional body. Its most recent mutual evaluation report of the Cypriot banking sector, released December 2021, can be found at: https://www.coe.int/en/web/moneyval/jurisdictions/cyprus .

AREA ADMINISTERED BY TURKISH CYPRIOTS

The “Central Bank” oversees and regulates local, foreign, and private banks. In addition to the “Central Bank” and the “Development Bank”, there are 21 banks in the area administrated by Turkish Cypriots, of which 16 are Turkish Cypriot-owned banks, and five are branch banks from Turkey. Banks are required to follow “know-your-customer” (KYC) and AML “laws,” which are regulated by the “Ministry of Economy and Energy,” and supervised by the “Central Bank,” but AML practices do not meet international standards. Due to non-recognition issues, Turkish Cypriot banks do not qualify for a SWIFT number to facilitate international transactions. All international transfers depend on routing through Turkish banks.

In the third quarter of 2021, total deposits, which have the largest share in the sector’s total liabilities, reached 48,8 billion TL (USD 3.3 billion).

As of the end of the third quarter of 2021 , NPLs reached 1.5 Billion Turkish Lira (USD 10 million).

REPUBLIC OF CYPRUS

The Parliament passed legislation in March 2019 providing for the establishment of a National Investment Fund (NIF) to manage future offshore hydrocarbons and other natural resources revenue. Section 29 of the NIF Law specifies that the Corporation to be set up shall invest the Fund in a diversified manner with a view to maximizing risk-adjusted financial returns and in a manner consistent with the portfolio management by a prudent institutional investor. The Fund is precluded from investing in securities issued by a Cypriot issuer (including the state) or in real estate located in Cyprus. This provision safeguards against the possibility of speculative development catering to the Fund and political interference favoring domestic investments for purposes other than the best interests of the Fund and the Cypriot people as a whole. Additionally, Section 30 of the law provides that the fund cannot invest, directly or indirectly, to acquire more than five percent of any one company or legal entity. The fund is not yet operational. Regulations for the NIF are being drafted and will require legislative approval, and it will be several years before there are any revenues generated from the ROC’s hydrocarbon assets.

AREA ADMINISTERED BY TURKISH CYPRIOTS

There is no established sovereign wealth fund.

REPUBLIC OF CYPRUS

The ROC maintains exclusive or majority-owned stakes in more than 40 SOEs and is making slow progress towards privatizing some of them (see sections on Privatization and OECD Guidelines on Corporate Governance of SOEs). There is no comprehensive list of all SOEs available but the most significant are the following:

• Electricity Authority of Cyprus (EAC);
• Cyprus Telecommunications Authority (CyTA);
• Cyprus Sports Organization;
• Cyprus Ports Authority;
• Cyprus Broadcasting Corporation (CyBC);
• Cyprus Theatrical Organization; and
• Cyprus Agricultural Payments Organization.

These SOEs operate in a competitive environment (domestically and internationally) and are increasingly responsive to market conditions. The state-owned EAC monopoly on electricity generation and distribution ended in 2014, although competition remains difficult given the small market size and delays in implementing new market rules. As an EU Member State, Cyprus is a party to the WTO Government Procurement Agreement (GPA).

OECD Guidelines on Corporate Governance are not mandatory for ROC SOEs, although some of the larger SOEs have started adopting elements of corporate governance best practices in their operating procedures. Each of the SOEs is subject to dedicated legislation. Most are governed by a board of directors, typically appointed by the government at the start of its term, and for the duration of its term in office. SOE board chairs are typically technocrats, affiliated with the ruling party. Representatives of labor unions and minority shareholders contribute to decision making. Although they enjoy a fair amount of independence, they report to the relevant minister. SOEs are required by law to publish annual reports and submit their books to the Auditor General.

AREA ADMINISTERED BY TURKISH CYPRIOTS

In the area administrated by Turkish Cypriots, there are several “state-owned enterprises” and “semi-state-owned enterprises,” usually common utilities and essential services.

In the Turkish Cypriot administered area, the below-listed institutions are known as “public economic enterprises” (POEs), “semi-public enterprises” and “public institutions,” which aim to provide common utilities and essential services.

Some of these organizations include:

• Turkish Cypriot Electricity Board (KIBTEK);
• BRTK – State Television and Radio Broadcasting Corporation;
• Cyprus Turkish News Agency;
• Turkish Cypriot Milk Industry;
• Cypruvex Ltd. – Citrus Facility;
• EMU – Eastern Mediterranean Foundation Board;
• Agricultural Products Corporation;
• Turkish Cypriot Tobacco Products Corporation;
• Turkish Cypriot Alcoholic Products LTD;
• Coastal Safety and Salvage Services LTD; and
• Turkish Cypriot Development Bank.

REPUBLIC OF CYPRUS

The ROC has made limited progress towards privatizations, despite earlier commitments to international creditors in 2013 to raise USD 1.6 billion (EUR 1.4 billion) from privatizations by 2018. In 2017, opposition parties passed legislation abolishing the Privatizations Unit, an independent body established March 2014. A bill providing the transfer of Cyprus Telecommunications Authority (CyTA) commercial activities to a private legal entity, with the government retaining majority ownership, has been pending since March 2018. In December 2015, under the threat of strikes, the government reversed earlier plans to privatize the Electricity Authority of Cyprus (EAC). However, in recent years, the EAC has been forced to unbundle its operations in line with Cyprus Energy Regulatory Authority (CERA) recommendations and EU regulations. The EAC has created independent units for its core regulated activities, namely Transmission, Distribution, Generation, and Supply. Private firms have been offering renewable energy generation since 2003 and electricity supply since January 1, 2021.

Despite slow progress in electricity and telecommunications, the current administration continues pursuing privatizations in other areas. In August 2020, the government assigned the Larnaca marina and port privatization project to a Cyprus-Israeli consortium, based on a 40-year lease agreement. The project, starting in April 2022, will be completed in four phases by 2037. It provides for port infrastructure, a marina, land redevelopment, a road network, green areas, parks and pedestrian areas as well as residential units and catering and recreation establishments. At a cost of about EUR1.2 billion, this project will be the biggest investment in Cyprus so far.

The government also continues efforts to sell the state lottery, find long-term investors to lease state-owned properties in the Troodos area, and forge a strategic plan on how to handle the Cyprus Stock Exchange.

AREA ADMINISTERED BY TURKISH CYPRIOTS

The airport at Ercan and K-Pet Petroleum Corporation have been converted into public-private partnerships. The concept of privatization continues to be controversial in the Turkish Cypriot community.

In March 2015, Turkish Cypriot authorities signed a public-private partnership agreement with Turkey regarding the management and operation of the water obtained from an underwater pipeline funded by Turkey. Within the area administrated by Turkish Cypriots, there has also been discussion about privatizing the electricity authority “KIBTEK”, Turkish Cypriot telecommunications operations, and the seaports.

REPUBLIC OF CYPRUS

In recent years, responsible business conduct (RBC) awareness among both producers and consumers is growing in Cyprus. Leading foreign and domestic enterprises tend to follow generally accepted RBC principles, and firms pursuing these practices tend to be viewed more favorably by the public. The Cyprus Stock Exchange is among the entities imposing a responsible code of conduct. Most professional associations also promote ethical business conduct among their members, including the Cyprus Bar Association, and the Institute of Certified Public Accountants of Cyprus. For example, the Cyprus Integrity Forum promotes transparency and accountability in business through its Business Integrity Forum certification program – see: https://cyprusintegrityforum.org/business-integrity-forum/ .

The ROC does not specifically adhere to OECD Guidelines for Multinational Enterprises; however, multinationals are expected to follow generally accepted RBC principles. ROC authorities have made some initial soundings considering the possibility of eventually joining the Extractive Industries Transparency Initiative (EITI – https://www.eiti.org/ ).

AREA ADMINISTERED BY TURKISH CYPRIOTS

RBC awareness has grown among both producers, consumers and business in the area administrated by Turkish Cypriots. Firms pursuing these practices tend to be viewed favorably by the public.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

REPUBLIC OF CYPRUS

Promoting green investments is high on the ROC government’s agenda as it looks to make gains toward a green transition. The ROC Recovery and Resilience Plan under the EU’s Next Generation EU recovery instrument envisions a total of 58 reforms in exchange for $1.3 billion in EU funding ($1.1 billion in grants and $220 million in loans). Fully 41 percent of the plan’s allocation for reforms and investments support climate objectives, ranging from green taxation, energy efficiency and renewable energy, and promoting more sustainable transport modes.

