Many potential business people ask the following question: 

“Why set up a company and conduct business in Cyprus and not the UAE?”. 

The summarised comparison below may assist in reaching a decision.

Choosing between Cyprus and the UAE for setting up a business depends on various factors like taxation, legal framework, costs, and strategic advantages. 

Here’s why Cyprus may be a better choice than the UAE for certain businesses:

1. Lower Corporate Tax & Business-Friendly Tax Regime

• Cyprus: Offers one of the lowest corporate tax rates in the EU at 12.5%, with attractive tax incentives, exemptions on dividends, and no withholding tax on outbound dividends, interest, and royalties.
• UAE: While previously tax-free, the UAE now has a 9% corporate tax for businesses earning above AED 375,000 (approx. €95,000).

2. EU Membership & Access to European Market

• Cyprus: As a full EU member, Cyprus provides businesses with access to the European Single Market, allowing for easy trade, lower barriers, and compliance with EU regulations.
• UAE: Not part of the EU, limiting market access and requiring businesses to set up separate entities in Europe for trade.

3. Lower Setup & Operational Costs

•  Cyprus: Business setup costs, office rentals, and operational expenses are generally lower than in Dubai or Abu Dhabi.
•  UAE: Costs for company registration, visas, office space, and regulatory compliance can be significantly higher, especially in mainland UAE.

4. Fewer Residency & Substance Requirements

• Cyprus: Allows low-cost, flexible tax residency with only 60 days of stay per year (under the 60-day tax residency rule).
• UAE: Requires substantial presence and proof of economic substance, making it harder to maintain tax benefits if you're not physically operating in the UAE.

5. Better Banking & Financial Stability

• Cyprus: Has a strong banking system, access to SEPA payments, and smooth financial transactions with the EU.
• UAE: While banking is advanced, many foreign investors face challenges opening bank accounts due to strict compliance regulations.

6. Fewer Restrictions on Foreign Ownership & Business Scope

• Cyprus: No foreign ownership restrictions across various industries, making it ideal for international businesses.
• UAE: While free zones allow 100% foreign ownership, mainland businesses often require a local partner, depending on the sector.

7. Double Tax Treaties & Global Reputation

• Cyprus: Has over 65 double tax treaties, making it highly efficient for structuring international businesses.
• UAE: Also has many treaties but is often under scrutiny due to concerns about compliance with international tax regulations.

8. Better Weather Conditions & Quality of Life

• Cyprus: Enjoys a Mediterranean climate with mild winters and warm summers. The average summer temperature is around 30-35°C, and winters are pleasant at 10-15°C with fresh sea breezes.
• UAE: Has an extreme desert climate, with scorching summers reaching 45-50°C and high humidity, making outdoor activities difficult for several months.

Hence, Cyprus offers a more comfortable year-round climate, making it a better location for living, working, and attracting international talent.

When UAE Might Be a Better Choice

• If you need zero personal income tax (although this might change in the future), although Cyprus offers 50% exemption to employees earning more than €55,000.
• If your business is focused on the Middle East, Asia, or Africa.
• f you require 100% free trade zones for imports/exports.

Conclusion: Why Choose Cyprus?

Cyprus is the better choice if you are looking for: 

•     Low corporate tax (12.5% vs. 9% in UAE).
•     EU market access for trade advantages.
•     Lower setup & operational costs.
•     Banking access with SEPA transactions.
•     Flexible residency rules (60 days per year).

For businesses aiming to trade in Europe or globally with tax efficiency, Cyprus offers a more stable, cost-effective, and strategically beneficial environment than the UAE.