Cyprus's Digital Transformation: Strategic Investments and Future Opportunities

The digital-first economy, driven by technology and innovation, is now a reality. Global operations have moved from industrial application to digital and technology-driven innovation.

Cyprus is positioning itself as a key player in the international investment landscape.

The island nation has a distinctive advantage based on its strategic location, business-friendly policies, and government-backed initiatives to attract more FDI (foreign direct investment) opportunities – especially in the technology sector.

The current Information and Communication Technology (ICT) industry already contributes over €3.3 billion, or roughly 13% of 2022 GDP. It is projected to reach €5.6 billion once indirect investments are considered. Investors seeking opportunities in AI tech, blockchain environments, cybersecurity, and fintech are all looking at Cyprus because of the attractive infrastructure, tax incentives, and an evolving workforce.

Workforce Demand and Sector Growth

Cyprus is witnessing a surge in demand for ICT specialists. Around 5.4% of the workforce is ICT – exceeding the EU average. To meet this demand, several targeted initiatives have been launched, including the €30 million THALIA program and the INNOVATIVE and DISRUPT funding schemes. All are targeting SMEs and startup companies to fuel workforce support.

The government also emphasizes the growing need for cybersecurity improvements. This sector alone has over 300 job openings with salaries ranging from €55,000 to €75,000. With 43% of cyber-attacks targeting SMEs, the need for skilled, trained, and experienced ICT professionals is high.

National Digital Decade Strategic Roadmap (2023–2030)

A crucial point to the digital transformation happening in Cyprus is the National Digital Decade Strategic Roadmap. This outlines significant infrastructure projects aimed at cultivating strong digital skill development, public service enhancement, and business digitization from 2023 to 2030.

To reach these goals, the Cyprus government has allocated €24 million for relevant training to ensure workforce readiness by 2026 – helping 20,000 individuals from diverse backgrounds. Another €1.55 billion investment is directed toward technology sector expansion with a focus on gigabit internet connectivity and cloud computing support.

Tax Incentives and Investment Climate

One of the essential reasons so many FDIs are looking at Cyprus is due to the favorable tax environment. The IP Box regime reduces corporate tax to only 2.5% for qualifying intangible assets. That benefits companies specializing in software development and IP resource allocation.

On top of this incentive, Cyprus offers a 50% tax exemption on earnings exceeding €55,000, ensuring high-performing professionals benefit when working out of a locally based business.

To take advantage of the trend for digital nomads and entrepreneurs, the Digital Nomad Visa and Startup Visa programs provide a streamlined process to establish operations in Cyprus. Leading tech firms like Wargaming, Amdocs, and VivaWallet have all chosen to base their regional headquarters here for this reason.

According to the Cyprus Tech Ecosystem Map by Techisland and Dealroom, around 130 startups and scaleups that have raised capital since 2016 are now established in Cyprus.

In 2024, 23 startups with a local presence raised €67 million, which helps support the local economy. While this is a good start, more can be done. In terms of GDP, VC investments equaled 0.2%, slightly lower than the EU average of 0.3% and 3x lower than the U.S. The potential growth for VC investment is high and a must-have for local startup support.

More VC firms are paying attention to Cyprus due to the changes in taxes, policies, and incentives. Some of these firms include:

• GEM Capital – The Games Fund (game dev)
• Embria
• Kinisis Ventures
• Prytek
• Flint Capital
• Flyer One Ventures
• TA Ventures and IClub
• Altair
• TMT
• Ultra VC

Zubr Capital is also showing significant investment. They are headquartered in Cyprus and actively looking for new opportunities in technology and startups with a positive growth position for multinational expansion.

EU Funding and Infrastructure Expansion

Cyprus has secured €350 million in funding from the EU's Recovery and Resilience Facility (RRF) to support digital transformation efforts. These funds drive current digital transformation initiatives, ensuring the local ecosystem is well poised for long-term growth. Projects like AI, quantum computing, and blockchain all receive support, cementing Cyprus as a good location for technological advancement. The goal is to create a welcoming environment where businesses of all sizes, scopes, and ages can thrive.

Future Outlook: 2025–2030

The future of business growth in Cyprus is good! Current projections for 2025-2030 look to achieve 100% Very High-Capacity Networks (VHCN) coverage, ensuring nationwide digital access. Further investment in quantum computing infrastructure is supported by the European High-Performance Computing Joint Undertaking (EuroHPC JU) and Cyprus Quantum Communication Infrastructure (CYQCI). This will place Cyprus on the leading edge of innovative research and development.

Cyprus is also playing a crucial role in European Digital Infrastructure Consortia (EDICs). The government is working with AI, cybersecurity, and blockchain development partners, bringing strategic collaboration and joint initiatives to the area. One example is Greece through the AI Factories program.

Vision 2035: Long-Term Investment Strategy

All this data and growth highlight Cyprus as it moves towards “Vision 2035.” The comprehensive strategy is designed to position the country as one of the most attractive places for businesses, startups, and investment.

It certainly helps the island nation have a business-friendly environment, modern infrastructure, and a well-educated workforce. Investors will likely find high returns due to the evolving digital economy. On top of these, there is government funding, tax incentives, and a clear roadmap for digital expansion, and you can expect Cyprus to become a leading destination for tech-driven investment.

Right now is the best time for entrepreneurs, venture capitalists, and multinational corporations to seize such opportunities and tap into the island’s thriving digital sector.

Shaping the Future of Digital Investments

The more Cyprus embraces digital transformation and cultivates a forward-thinking investment ecosystem, the more VCs and funding programs will call this geographic region a strong return possibility. Through the synergy of government initiatives, private sector innovation, and international partnerships, Cyprus's economy is set to continue attracting global investors well into the next decade.

Cyprus is already positioned as a thriving business ecosystem, especially in the IT sector. Companies like Easybrain in Gamedev, Zing Coach in B2C applications, and The Soul Publishing in digital content production and creator services run well-established tech verticals. Sprinkle in Fintech support from Petr Valov, XM, or eToro trading platforms, and it is clear that the country’s welcoming environment is poised for growth. Even the IT infrastructure giant Servers.com has operations in Cyprus.

Beyond established brands, the technology community and events help ensure a cohesive growth structure. Techisland provides community initiatives that unite over 300 companies, employing over 20,000 individuals and demonstrating a strong public-private collaboration. Other well-known gatherings include IT community by Oleg Reshetnikov, Founders’ Club, and The Hub.

The communities, ecosystems, and innovative social support, like the Reflect Festival’s regional success of 10,000 attendees, 1,000 startups, and 250 investors, are crucial for future growth. This foundation of public interest, private support, and governmental integration must be seized to continue the upward trend of digital transformation for strategic business inclusion that will attract future investment.

*Oleg Khusaenov, CEO & Founder of Zubr Capital