REPUBLIC OF CYPRUS

Corruption continues to undermine growth and investment in the ROC, despite the existence of a strong-anti corruption framework. Ninety-five percent of Cypriots think the problem of corruption is widespread, compared to an average of 71 percent in the EU, according to a Eurobarometer survey on corruption conducted by the European Commission in December 2019. In the same survey, 60 percent of Cypriots said they were personally affected by corruption in their daily life, compared to an average of just 26 across the EU. Perhaps even more alarmingly, 69 percent of Cypriots said they thought the level corruption had increased in the past three years, against 42 percent in the EU, who thought the same for their countries. Cypriots put political parties at the top of their list of groups they thought perpetrated corruption (at 63 percent), followed by the healthcare system (59 percent), the police/customs (53 percent), and officials awarding public tenders (52 percent). Corruption, both in the public and private sectors, constitutes a criminal offense. Under the Constitution, the Auditor General controls all government disbursements and receipts and has the right to inspect all accounts on behalf of the Republic, and fear of the Auditor General’s scrutiny is widespread. Government officials sometimes manage procurement efforts with greater concern for the Auditor General than for getting the best outcome for the taxpayer. Private sector concerns focus on the inertia in the system, as reflected in the Auditor General’s annual reports, listing hundreds of alleged incidents of corruption and mismanagement in public administration that usually remain unpunished or unrectified.

Transparency International, the global anti-corruption watchdog, ranked Cyprus 52nd out of 180 countries in its 2021 Corruption Perception Index – from 42nd the year before. Disagreements between the Berlin-based headquarters of Transparency International and its Cypriot division in 2017 led to the dis-accreditation of the latter in 2017 and the launch of a successor organization on the island called the Cyprus Integrity Forum (contact details follow).

GAN Integrity, a business anti-corruption portal with offices in the United States and Denmark, released a report on corruption in Cyprus April 2018 noting the following: “Although Cyprus is generally free from corruption, high-profile corruption cases in recent years have highlighted the presence of corruption risks in the Cypriot banking sector, public procurement, and land administration sector. Businesses may encounter demands for irregular payments, but the government has established a strong legal framework to combat corruption and generally implements it effectively. Bribery, facilitation payments and giving or receiving gifts are criminal offenses under Cypriot law. The government has a strong anti-corruption framework and has developed effective e-governance systems (the Point of Single Contact and the e-Government Gateway project) to assist businesses.” The report can be accessed at: https://www.ganintegrity.com/portal/country-profiles/cyprus/ .

Cyprus cooperates closely with EU and other international authorities to fight corruption and provide mutual assistance in criminal investigations. Cyprus ratified the European Convention on Mutual Assistance in Criminal Matters. Cyprus also uses the foreign Tribunal Evidence Law, Chapter 12, to execute requests from other countries for obtaining evidence in Cyprus in criminal matters. Additionally, Cyprus is an active participant in the Council of Europe’s Multidisciplinary Group on Corruption. Cyprus signed and ratified the Criminal Law Convention on Corruption and has joined the Group of States against Corruption in the Council of Europe (GRECO). GRECO’s second compliance report on Cyprus, released November 17, 2020, is available at: https://www.coe.int/en/web/greco/evaluations/cyprus .

Cyprus is also a member of the UN Anticorruption Convention but it is not a member of the OECD Convention on Combating Bribery.

Government agencies responsible for combating corruption: 

Financial Crime Unit
Cyprus Police Headquarters
Athalassa
1478 Nicosia
Tel. +357 22 808080
E-mail: fcu@police.gov.cy
Website: https://www.police.gov.cy/police/police.nsf/index_gr/index_gr?opendocument

Unit for Combating Money Laundering (MOKAS)
7 Pericleous Str.
2020 Strovolos
Tel. +357 22 446004
E-mail: mokas@mokas.law.gov.cy
Website: http://www.law.gov.cy/law/mokas/mokas.nsf/index_en/index_en?OpenDocument

Auditor General of the Republic
6 Deligiorgi Str.
1406 Nicosia
Tel. +357 22 401300
E-mail: omichaelides@audit.gov.cy
Website: http://www.audit.gov.cy/audit/audit.nsf/home/home?opendocument

Anti-corruption NGO: 

Cyprus Integrity Forum (CIF)
38 Grivas Dhigenis Avenue & 3 Deligiorgis Street
PO Box 21455
1509 Nicosia
T. +357 22 025772
F. +357 22 025773
E-mail: info@cyprusintegrityforum.org 
Website: https://cyprusintegrityforum.org/

AREA ADMINISTERED BY TURKISH CYPRIOTS

Corruption in the area administered by Turkish Cypriots continues to be a major problem, mainly in the public sector, allegedly involving politicians, political parties, and bureaucrats.

Given its small size and disputed status, international anti-corruption organizations do not evaluate conditions in the north.

According to a 2020 Corruption Perception Report carried out by Turkish Cypriot researchers at the Friedrich Ebert Stiftung (FES), a non-profit foundation funded by the German Government, 88 percent of businesspeople responding to the survey believe bribery and corruption occurs in Northern Cyprus, while 58 percent believe corruption is a “very serious problem.” Respondents said bribery is most common in “allocation and lease of public land and buildings” (55 percent), “incentives” (46 per cent), and “public contracts and licenses” (45 per cent).

The “Audit Office” controls all disbursements and receipts and has the right to inspect all accounts. In its annual report, this office identifies specific instances of mismanagement or deviation from proper procedures and anecdotal evidence suggests corruption and patronage continue to be a factor in the economy.

REPUBLIC OF CYPRUS

There have been no incidents of politically-motivated damage to foreign projects and or installations since 1974. U.S. companies have not been the target of violence. There were numerous relatively peaceful protests against the ROC government following the financial crisis of March 2013 and in response to the forced conversion of deposits into equity. Since then, protests against additional austerity measures have been fairly calm.

AREA ADMINISTERED BY TURKISH CYPRIOTS

There have been no incidents of politically-motivated damage to foreign projects and or installations since 1974. U.S. companies have not been the target of violence. Protests and demonstrations, usually targeting the “government,” are commonplace. They are generally peaceful and well-regulated; however, some demonstrations result in scuffles with police or minor damage to buildings.

REPUBLIC OF CYPRUS

As an EU country, Cyprus has robust labor standards, safeguarding the freedom of association and the right to organize and bargain collectively. The Department of Labor Inspection and other bodies effectively guard against forced labor, child labor, employment discrimination, and secure acceptable working conditions with respect to minimum wage, occupational safety and health, and hours of work. There are several social safety net programs, including unemployment insurance. There is likely some undeclared income in the ROC, as in most developed countries, but there are no indications the informal economy plays a decisive role here. Illegal migrants are sometimes used as cheap labor but this does not appear to be a systemic problem, and authorities do not hesitate to fine employers of illegal laborers.

Prior to the COVID-19 pandemic, the rate of unemployment in the ROC had been declining steadily, dropping from 16.1 percent in 2014 to 8.1 percent in Q3 2020 – at par with the Eurozone area. According to Eurostat, Cyprus has a tertiary education attainment level of 36.3 percent of the total population – well above the EU average of 26.7 percent, and one of the highest in the EU. Many of these graduates are from UK and U.S. colleges and universities, resulting in an abundant supply of English-speaking staff. Cyprus’s total labor force was estimated at 402,000 persons in 2020, broken down as follows: services, 77.8 percent; industry and construction, 19.5 percent; and agriculture, 2.7 percent. More women are joining the labor force and their percentage participation has risen from 33.4 percent in 1980 to 47.6 percent today. Applications for work permits for non-EU workers must be submitted to the Civil Registry and Migration Department by the intended employer and should be accompanied by a work contract stamped by the Ministry of Labor and Social Insurance. This ministry must certify that there are no available or adequately qualified Cypriots to carry out the work in question.

Cypriot labor law differentiates between layoffs and firing on redundancy grounds. In order to be eligible for redundancy pay, an employee must have worked in the same position for more than two years and must be laid off either due to: (a) budget constraints leading the employer to abolish the position, or (b) inability on the part of the employee to keep up with technological advances. Employees laid off by their employer are entitled to a redundancy payment depending on their length of service. Redundancy payments are equivalent to between two and four weeks of pay per year of service depending on length of service for up to 25 years, with a maximum of 75 weeks of pay or USD 64,350 (EUR 55,000) per employee, whichever is greater. Redundancy payments come out of a government fund, supported with employer and employee contributions. In addition to redundancy pay, a handful of employers, including banks and SOEs, offer severance pay to their employees, although this is not common in the private sector.

Some employers hire temporary workers or employ staff on personal contract to avoid hiring unionized labor, often offering less than the going rate under collective agreements. Similarly, some employers hire employees for a year in order to benefit from a wage subsidy of up to USD 1,290 (EUR 1,100) per month by the Human Resources Development Authority and then dismiss them as soon as the subsidy expires.

International companies are not required by law to hire union labor, but investors should be aware Cyprus tends to have strong unions in several sectors. As of March 2021, the percentage of the labor force belonging to unions was unofficially estimated at approximately 50 percent, compared to the EU average of approximately 33 percent. The unions remain vocal opponents to privatizations and general austerity measures.

