When we talk about expats moving abroad many people assume we are talking about those either moving to retire or those moving to work for their employer or new employer overseas. However, many people also look to move overseas and take their existing businesses with them or set up totally the new enterprises in other parts of the world. While the Internet has allowed many online businesses to move with ease there are a number of off-line businesses which can be translated to countries such as Cyprus but there are many issues to consider.
Of the various issues which need careful consideration the main ones would appear to be:-
Is there a demand for your business?
It is all very well having a successful business in a country such as the UK but will your business model and business idea translate into the Cypriot market?
The thread upon which this article is based covers the subject of “Setting up business in Cyprus” and is in relation to a hairdressing salon. Service businesses such as the hairdressing industry are obviously required in all areas of the world although it is vital to investigate your potential market as the UK sector may be very different to the Cyprus sector where trends and local customs may be very different.
The thread contains a number of very interesting points which include the fact that various areas of Cyprus, both North and South, have a high tourist population which often disappear in the winter. Then again, a number of areas of Cyprus also have a high expat population which could offer substantial work all of the year around. This shows how vital it is to ensure that you move to an area which is both acceptable in social terms and will allow you to set up your own business with sufficient clientele in the local vicinity.
Structure of your business
Many people make the mistake of assuming that all business regulations around the world are the same and the structure of your business can be replicated exactly in a foreign land. While this could be the case in a number of European countries it is very dangerous to assume that setting up a company in somewhere such as Cyprus has the same advantages and disadvantages as setting up a business in the UK.
You need to consider whether you will trade as a sole trader or a limited company and the various benefits and disadvantages each business structure will bring. It would appear from the thread that it would be sensible to begin life as a sole trader in order to simplify the taxation element of your business but you need to be aware of the liability situation which can vary substantially from that of a limited company.
One interesting element of the post suggests that registered businesses are taxed at 10% while unregistered businesses are taxed at 40%. The substantial difference in charges could well dictate the structure of your future business or how long you remain unregistered to “try the business out”.
Cost of setting up a business
The general consensus seems to be that the cost of setting up a business in Cyprus is around €1200 although this fee only allows you to set up the business with other ongoing costs such as auditors, insurance, employee costs and general day-to-day expenditure all on top. The process of arranging the paperwork to set up a new business would appear to be fairly straightforward with no obvious concerns expressed on the thread.
Running costs of your business
There is a suggestion that cost related to each employee can be as high as 19% of their salary with Cypriot law requiring you to contribute to social insurance, a central holiday fund, redundancy fund, human resources development fund and a social cohesion fund all of which need to be paid on a monthly basis to the authorities. The fact that the charges need to be paid on a monthly basis could impact upon your businesses cash flow, assuming that you have employees, which needs careful consideration.
The standard rate of VAT in Cyprus is 15% although there is no need to register a business for VAT unless turnover exceeds €15,600 per annum. It is also worth remembering that if you have suppliers from outside of Cyprus but within EU there will be no VAT charged on either side. This can be a blessing for the cash flow situation of your business.
A number of contributors to the thread have highlighted the fact that the cost of living in Cyprus has risen substantially since the conversion to the euro and you need to be aware that your business may not “take off” immediately, resulting in a possible need for additional funding as backup to get you by. Those who expect to “hit the ground running” when moving to a new country may well be disappointed and see their finances stretched to breaking point.
As with any move overseas, it is vital that you do your homework as soon as possible so that you are aware if it is viable to transfer your business overseas. The issue of regulation, laws and the cost of opening and running your business will probably dictate whether you decide to go ahead or not because there are substantial differences between countries, even those within the EU.
It is very dangerous to assume that all elements of your local market will be replicated in an overseas environment as many business entrepreneurs have found out to their horror. While there is significant information available on the Internet and via official sources, it may be worthwhile seeking professional advice which could help you avoid significant problems and potential costs in the future.
The pressure of moving overseas, finding a home, schools for the kids and other such issues are difficult enough on their own but having to set up a business and promote yourself in the local community can add significantly to the pressure, although this can be relieved if you “know your market” before you leave.