Cyprus, a full EU member since May 1, 2004, has a liberal climate for investments. On October 1, 2004, the Government of Cyprus lifted most investment restrictions concerning non-EU residents, completing earlier reforms (introduced in January 2000) concerning EU investors. Through this decision, the Government of Cyprus has lifted most capital restrictions and limits on foreign equity participation/ownership, thereby granting national treatment to foreign investors. Non-EU investors (both natural and legal persons) may now invest freely in Cyprus in most sectors, either directly or indirectly (including all types of portfolio investment in the Cyprus Stock Exchange).

The inflow of approved foreign direct investment reached $1.22 billion in 2004, compared with $1.0 billion in 2003, and $1.06 billion in 2002. The sectoral allocation of this investment in 2003 was as follows: manufacturing 0.8%; construction 0.8%; trading 14.6%; hotels and restaurants 0.2%; transport and communications 11.1%; financial intermediation 24.7%; real estate and business 41.0%, other services 6.7%. In terms of geographical origin, the majority of new investments in 2003 (58.1% of total value) originated from the EU; 31.1% originated from other European countries; 4.6% from the United States of America; and the remaining 6.2% from various other countries.

Cyprus has good business and financial services, modern telecommunications, an educated labor force, good airline connections, a sound legal system, and a low crime rate. Cyprus's geographic location, tax incentives and modern infrastructure also make it a natural hub for companies looking to do business with the Middle East, Eastern Europe, the former Soviet Union, the European Union, and North Africa. As a result, Cyprus has developed into an important regional and international business center.