ROC public sector working hours are 07:30 – 15:00, Monday to Friday.

Cyprus imposes a minimum wage for certain professions as follows (unchanged since March 2016):

• Clerks/secretaries, sales assistants, paramedical, live-in maids/domestic helpers, school assistants/child-caregivers: USD 1,044 (EUR 870) per month, rising to USD 1,108 (EUR 924) after six months’ employment.
• Security guards: USD 5.88 (EUR 4.90) per hour, rising to USD 6.24 (EUR 5.20) after six months’ employment.
• Cleaning personnel: USD 5.46 (EUR 4.55) per hour, rising to USD 5.81 (EUR 4.84) after six months’ employment. Non-EU, live-in domestic servants have a separate minimum wage, set at USD 552 (EUR 460) per month, plus their room and board.

For all other professions, there is no minimum wage and wages are set by the employer and employee. Collective bargaining agreements between trade unions and employers cover most sectors of the economy. Wages set in these agreements are typically significantly higher than the legislated minimum wage. In June 2021, the Ministry of Labour initiated consultations with unions and employers to introduce a national minimum wage, but these discussions have so far been inconclusive.

Under the EU single market, EU citizens benefit from the right to free movement of workers. Employers are required to seek work visas for third-country nationals from the Civil Registry and Migration Department. The ROC caps the number of third-country nationals a company may employ. Some companies have noted seeking visas for their third-country national staff can be lengthy and cumbersome.

AREA ADMINISTERED BY TURKISH CYPRIOTS

According to the 2019-2020 Turkish Cypriot Competitiveness Report published by the Turkish Cypriot Chamber of Commerce, the greatest obstacle to doing business was an insufficiently trained workforce.

Reliable labor statistics are often difficult to obtain. The “State Planning Office” (“SPO”) estimated the total number of people employed in 2021 was 125,739. The labor force in the area administered by Turkish Cypriots has a high per capita level of university graduates, including many from U.S. and European universities, and offers an abundant supply of white-collar workers. The unemployment rate was 7.8 percent as of December 2021. Women accounted for approximately 34.9 percent of the labor force. Around 10 percent of private sector workers and more than 65 percent of “semi-public” and “public sector” workers belong to labor unions. Workers are allowed to form and become members of unions. As of February 2021, the minimum wage was USD 410 (6,090 Turkish Lira) per month.

Foreign persons are required to obtain work permits through their employer. Foreign entities may import their key personnel from abroad and are also permitted to hire trainees and part-time workers. A full-time work week is 40 hours for “public sector” employees.

Private sector employees can work up to 8 hours a day. After 8 hours, employees can continue to work up to 4 hours of overtime a day. Overtime during weekdays is paid at 110 percent of the base rate. On weekends and holidays, overtime is paid at 150 percent of the base rate. Employees cannot work on Sundays unless there is an emergency, or an approval by “labor authorities.”

Workers are able to exercise their right to bargain collectively, mainly in the public sector. “Public sector” and “semi-public sector” employees benefit from collective bargaining agreements. The “law” provides for collective bargaining.

According to “authorities,” the majority of foreign workers are from Turkey and work in the service (hotel, restaurant, catering) and construction sectors.

George F. Demetriou
Economic Specialist
U.S. Embassy
Metochiou & Ploutarchou Streets
2407 Engomi
Nicosia, Cyprus
Tel: +357 22 393361
Email: DemetriouGF@state.gov 

The GOT has made efforts to improve the business climate and attract FDI. The GOT prioritizes attracting and retaining investment, particularly in the underdeveloped interior regions, and reducing unemployment by providing tax breaks, subsidizing social security fee contributions for new hires, and offering investment bonuses. However, government policies have not always yielded the anticipated flow of foreign investment in the country, and political developments have had a mitigating effect. More than 3,700 foreign companies currently operate in Tunisia, and the government has historically encouraged export-oriented FDI in key sectors such as call centers, electronics, aerospace and aeronautics, automotive parts, textile and apparel, leather and shoes, agro-food, and other light manufacturing. Through the first half of 2021, the sectors that attracted the most FDI were electrical and electronic (31.3 percent), energy (29 percent), services (10 percent), mechanical (8.2 percent), and agro-food (7.4 percent). Inadequate infrastructure in the interior regions results in the concentration of foreign investment in the capital city of Tunis and its suburbs (54.7 percent), the northern coastal region (20 percent), the eastern coastal region (18.8 percent), and the northwest region (5.7 percent). Internal western and southern regions attracted only 0.8 percent of foreign investment despite special tax incentives for those regions.

The Tunisian Parliament passed an Investment Law (#2016-71) in September 2016 that went into effect April 1, 2017 to encourage the responsible regulation of investments. The law provided for the creation of three major institutions:

• The High Investment Council, whose mission is to implement legislative reforms set out in the investment law and decide on incentives for projects of national importance (defined as investment projects of more than 50 million dinars ($17.9 million) and 500 jobs).
• The Tunisian Investment Authority, whose mission is to manage investment projects of more than 15 million dinars ($5.4 million) and up to 50 million dinars ($17.9 million). Investment projects of less than 15 million dinars ($5.4 million) are managed by the Agency for Promotion of Industry and Innovation (APII).
• The Tunisian Investment Fund, which funds foreign investment incentive packages.

These institutions were all launched in 2017. However, the Foreign Investment Promotion Agency (FIPA) continues to be Tunisia’s principal agency to promote foreign investment. FIPA is a one-stop shop for foreign investors. It provides information on investment opportunities, advice on the appropriate conditions for success, assistance and support during the creation and implementation of the project, and contact facilitation and advocacy with other government authorities.

Under the 2016 Investment Law (article 7), foreign investors have the same rights and obligations as Tunisian investors. Tunisia encourages dialogue with investors through FIPA offices throughout the country.

Foreign investment is classified into two categories:

• “Offshore” investment is defined as commercial entities in which foreign capital accounts for at least 66 percent of equity, and at least 70 percent of the production is destined for the export market. However, investments in some sectors can be classified as “offshore” with lower foreign equity shares. Foreign equity in the agricultural sector, for example, cannot exceed 66 percent and foreign investors cannot directly own agricultural land, but agricultural investments can still be classified as “offshore” if they meet the export threshold.
• “Onshore” investment caps foreign equity participation at a maximum of 49 percent in most non-industrial projects. “Onshore” industrial investment may have 100 percent foreign equity, subject to government approval.

Pursuant to the 2016 Investment Law (article 4), a list of sectors outlining which investment categories are subject to government authorization (the “negative list”) was set by decree no. 417 of May 11, 2018. The sectors include natural resources; construction materials; land, sea and air transport; banking, finance, and insurance; hazardous and polluting industries; health; education; and telecommunications. The decree specified the deadline to respond to authorization requests for most government agencies and fixed a deadline of 60 days for all other government decision-making bodies not specifically mentioned in the decree. The decree went into effect on July 1, 2018.

In June 2021, the government announced the elimination of government authorization requirements for 27 business activities in various sectors, about 10 percent of the total authorization categories.  The change allows foreign and local investors to open businesses under conditions detailed in books of specifications without waiting for a government license.  The action is meant to revive an economy heavily impacted by the COVID-19 pandemic and boost investment in sectors such as tourism, transportation, finance, and renewable energy.

For example, government authorizations are no longer required for business ventures such as the opening of shopping malls and supermarkets, operation of certain aircraft for tourism and leisure activities, management of financial portfolios by non-resident companies, organization of sporting events, cement manufacturing, self-production of electricity from renewable energies under 1 megawatt, import and marketing of films, sale and distribution of tobacco and alcohol, and import of used clothes. While the government decree has yet to be published, the elimination of authorization categories will likely improve Tunisia’s investment climate.

The WTO completed a Trade Policy Review for Tunisia in July 2016. The report is available here: https://www.wto.org/english/tratop_e/tpr_e/tp441_e.htm .

The OECD completed an Investment Policy Review for Tunisia in November 2012. The report is available here: http://www.oecd.org/daf/inv/investment-policy/tunisia-investmentpolicyreview-oecd.htm .

The list of Tunisia’s environmental conflicts on Environmental Justice Atlas is available at https://ejatlas.org/country/tunisia 

In May 2019, the Tunisian Parliament adopted law 2019-47, a cross-cutting law that impacts legislation across all sectors. The law is designed to improve the country’s business climate. The law simplified the process of creating a business, permitted new methods of finance, improved regulations for corporate governance, and provided the private sector the right to operate a project under the framework of a public-private partnership (PPP).

This legislation and previous investment laws are all referenced on the United Nations Conference on Trade and Development (UNCTAD) website: https://investmentpolicy.unctad.org/country-navigator/221/tunisia .

