04.02.21
Cyprus, a “Bonus Stage” in the Gaming Business World?
Era of 3-dimensional reality, games and sports

Cyprus has long been an established hub for international business and recent years have seen an increasing number of tech companies and start-ups choosing Cyprus for their regional headquarters from where to service clients in, amongst others, Europe, Middle East and North Africa.

In addition to being established as a safe and reliable jurisdiction, Cyprus is also high in the list of choices because of its cost-effective services, favourable tax and business environment, including more than 60 double tax treaties, as well as its skilled workforce.

E-sports and Games of Skill

We are in an era of digitisation where more and more activities that were once carried out in the real world are now transposed in the 3-dimensional reality and games and sports could not be an exception. A particular sector that has been emerging strong in the recent years is that of online games of skill and in particular e-Sport games, earning millions of dedicated supporters globally including not only the gamers themselves but also dedicated fans that watch the carrying out of organised tournaments in live streaming.

The increasing popularity of online games of skill and e-Sports, has given rise to new business opportunities for game developers, businesses organising tournaments for the said games, as well as a number of ancillary businesses such as gamers who provide tutorials and walkthroughs as well as stream their sessions online, reviewers, resellers, marketing and advertising.

As per the World Economic Forum, it was expected that the e-Sport sector was to grow to just over USD 1 billion in 2020. Given also the impact of the Covid-19 pandemic on traditional physical sports and games, it appears that online games of skill and e-Sport games have their chance to fill the gab created and claim their market share.

Undisputedly, online games of skill and especially e-Sports are here to stay and to this end one may argue that Cyprus as a jurisdiction from where to operate in that market is a strong and competitive choice.


Why Cyprus should be on the International Businesses’ Watch List

Cyprus has already started to attract the attention of tech and gaming businesses and start-ups and is seeing a growth in the number of those that choose to set up their operations in the sunny shores of our Mediterranean island.

Currently, Cyprus legislation is silent with regards to the carrying out/organisation of games of skill and consequently e-Sports, that fall under the categorisation of games of skill. The relevant Cyprus legislation on this matter is the Law Providing for the Regulation of Betting and Related Matters of 2019 (No.37(I)/2019 as amended) (“the Betting Law”). The provisions of Betting Law regulate, amongst others, the provision of betting services in Cyprus, whether land based or electronic, which are licensed activities and strictly prohibit, inter alia, the carrying out of games of chance that fall under the definition of online casino games.  

Although the Betting Law is expected to undergo amendments, as per the draft legislation that was published for consultation by the National Betting Authority in the end of 2020, games of skill were not explicitly included in the licensed activities under the law. A level of control is attempted to be established, as per the draft provisions of the amended law, in the sense that, in order for a holder of Class A or Class B bookmaker’s license to be able to carry out/provide games of skill, details of these should be submitted to the National Betting Authority for prior approval. As noted above, the amendments are currently in a draft state, therefore it remains to be seen the extent of any regulation to be imposed on games of skill and consequently e-Sports under Cyprus law. The spirit of the amendments introduced in the draft legislation do not foretell the intention for strict regulation over the said activities however.

In addition to the regulatory flexibility currently provided under the Cyprus legislation for activities that fall under the umbrella of games of skill, tech companies that choose Cyprus as their base may also benefit from:

  • The geostrategic position of Cyprus that allows access to the EU market and close proximity to MENA;
  • A service industry with long established experience in the establishment, administration and management of companies;
  • The beneficial IP Box regime that Cyprus has to offer for software development.  According to the Regime, 80% of “Qualifying Profit” generated from Qualifying IP Rights will be considered as a deemed expense for corporation tax purposes. The remaining 20% will be subject to the normal corporation tax rate of 12.5%;
  • Strong network of double tax treaties with more than 60 countries;
  • Excellent business and diplomatic relationships with a large number of jurisdictions that allow for smooth business operations;
  • Fast track mechanism for licensing and immigration for non-EU nationals;
  • Special income tax incentives for expat executives and new tax residents of Cyprus;
  • Highly skilled workforce and given that Cyprus is a member of the EU the pool of available specialised workforce expands throughout Europe;
  • Strong legal system based on common law.

A number of major international companies already have their regional headquarters operating in Cyprus for software development, system integration, testing services, R&D activities, project management, as well as marketing and sales. Such companies include NCR, Amdocs, Wargaming, 3CX and Viber.

Other than the major international corporations, Cyprus is also the chosen jurisdiction for a number of gaming start-ups, such as Nival, a video game developer specialising in strategy and MMORPG games, Learn2Play, an eSports company offering skill improvement platforms and Whipper, a gamified messaging platform, the founding team of which includes executives, investors and advisors from Netflix, Riot Games, Amazon, Swiftkey, Expedia and Viber.

In addition to its cost effective services, favourable tax and business environment, Cyprus has developed an advanced communications infrastructure that can support businesses. With the government’s commitment to launch incentives and invest in the tech scene, undoubtedly Cyprus is a “bonus stage” for international businesses operating in the online skill gaming and e-Sports sector.


The above does not constitute a legal opinion or legal advice under any circumstances. For further information, please contact us at kinanisllc@kinanis.com.


DISCLAIMER

This publication has been prepared as a general guide and for information purposes only. It is not a substitution for professional advice. One must not rely on it without receiving independent advice based on the particular facts of his/her own case.  No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication.

February 2021

Author

Maria Makridou
Counsel – Corporate Department
CorporateLegal1@kinanis.com

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