The Agency for Promotion of Industry and Innovation (APII) and the Tunisia Investment Authority (TIA) are the focal point for business registration. Online project declaration for industry or service sector projects for both domestic and foreign investment is available at: www.tunisieindustrie.nat.tn/en/doc.asp?mcat=16&mrub=122 .

The 2019 new online TIA platform allows potential investors to electronically declare the creation, extension, and renewal of all types of investment projects. The platform also allows investors to incorporate new businesses, request special permits, and apply for investment and tax incentives. https://www.tia.gov.tn/ .

APII has attempted to simplify the business registration process by creating a one-stop shop that offers registration of legal papers with the tax office, court clerk, official Tunisian gazette, and customs. This one-stop shop also houses consultants from the Investment Promotion Agency, Ministry of Employment, National Social Security Authority (CNSS), postal service, Ministry of Interior, and the Ministry of Trade and Export Development. Registration may face delays as some agencies may have longer internal processes. Prior to registration, a business must first initiate an online declaration of intent, to which APII provides a notification of receipt within 24 hours.

For agriculture and fisheries, business registration information can be found on the Agricultural Investment Promotion Agency’s (APIA) website: www.apia.com.tn . In February 2022, APIA announced the establishment of a 100% online investment declaration service for Tunisian and foreign investors in agricultural projects. The online service provides investors with an electronic investment declaration certificate (in PDF format) authenticated by a QR code. The service is accessible through “Espace Promoteur” (apia.com.tn) 

In the tourism industry, companies must register with the National Office for Tourism at: http://www.tourisme.gov.tn/en/investing/administrative-services.html .

The central points of contact for established foreign investors and companies are the Tunisian Investment Authority (TIA): https://www.tia.gov.tn/en  and the Foreign Investment Promotion Agency (FIPA): http://www.investintunisia.tn .

The GOT does not incentivize outward investment, and capital transfer abroad is tightly controlled by the Central Bank.

The constitution provides citizens the ability to choose their government in free and fair periodic elections held by secret ballot and based on universal and equal suffrage. On July 25, citing widespread protests and political paralysis, President Saied invoked Article 80 of the constitution and took “exceptional measures” to dismiss Prime Minister Hichem Mechichi, freeze parliament’s activities for 30 days, and lift immunity for members of parliament. On August 23, President Saied announced an indefinite extension of the “exceptional measures” period, and on September 22, issued a decree granting himself certain executive, legislative, and judicial powers, and the authority to rule by decree, subject to rights guaranteed in the constitution. Civil society organizations criticized the president for granting himself unprecedented decision-making powers, without institutional checks and balances and for an unlimited period. On September 29, President Saied named Najla Bouden Romdhane as prime minister, and on October 11 she formed a government composed of 24 ministers and one secretary of state. On December 13, President Saied announced a timeline including public consultations and the establishment of a committee to revise the constitution and electoral laws, leading to a national referendum in July 2022. Parliamentary elections would follow in December 2022. According to local polling, the measures were broadly popular, although some civil society groups and political parties expressed concern regarding the lack of transparency and inclusivity of Saied’s actions. On March 30, the President issued a decree formally dissolving Parliament.

After adoption, all laws, decrees, and regulations are published on the website of the Official Gazette and enforced by the Government at the national level. The Government has historically taken few proactive steps to raise public awareness of the public consultation period for new draft laws and decrees. Civil society, NGOs, and political parties have pushed for increased transparency and inclusiveness in rulemaking. Many draft bills, such as the budget law, were reviewed before submission for a final vote under pressure from civil society. Business associations, chambers of commerce, unions, and political parties reviewed the 2016 Investment Law prior to final adoption.

In January 2019, the Tunisian Parliament passed the Organic Budget Law, which is a foundational law defining the parameters for the government’s annual budgeting process. The law aims to bring the budget process in line with principles expressed in the 2014 constitution by enlarging Parliament’s role in the budgetary process and strengthening the financial autonomy of the legislative and judiciary branches.  The law requires the government to organize its budget by policy objective, detail budget projections over a three-year timeframe, and revise its accounting system to ensure greater transparency.

Due to the freezing of the Tunisian Parliament as of July 25, 2021, Tunisia’s 2022 budget law was passed directly through Presidential decree law #2021-21 on December 28, 2021.

In May 2020, the government adopted decree #2020-316, establishing simplified conditions and procedures for granting project concessions and their monitoring based on a new public-private partnership (PPP) approach. The decree aims to further promote investment by young entrepreneurs (under the age of 35) and projects of all sizes, including those less than 15 million dinars ($5.5 million).

Not all accounting, legal, and regulatory procedures are in line with international standards. Publicly listed companies adhere to national accounting norms.

Prior to July 25, the Parliament had oversight authority over the GOT but could not ensure that all administrative processes are followed. Following the exceptional measures implemented by President Saied on July 25 suspending Parliament, the Council of Ministers led by President Saied and at times, Prime Minister Bouden, have deliberated and approved decree laws. On March 30, President Saied issued a decree formally dissolving Parliament. Parliament will be established following legislative elections in December 2022.

The World Bank Global Indicators of Regulatory Governance  for Tunisia are available here: http://rulemaking.worldbank.org/en/data/explorecountries/tunisia .

Tunisia is a member of the Open Government Partnership, a multilateral initiative that aims to secure concrete commitments from governments to promote transparency, empower citizens, fight corruption, and harness new technologies to strengthen governance: http://www.opengovpartnership.org/country/tunisia .

Prior to July 25, most of Tunisia’s public finances and debt obligations were debated and voted on by the Parliament. Since July 25, the Council of Ministers has discussed and approved Tunisia’s finances.

In general, Tunisia promotes companies’ environmental, social, and governance (ESG) disclosure to facilitate transparency but does not require it.

As part of its negotiations toward a comprehensive free-trade agreement with the EU, the GOT is considering incorporating a number of EU standards in its domestic regulations.

Tunisia became a member of the WTO in 1995 and is required to notify the WTO regarding draft technical regulations on Technical Barriers to Trade (TBT). However, in October 2018 the Ministry of Commerce released a circular that temporarily restricted the import of certain goods without going through the WTO notification process, which negatively impacted some business operations without forewarning.

In February 2017, Tunisia domestically ratified the WTO Trade Facilitation Agreement (TFA) and presented its instrument of ratification to the WTO in July 2020 for all categories A, B, and C. However, Tunisia has yet to communicate indicative and definitive dates under category B and is overdue in submitting notifications related to technical assistance requirements and support and information on assistance and capacity building (Article 22.3). Tunisia has also yet to submit two transparency notifications related to: (1) import, export, and transit procedures, contact information of enquiry points, (Article 1.4) and (2) contact points for customs cooperation (Article 12.2.2).

The Tunisian legal system is secular and based on the French Napoleonic code and meets EU standards. While the 2014 Tunisian constitution guarantees the independence of the judiciary, constitutionally mandated reforms of courts and broader judiciary reforms are still ongoing. Citing corruption in the judiciary, on February 12, Saied dissolved the Supreme Judicial Council, the highest judicial authority responsible for judicial assignments and enforcing ethical standards and discipline and replaced it with a temporary council. Tunisia has a written commercial law but does not have specialized commercial courts. Regulations or enforcement actions can be appealed at the Court of Appeals.

The 2016 Investment Law directs tax incentives towards regional development promotion, technology and high value-added products, research and development (R&D), innovation, small and medium-sized enterprises (SMEs), and the education, transport, health, culture, and environmental protection sectors. Foreign investors can apply for government incentives online through the Tunisian Investment Authority (TIA) website: https://www.tia.gov.tn/en .

The primary one-stop-shop webpage for investors looking for relevant laws and regulations is hosted at the Investment and Innovation Promotion Agency website, http://www.tunisieindustrie.nat.tn/en/doc.asp?mcat=12&mrub=209 . The 2016 Investment Law (article 15) calls for the creation of an Investor’s Unique Point of Contact within the ministry in charge of investment to assist new and existing investors to launch and expand their projects.

In addition, the Parliament adopted a number of economic reforms since 2015, including laws concerning renewable energy, competition, public-private partnerships (PPP), bankruptcy, and the independence of the Central Bank of Tunisia, as well as the Start-Up Act to promote the creation of new businesses and entrepreneurship.

The 2015 Competition Law established a government appointed Competition Council to reduce government intervention in the economy and promote competition based on supply and demand.

This law voided previous agreements that fixed prices, limited free competition, or restricted the entry of new companies as well as those that controlled production, distribution, investment, technical progress, or supply centers. While the law ensures free pricing of most products and services, there are a few protected items, such as bread, sugar, milk, water, and electricity, for which the GOT can still intervene in pricing. Moreover, in exceptional cases of large increases or collapses in prices, such as sharp price increases of surgical masks, sanitizer, and disinfection products during the COVID-19 pandemic, the Ministry of Trade and Export Development reserved the right to regulate prices for a period of up to six months. The ministry can also intervene in some other sectors to ensure free and fair competition. However, the Competition Council can make exceptions to its anti-trust policies if it deems it necessary for overall technical or economic progress.

The Competition Council also has the power to investigate competition-inhibiting cases and make recommendations to the Ministry of Trade and Export Development upon the Ministry’s request. Competition Council rulings can range from ordering temporary closures of a business to penalties and fines which could amount to a maximum of 10 percent of business revenue.

There are no outstanding expropriation cases involving U.S. interests. The 2016 Investment Law (article 8) states that investors’ property may not be expropriated except in cases of public interest. Expropriation, if carried out, must comply with legal procedures, be executed without discrimination on the basis of nationality, and provide fair and equitable compensation.

U.S. investments in Tunisia are protected by international law as stipulated in the U.S.-Tunisia Bilateral Investment Treaty (BIT). According to Article III of the BIT, the GOT reserves the right to expropriate or nationalize investments for the public good, in a non-discriminatory manner, and upon advance compensation of the full value of the expropriated investment. The treaty grants the right to prompt review by the relevant Tunisian authorities of conformity with the principles of international law. When compensation is granted to Tunisian or foreign companies whose investments suffer losses owing to events such as war, armed conflict, revolution, state of national emergency, civil disturbance, etc., U.S. companies are accorded “the most favorable treatment in regard to any measures adopted in relation to such losses.”

Parliament adopted in April 2016 a new bankruptcy law that replaced Chapter IV of the Commerce Law and the Recovery of Companies in Economic Difficulties Law. These two laws had duplicative and cumbersome processes for business rescue and exit and gave creditors a marginal role. The 2016 law increases incentives for failed companies to undergo liquidation by limiting state collection privileges. The improved bankruptcy procedures are intended to decrease the number of non-performing loans and facilitate access of new firms to bank lending.

Preferential status is usually linked to the percentage of foreign corporate ownership, percentage of production for the export market, and investment location. The 2016 Investment Law provides investors with a broad range of incentives linked to increased added value, performance and competitiveness, use of new technologies, regional development, environmental protection, and high employability.

To incentivize the employment of new university graduates, the GOT assumes the employer’s portion of social security costs (16 percent of salary) for the first seven years of the investment, with an extension of up to 10 years in the interior regions. Investments with high job-creation potential may benefit from the purchase of state-owned land at the price of one Tunisian dinar ($0.35) per square meter. Investors who purchase companies in financial distress may also benefit from tax breaks and social security assistance. These advantages are determined on a case-by-case basis.

Further benefits are available for offshore investments, such as tax exemptions on profits and reinvested revenues, duty-free import of capital goods with no local equivalents, and full tax and duty exemption on raw materials, semi-finished goods, and services necessary for operation.

On March 9, 2017, the GOT adopted decree no. 2017-389 on financial incentives to investment in priority sectors, economic performance areas, and regional development. Investors have to declare their projects through the regional APII offices to receive incentives. Investors can also request incentives online through the Tunisian Investment Authority (TIA) website: https://www.tia.gov.tn/en .

Tunisia has free-trade zones, officially known as “Parcs d’Activités Economiques,” in Bizerte and Zarzis. While the land is state-owned, a private company manages the free-trade zones. They enjoy adequate public utilities and fiber-optic connectivity. Companies established in the free-trade zones are exempt from taxes and customs duties and benefit from unrestricted foreign exchange transactions, as well as limited duty-free entry into Tunisia of inputs for transformation and re-export. Factories operate as bonded warehouses and have their own assigned customs personnel.

For example, companies in Bizerte’s free-trade zone may rent space for three Euros ($3.28) per square meter annually – a level unchanged since 1996 – plus a low service fee. Long-term renewable leases, up to 25 years, are subject to a negotiable 3 percent escalation clause. Expatriate personnel are allowed duty-free entry of personal vehicles. During the first year of operations, companies within the zone must export 100 percent of their production. Each following year, the company may sell domestically up to 30 percent of the previous year’s total volume of production, subject to local customs duties and taxes. Lease termination has not been a problem, and all companies that desired to depart the zone reportedly did so successfully.

Foreign resident companies face restrictions related to the employment and compensation of expatriate employees. The 2016 Investment Law limits the percentage of expatriate employees per company to 30 percent of the total work force (excluding oil and gas companies) for the first three years and to 10 percent starting in the fourth year. There are somewhat lengthy renewal procedures for annual work and residence permits, and the GOT has announced its intention to ease them in the future. Although rarely enforced, legislation limits the validity of expatriate work permits to two years.

Central Bank regulations impose administrative burdens on companies seeking to pay for temporary expatriate technical assistance from local revenue. For example, before it receives authorization to transfer payment from its operations in Tunisia, a foreign resident company that utilizes a foreign accountant must document that the service is necessary, fairly valued, and unavailable in Tunisia. This regulation hinders a foreign resident company’s ability to pay for services performed abroad.

The host government does not follow “forced localization,” but encourages the use of domestic content.

There are no requirements for foreign information technology (IT) providers to turn over source code that is protected by the intellectual property law; however, they are required to inform the Ministry of Communication Technologies and Digital Economy about encrypted equipment.

Public companies and institutions are prohibited by the Ministry of Communication Technologies from freely transmitting and storing personal data outside of the country.

Private and public institutions must comply with the recommendations of the National Authority for Personal Data Protection (INPDP) when handling personal data, even if it is business-related. The National Institute of Office Automation and Micro-computing (INBMI) enforces the rules on local data storage.

Until recently, performance requirements were generally limited to investment in the petroleum sector. Now, such requirements are in force in sectors such as telecommunications and for private sector infrastructure projects on a case-by-case basis. These requirements tend to be specific to the concession or operating agreement (e.g., drilling a certain number of wells, or producing a certain amount of electricity).

Secured interests in property are enforced in Tunisia. Mortgages and liens are in common use, and the recording system is reliable.

Foreign and/or non-resident investors are allowed to lease any type of land but can only acquire non-agricultural land.

A large portion of privately held land, especially agriculture land, has no clear title, and the government is investing a great deal of effort to encourage people to clear and register their properties. For the past 10 years, it has been estimated that privately held land accounts for approximately 45 percent of all land.

Properties legally purchased must be duly registered to ensure they remain the property of their actual owners, even if they have been unoccupied for a long time.

Tunisia is a member of the World Intellectual Property Organization (WIPO) and signatory to the United Nations Agreement on the Protection of Patents and Trademarks. The agency responsible for patents and trademarks is the National Institute for Standardization and Industrial Property (INNORPI — Institut National de la Normalisation et de la Propriété Industrielle). Tunisia also is party to the Madrid Protocol for the International Registration of Marks. Foreign patents and trademarks should be registered with INNORPI.

Tunisia’s patent and trademark laws are designed to protect owners duly registered in Tunisia. In the area of patents, foreign businesses are guaranteed treatment equal to that offered to Tunisian nationals. Tunisia updated its legislation to meet the requirements of the WTO agreement on Trade-Related Aspects of Intellectual Property (TRIPS).

Copyright protection is the responsibility of the Tunisian Copyright Protection Organization (OTDAV — Office Tunisien des Droits d´Auteurs et des Droits Voisins), which also represents foreign copyright organizations.

The 2009 Intellectual Property Law greatly expanded the scope of protections.  The minimum fine for counterfeiting is 10,000 Tunisian dinars (approximately USD 3,700), and copyright protection is valid for the holder’s lifetime. Customs agents have the authority to seize suspected counterfeit goods immediately.  Tunisia’s 2014 constitution enshrined intellectual property protection in article 41.

If customs officials suspect a copyright violation, they are permitted to inspect and seize suspected goods. For products utilizing foreign trademarks registered at INNORPI, the Customs Code empowers customs agents to enforce intellectual property rights (IPR) throughout the country. Tunisian copyright law applies to literary works, art, scientific works, new technologies, and digital works. Its application and enforcement, however, have not always been consistent with foreign commercial expectations. Print, audio, and video media are particularly susceptible to copyright infringement in Tunisia. Smuggling of illegal items takes place through Tunisia’s porous borders. The prevalence of, and trade in, counterfeit and pirated goods remains a concern and illegal internet protocol television (IPTV) streaming services is an emerging trend.

In 2015, the GOT issued a decree defining registration and arbitration procedures for trade and service marks and establishing a national trademark registry. The new decree contained provisions governing the registration of trademarks under the Madrid Protocol and included improvements such as the extension of the deadline for opposition to the registration of trademarks, as well as the electronic filing of applications for trademarks registration.

In March 2020, the Tunisian Parliament approved the government’s request for Tunisia to host the headquarters of the Pan-African Intellectual Property Body (PAIPO). Tunisia is waiting for at least 14 African countries to ratify the formation of PAIPO in order for it to enter into force.

The registration of pharmaceutical drugs in Tunisia requires that the product is both registered and marketed in the country of origin. In 2005, Tunisia removed its restriction on pharmaceutical imports where there are similar generic products manufactured locally.

Tunisia has yet to ratify the 2006 Singapore Treaty on the law of trademarks which aims to further harmonize the registration procedures for trademarks.

Peter Mehravari
Intellectual Property Attaché for the Middle East and North Africa
U.S. Embassy Abu Dhabi
U.S. Department of Commerce Global Markets
U.S. Patent and Trademark Office
Tel: +965 2259 1455
peter.mehravari@trade.gov 

AmCham Tunisia:  http://www.amchamtunisia.org.tn/ 

Attorneys list: https://tn.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/

For additional information about national laws and points of contact at local intellectual property offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Tunisia’s financial system is dominated by its banking sector, with banks accounting for roughly 85 percent of financing in Tunisia. The GOT’s overreliance on bank financing impedes economic growth and stronger job creation. Equity capitalization is relatively small; Tunisia’s stock market provided 9.1 percent of corporate financing in 2019 according to the Financial Market Council annual report. Other mechanisms, such as bonds and microfinance, contribute marginally to the overall economy.

Created in 1969, the Bourse de Tunis (Tunis stock exchange) listed 85 companies as of December 2021. Market capitalization increased by 0.74 percent to $8.3 billion (19 percent of GDP), versus $7.9 billion in 2020 (19.7 percent of GDP). Financial institutions still dominate market capitalization with a share of 42.3 percent. Foreign transactions generated a net outflow of $99.2 million in 2021, and their share of market capitalization declined to 23.1 percent in 2021 versus 25.3 percent in 2020; only a small share of foreign capitalization is floating. During the last five years, the exchange’s regulatory and accounting systems have been brought more in line with international standards, including compliance and investor protections. The exchange is supervised and regulated by the state-run Capital Market Board. Most major global accounting firms are represented in Tunisia. Firms listed on the stock exchange must publish semiannual corporate reports audited by a certified public accountant. Accompanying accounting requirements exceed what many Tunisian firms can, or are willing to, undertake. GOT tax incentives attempt to encourage companies to list on the stock exchange. Newly listed companies that offer a 30 percent capital share to the public receive a five-year tax reduction on profits. In addition, individual investors receive tax deductions for equity investment in the market. Capital gains are tax-free when held by the investor for two years. Listing on the stock exchange helps ensure transparent financial statements, whereby the public sharing of certified financial statements has generally discouraged the introduction of more companies on the stock exchange.

Foreign investors are permitted to purchase shares in resident (onshore) firms only through authorized Tunisian brokers or through established mutual funds. To trade, non-resident (offshore) brokers require a Tunisian intermediary and may only service non-Tunisian customers. Tunisian brokerage firms may have foreign participation, as long as that participation is less than 50 percent. Foreign investment of up to 50 percent of a listed firm’s capital does not require authorization.

According to the Central Bank of Tunisia (CBT) annual report on banking supervision published in January 2022, Tunisia hosts 30 banks, of which 23 are onshore and seven are offshore. Onshore banks include three Islamic banks, two microcredit and SME financing banks, and 18 commercial universal banks.

Domestic credit to the private sector provided by banks stood at 64 percent of GDP in 2019. According to the World Bank, this level is higher than the MENA region average of 56.7 percent. Eighty-seven percent of banks are located in the coastal regions, with about 41 percent in the greater Tunis area alone. The number of bank accounts has increased by 5 percent over the last five years to reach 10.3 million accounts at the end of 2020, of which 6 million are savings accounts.

Tunisia’s banking system activity is mainly within the 23 onshore banks, which accounted for 92 percent of total assets, 94 percent of loans, and 96 percent of deposits in 2020. The onshore banks offer identical services targeting Tunisia’s larger corporations. Meanwhile, SMEs and individuals often have difficulty accessing bank capital due to high collateral requirements.

The CBT report noted that in 2020, overall lending totaled $32.8 billion, an increase of 5 percent compared to a 3.1 percent increase in 2019. Loans to professionals were driven mainly by the increase in commitments of public enterprises, which rose by $586 million in 2020 (26.8 percent increase). Loans to the private sector increased by only 2.4 percent in 2020, the same rate as the previous year. These credits benefited mostly industry, trade, real estate development and tourism sectors. Tourism — alone made up nearly 80 percent of the lending.

Foreign banks are permitted to open branches and establish operations in Tunisia under the offshore regime and are subject to the supervision of the Central Bank.

Government regulations control lending rates. This prevents banks from pricing their loan portfolios appropriately and incentivizes bankers to restrict the provision of credit. Competition among Tunisia’s many banks has the effect of lowering observed interest rates; however, banks often place conditions on loans that impose far higher costs on borrowers than interest rates alone. These non-interest costs may include collateral requirements that come in the form of liens on real estate. Often, collateral must equal or exceed the value of the loan principal. Collateral requirements are high because banks face regulatory difficulties in collecting collateral, thereby adding to costs. According to the CBT banking supervision report, nonperforming loans (NPLs) were at 15.6 percent of all bank loans in 2020, mostly in the agriculture (28.4 percent) and tourism (41.3 percent) sectors.

Beyond the banks and stock exchange, few effective financing mechanisms are available in the Tunisian economy. A true bond market does not exist, and government debt sold to financial institutions is not re-traded on a formal, transparent secondary market. Private equity remains a niche element in the Tunisian financial system. Firms experience challenges raising sufficient capital, sourcing their transactions, and selling their stakes in successful investments once they mature. The microfinance market remains underexploited, but profitable for microfinance institutions with non-governmental organization Enda Inter-Arabe the dominant lender in the field.

The GOT recognizes two categories of financial service activity: banking (e.g., deposits, loans, payments and exchange operations, and acquisition of operating capital) and investment services (reception, transmission, order execution, and portfolio management). Non-resident financial service providers must present initial minimum capital (fully paid up at subscription) of 25 million Tunisian dinars ($8.9 million) for a bank, 10 million dinars ($3.5 million) for a non-bank financial institution, 7.5 million dinars ($2.6 million) for an investment company, and 250,000 dinars ($89,400) for a portfolio management company.

By decree no. 85-2011, the GOT established a sovereign wealth fund, “Caisse des Depots et des Consignations” (CDC), to boost private sector investment and promote small and medium enterprise (SME) development. It is a state-owned investment entity responsible for independently managing a portion of the state’s financial assets. The CDC was set up with support from the French CDC and the Moroccan CDG (Caisse des Depots et de Gestion) and became operational in early 2012. The original impetus for the creation of the CDC was to manage assets confiscated from the former ruling family as independently as possible to serve the public interest. More information is available about the CDC at www.cdc.tn . As of June 2021, CDC had 9.7 billion dinars ($3.5 billion) in assets and 466 million dinars ($167 million) in capital.

All CDC investments are made locally, with the objective of boosting investments in the interior regions and promoting SME development.

The CDC is governed by a supervisory committee composed of representatives from different ministries and chaired by the Minister of Finance.

There are 110 state-owned enterprises (SOEs) and public institutions in Tunisia per the Ministry of Finance’s most recent (May 2020) report on public enterprises. SOEs are still prominent throughout the economy but are heavily indebted. Per the Tunisian Ministry of Finance report on transfers and guarantees to SOEs, total transfers reached $2.6 billion in 2021 with $392 million dedicated to payroll. Annual budgetary transfers amounted to 6.3 percent of GDP in 2021, with significant amounts directed to three SOEs in the form of subsidies for cereals, fuel, and electricity.

Many SOEs compete with the private sector, in industries such as telecommunications, banking, and insurance, while others hold monopolies in sectors considered sensitive by the government, such as railroad, transportation, water and electricity distribution, and port logistics. Importation of basic food staples and strategic items such as cereals, rice, sugar, and edible oil also remains under SOE control.

The GOT appoints senior management officials to SOEs, who report directly to the ministries responsible for the companies’ sector of operation. SOE boards of directors include representatives from various ministries and personnel from the company itself. Similar to private companies, the law requires SOEs to publish independently audited annual reports, regardless of whether corporate capital is publicly traded on the stock market.

The GOT encourages SOEs to adhere to OECD Guidelines on Corporate Governance, but adherence is not enforced. Investment banks and credit agencies tend to associate SOEs with the government and consider them as having the same risk profile for lending purposes.

The GOT allows foreign participation in its privatization program. A significant share of Tunisia’s FDI in recent years has come from the privatization of state-owned or state-controlled enterprises. Privatization has occurred in many sectors, such as telecommunications, banking, insurance, manufacturing, and fuel distribution, among others.

In 2011, the GOT confiscated the assets of the former regime. The list of assets involved every major economic sector. According to the Commission to Investigate Corruption and Malfeasance, a court order is required to determine the ultimate handling of frozen assets.

Because court actions frequently take years – and with the government facing immediate budgetary needs – the GOT allowed privatization bids for shares in Ooredoo (a foreign telecommunications company of which 30 percent of shares were confiscated from the previous regime), Ennakl, Alpha Ford, and City Cars (car distribution), Goulette Shipping Cruise (cruise terminal management), Airport VIP Service (business lounge management), and Banque de Tunisie and Zitouna Bank (banking). The government is expected to sell some of its stakes in state-owned banks; however, no clear plan has been adopted or communicated so far due to fierce opposition by labor unions.

Tunisia adopted law no. 35 in June 2018 to encourage Corporate Social Responsibility (CSR). The law requires companies to allocate a portion of their budgets to finance CSR projects such as those in sustainable development, green economy, and youth employment. According to the law, an organization in charge of monitoring CSR projects will be created to ensure that the projects comply with the principles of good governance and sustainable development. Tunisia is an adherent to the OECD Guidelines for Multinational Enterprises.

Since 1989, the public sector has been subject to a government procurement law that requires labor, environmental, and other impact studies for large procurement projects. All public institutions are subject to audits by the Court of Auditors (Cour des Comptes).

The Tunisian Central Bank issued a circular in 2011 setting guidelines for sound and prudent business management and guaranteeing and safeguarding the interests of shareholders, creditors, depositors and staff. The circular also established policies on recruitment, appointment, and remuneration, as well as dissemination of information to shareholders, depositors, market counterparts, regulators, and the general public.

In January 2019, the High Committee for Administrative and Financial Control (HCCAF) under the Presidency of the Government, published a guide on best practices for improved governance of public enterprises and establishments.

In May 2019, the Parliament adopted law no. 2019-47, which introduced in Chapter 5 a set of articles designed to improve corporate governance and increase transparency. For example, the new legislation required that all companies listed on Tunisia’s stock exchange have on their board of directors at least two independent members, and separate individuals serving as the chairman of the board and the chief executive officer.

On October 14, 2020, the High Instance for Public Procurement (HAICOP) under the Presidency of the Government, published a report on risk management strategy in public procurement.

In March 2022, President Saied issued decrees regarding the creation of “community companies” and the penal reconciliation program that will help fund them. The intention is for

community companies to be established by private communities in marginalized areas of the country to help with infrastructure development and job creation. Community companies will receive funding from financial penalties paid by businesspeople found guilty of economic and financial crimes, and they will receive amnesty in return.

The national point of contact for OECD for Multinational Enterprises guidelines is:

Ministry of Economy
Avenue Mohamed V
1002 Tunis
Tel: +216 7184 9596
Fax: +216 7179 9069

Tunisia has not yet joined the Extractive Industries Transparency Initiative (EITI). However, in June 2012, former Prime Minister Hammadi Jebali announced the GOT’s decision to implement the EITI. In June 2016, Tunisia officially began publicizing all documents pertaining to oil agreements signed in Tunisia, including permits and operating benefits governed by specific agreements and annexes dating to 1960. Tunisia participated in the eighth world conference of the EITI in Paris, France, in 2019.

Per Tunisia’s 2014 constitution, projects related to commercial development of oil, natural gas, or minerals are subject to Parliamentary approval. However, following the July 25, 2021 events resulting in the freeze of the Parliament, these decisions are currently made by the Ministerial Council.

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions 

Department of Labor

• Findings on the Worst Forms of Child Labor Report ;
• List of Goods Produced by Child Labor or Forced Labor ;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World  and;
• Comply Chain .

Tunisia updated its Nationally Determined Contribution (NDC) to the Paris Climate Accord in September 2021 with a commitment to reduce its carbon intensity by 45 percent by 2030, compared to 2010. Tunisia’s first NDC submitted in 2015 called for a 41 percent carbon intensity reduction between 2010 and 2030. Tunisia’s new plan requires the mobilization of approximately $19.3 billion ($14.3 billion for mitigation, $4.3 billion for adaptation, and $0.7 billion for capacity building) from both domestic resources and international support.

The energy sector accounts for 73 percent of the country’s greenhouse gas emissions, requiring the largest share of investment. The updated NDC also covers other sectors such as industrial processes, agriculture, forestry, other land use (AFOLU), and waste.

Tunisia’s 2022 Finance Law included several articles to support business financing for the green economy and sustainable development, establish tax relief for electric cars, reduce customs duties on the import of solar panels, and increase the tax rate for the protection of the environment.

• Tunisia ratified the United Nations Framework Convention on Climate Change (UNFCCC) in 1993, the Kyoto Protocol in 2002, and Paris Agreement in 2017.
• Tunisia’s Initial Communication (2001) under the UNFCCC
  ( https://unfccc.int/sites/default/files/resource/summary.pdf )

• Tunisia’s second national communication as part of the UNFCCC (2013)
  (http://unfccc.int/resource/docs/natc/tunnc2.pdf )

• Tunisia’s 2015 NDCs
  (https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Tunisia%20First/INDC-Tunisia-English%20Version.pdf )

• Tunisia’s third national communication as part of the UNFCCC (2017)
  (https://unfccc.int/sites/default/files/resource/Synthese%20Ang%20Finalise%20Tunisia.pdf )

• Tunisia’s 2018 Climate Risk Profile (USAID)(https://www.climatelinks.org/resources/climate-risk-profile-tunisia )

• Tunisia’s 2021 NDCs
  (https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Tunisia%20First/INDC-Tunisia-English%20Version.pdf )

Most U.S. firms involved in the Tunisian market do not identify corruption as a primary obstacle to foreign direct investment. However, some have reported that routine procedures for doing business (customs, transportation, and some bureaucratic paperwork) are sometimes tainted by corrupt practices. Transparency International’s Corruption Perceptions Index 2021 gave Tunisia a score of 44 out of 100 and a rank of 70 among 180 countries marking the same score and a slight ranking improvement from 69 in 2020. Regionally, Tunisia is ranked 7 for transparency among MENA countries and first in North Africa, ahead of Morocco, Algeria, Egypt, and Libya. Transparency International expressed concern that Tunisia’s score has not improved in recent years despite advances in anti-corruption legislation, including laws to protect whistleblowers, improve access to information, and encourage asset declarations by public officials or individuals with public trust roles.

Polls indicated that most citizens viewed widespread corruption as a key hindrance to effective government. President Saied has consistently stated that ending corruption and prosecuting corrupt businesspeople and others is one of his top priorities. Since July 25, 2021, some members of parliament were charged and detained based on corruption allegations. Recent government efforts to combat corruption include: assurances that price controls on staple and basic food products are respected; combatting price gouging; hoarding, and monopolistic practices; enhancement of commercial competition in the domestic market; arrests of corrupt businessmen and officials; and harmonization of Tunisian corruption laws with those of the European Union.

The constitution requires those holding high government offices to declare assets “as provided by law.” In 2018, Parliament adopted the Assets Declaration Law, identifying 35 categories of public officials required to declare their assets upon being elected or appointed and upon leaving office. By law, the National Authority for the Combat Against Corruption (INLUCC) is then responsible for publishing the lists of assets of these individuals on its website. In addition, the law requires other individuals in specified professions that have a public role to declare their assets to the INLUCC, although this information is not made public. This provision applies to journalists, media figures, civil society leaders, political party leaders, and union officials. The law also enumerates a “gift” policy, defines measures to avoid conflicts of interest, and stipulates the sanctions that apply in cases of illicit enrichment. In 2019, Tunisia’s newly elected government officials declared their assets, including the 217 Members of Parliament. The declaration of assets was also made in September 2020 and again in October 2021, when new governments took office.

On August 20 security personnel ordered the closure of INLUCC’s headquarters. Beside the declaration of assets by the new cabinet on October 15, 2021, INLUCC’s offices have remained closed and its work paused.  INLUCC’s regional offices have been closed since January 1, 2022. The government has not given a reason for the ongoing closure and has not announced plans for the creation of an alternative anticorruption institution.

In February 2017, Parliament passed law no. 2017-10 on corruption reporting and whistleblower protection. The legislation was a significant step in the fight against corruption, as it establishes the mechanisms, conditions, and procedures for denouncing corruption. Article 17 of the law provides protection for whistleblowers, and any act of reprisal against them is considered a punishable crime. For public servants, the law also guarantees the protection of whistleblowers against possible retaliation from their superiors. In September 2017, the GOT established the Independent Access to Information Commission.  This authority was prescribed in the 2016 Access to Information Law to proactively encourage government agencies to comply with the new law and to adjudicate complaints against the government for failing to comply with the law. Following the passage of the access to information and whistleblower protection laws, the government initiated an anti-corruption campaign led by then prime minister Youssef Chahed.  A series of arrests and investigations targeted well-known businesspersons, politicians, journalists, police officers, and customs officials.  Preliminary charges included embezzlement, fraud, and taking bribes.

Tunisia’s penal code devotes 11 articles to defining and classifying corruption and assigns corresponding penalties (including fines and imprisonment). Several other regulations also address broader concepts of corruption. Detailed information on the application of these laws and their effectiveness in combating corruption is not publicly available, and there are no GOT statistics specific to corruption. The Independent Commission to Investigate Corruption handled corruption complaints from 1987 to 2011. The commission referred 5 percent of cases to the Ministry of Justice. In 2012, the commission was replaced by the National Authority to Combat Corruption (INLUCC), which has the authority to forward corruption cases to the Ministry of Justice, give opinions on legislative and regulatory anti-corruption efforts, propose policies and collect data on corruption, and facilitate contact between anti-corruption efforts in the government and civil society. Tunisia’s constitution stipulates that INLUCC is a temporary institution, and that Parliament must appoint members to a permanent Institute for Good Governance and Anticorruption.  Parliament did not make substantive progress toward establishing this permanent institution prior to July 25, 2021. Prime Minister Fakhfakh resigned on July 15, 2020, following allegations of a conflict of interest involving his partial ownership of companies that received government contracts.  In apparent retaliation for his ouster, Fakhfakh dismissed then INLUCC president Chawki Tabib, replacing him with Imed Boukhris, a former judge.

During a March 16, 2019 press conference, INLUCC president Chawki Tabib said that it takes 7-10 years on average for corruption cases to be processed in the judicial system. In 2018, the Tunisian Financial Analysis Committee, which operates under the auspices of the Central Bank as a financial intelligence unit, announced that it froze approximately 200 million dinars ($70 million) linked to suspected money-laundering transactions. The committee received approximately 600 reports of suspicious transactions related to corruption and illicit financial flows during the year.

Since 1989, a comprehensive law designed to regulate each phase of public procurement has governed the public sector. The GOT also established the Higher Commission on Public Procurement (HAICOP) to supervise the tender and award process for major government contracts. The government publicly supports a policy of transparency. Public tenders require bidders to provide a sworn statement that they have not and will not, either by themselves or through a third party, make any promises or give gifts with a view to influencing the outcome of the tender and realization of the project. Starting September 2018, the government imposed by decree that all public procurement operations be conducted electronically via a bidding platform called Tunisia Online E-Procurement System (TUNEPS). Despite the law, competition on government tenders appears susceptible to corrupt behavior. Pursuant to the Foreign Corrupt Practices Act (FCPA), the U.S. Government requires that American companies requesting U.S. Government advocacy certify that they do not participate in corrupt practices.

Contacts at agencies responsible for combating corruption:

“Watchdog” organization
Achraf Aouadi
President
I WATCH Tunisia
14 Rue d’Irak 1002 Lafayette, Tunisia
+ 216 71 844 226
contact@iwatch.tn 

President Kais Saied was elected in the aftermath of presidential and parliamentary elections held in September and October 2019, the country’s first elections since its post-revolution constitution was ratified in 2014, which were widely regarded as well-executed and credible.  The transition of power was smooth and without incident, following a clear procedure outlined by the 2014 constitution.

In the 10 years since the revolution, Tunisia has made significant progress in the areas of civil society and rights-based reforms, but economic indicators continue to lag and have been a major driver of frequent protests.  Public opinion polls indicated that corruption, poor economic conditions, and persistently high unemployment fuel public discontent with the political class.

On July 25, citing widespread protests and political paralysis, President Saied took “exceptional measures” under Article 80 of the constitution to dismiss Prime Minister Hichem Mechichi, freeze parliament’s activities for 30 days, and lift the immunity of members of parliament. On August 23, Saied announced an indefinite extension of the “exceptional measures” period and on September 22, he issued a decree granting the president certain executive, legislative, and judiciary powers and authority to rule by decree, but allowed continued implementation of the preamble and chapters one and two, which guarantee rights and freedoms. Civil society organizations and multiple political parties raised concern that through these decrees President Saied granted himself unprecedented decision-making powers, without checks and balances and for an unlimited period. On September 29, Saied named Najla Bouden Romdhane as prime minister, and on October 11, she formed a government. On December 13, Saied announced a timeline for constitutional reforms including public consultations and the establishment of a committee to revise the constitution and electoral laws, leading to a national referendum in July 2022. Parliamentary elections would follow in December 2022. On March 30, President Saied issued a decree formally dissolving Parliament.

Terrorist groups continue to operate in the mountains of Western Tunisia and developments in Libya continue to affect the security situation along the Tunisian-Libyan border. Extremist groups, including ISIS affiliates, operate and recruit in the country’s interior, particularly in disadvantaged regions. Tunisia has been under a State of Emergency since November 24, 2015, following two major terrorist attacks that targeted tourism destinations. Under the state of emergency, security forces have more authority to maintain civil order, enabling the government to focus on combating terrorism. Despite COVID-19 and economic challenges that affect national resources, Tunisia continues to demonstrate consistent security force readiness to combat security threats. There have been no terrorist attacks targeting tourists or other western interests since June 2015. Extremist elements continue to target police and military forces in suspected “lone wolf” attacks, including in front of the U.S. Embassy on March 6, 2020, and more recently in November 2021 at the Ministry of Interior in downtown Tunis. Travelers are urged to visit www.travel.state.gov for the latest travel alerts and warnings regarding Tunisia.

According to National Institute of Statistics (INS) 2021 figures, Tunisia has a labor force of 3.4 million, 29 percent of which are women and 71 percent men. The number of unemployed in 2021 reached 746,400 people. The official 2021 unemployment rate was 18.4 percent (representing the unemployment rate for the third quarter of 2021). In November 2021, the INS published 2021unemployment rates per region, including 30 percent in the northwest, 25 percent in the southwest, 22.1 percent in the center-west, 23.4 percent in southeast, and 15.8 percent in Greater Tunis. Professionals, such as IT engineers, doctors, and professors, continue to seek employment abroad. Tunisian interlocuters maintain that around 70 percent of Tunisian young professionals seek employment in other countries after graduation. Additionally, an INS study estimated that 44.8 percent of the Tunisian workforce is employed in the parallel economy, including 11.8 percent in agriculture and fisheries.

Over the past two decades, the structure of the workforce remained relatively stable, and as of the last quarter of 2020, it stood at 13.3 percent in agriculture and fishing, 33.9 percent in industry, and 52.8 percent in commerce and services. Tunisia has developed its industrial sector and created low-skilled employment, although several manufacturers struggle to find qualified technical workers. Tunisian law provides workers with the right to organize, form and join unions, and bargain collectively. The law prohibits anti-union discrimination by employers and retribution against strikers. The government generally enforces applicable laws.

Currently, four national labor confederations operate in Tunisia. The oldest and largest is the General Union of Tunisian Workers (UGTT — Union Générale des Travailleurs Tunisiens). The others are the General Confederation of Tunisian Workers (CGTT — Confederation Générale des Travailleurs Tunisiens), the Tunisian Labor Union (UTT — Union Tunisienne du Travail), created in May 2011, and the Tunisian Labor Organization (OTT — Organisation Tunisienne du Travail), created in August 2013. However, based on the criteria established by the Ministry of Social Affairs in 2018, only UGTT can negotiate with the government on behalf of all Tunisian workers within the National Council of Social Dialogue, which has drawn criticism from other labor federations. UGTT claims about one third of the salaried labor force as members, although more are covered under UGTT-negotiated contracts. Wages and working conditions are established through triennial collective bargaining agreements between the UGTT, the national employers’ association (UTICA — Union Tunisienne de l’Industrie, du Commerce, et de l’Artisanat), and the GOT. These tripartite agreements set industry standards and generally apply to about 80 percent of the private sector labor force, regardless of whether individual companies are unionized. The regional tripartite commissions also arbitrate labor disputes. Employees have strong legal protections against dismissal. According to the labor code, employer bankruptcy is not a just cause for termination of an employee contract. Dismissal of an employee for economic considerations requires notification to the regional labor inspectorate for review and concurrence.

In January 2022, UGTT and UTICA signed an agreement to increase wages in the private sector in 2022, 2023 and 2024. This agreement includes an increase in the Guaranteed Minimum Wage (SMIG) and in allowances/benefits. This convention implements the agreement signed on September 19, 2018 between the two organizations

Embassy Tunis Commercial Section
Commercial Officer
U.S. Embassy Tunis, Les Berges du Lac, 1053, Tunisia
+216 71 107 000
TunisCommercial@state.gov