The implementation of the special urban planning incentives scheme for developments in primary and secondary education, approved last week by the Council of Ministers following a proposal by the Ministry of Interior, is expected to generate significant multiplier benefits for Cyprus as an investment destination.
With the education sector being one of the key pillars of the state’s overall strategy for societal and economic development, providing incentives for the upgrading of existing private schools, as well as creating opportunities for the establishment of new model schools, is a core objective of government policy.
In this context, the plan essentially serves the government’s dual objective: on the one hand, attracting investments from both Cyprus and abroad—aligned with its broader strategic focus—and on the other, fostering growth in a sector with immense growth potential: education.
At the same time, the plan has the potential to significantly address one of the key challenges faced by foreign nationals working in Cyprus for international companies operating in the country. The limited educational options for their children often act as a deterrent to relocating their families to the island.
These individuals are largely highly skilled professionals, whose presence in Cyprus—along with that of their families—brings, or has the potential to bring, significant benefits to the country’s socio-economic ecosystem.
With this special plan, the primary goal is to achieve an immediate increase in the capacity of existing educational institutions, as well as the upgrade of their infrastructure, to bridge the current gap between supply and demand.
It is worth noting that several existing private educational institutions had already submitted requests for capacity expansion to meet their growing needs.
According to information obtained by InBusinessNews, there are currently 14 pending applications at the Urban Planning Authority (noting that, by decree, the licensing of educational developments remains under the authority of the Director of the Department of Town Planning and Housing). Of these applications, four relate to additions or modifications to existing educational institutions, while the remaining ten concern the construction of new educational facilities.
It should be emphasised that the plan approved by the Council of Ministers applies exclusively to the education sector, and the incentive provided is strictly limited to the development of educational institutions. The increase in the building coefficient is calculated based on the land area occupied by the school, and this increase cannot be transferred to another part of the property that will not be used for the development of an educational institution for any other purpose.
Tanya Romanyukha: Interior Ministry’s measures a positive step forward
Tanya Romanyukha, General Manager of TechIsland, said the association welcomes the government’s initiative “to address the pressing issue of limited capacity in private schools, which now stands as one of the main blockers not only for the further growth of the tech sector, but also for Cyprus to remain competitive as a business hub”.
Highly skilled professionals and entrepreneurs come to the island bringing necessary expertise, she pointed out. “These people often relocate with their families, and access to quality education is a decisive factor in their decision-making. If suitable schooling options are not available, it becomes a significant deterrent.”
Romanyukha referred to a TechIsland survey conducted with IMR/UNIC among its members:
● Almost 60% of highly skilled individuals relocating to Cyprus (EU & third-country nationals) bring children, with an average of two children per employee.
● Between 2020 and 2024, from a sample of only 50 companies, employees relocated with over 2,600 children, increasing pressure on an already stretched private school system.
● This demand is set to grow, as 68% of international companies plan to relocate an average of 49 new employees per company over the next five years.
“The measures announced by the Ministry of Interior are a positive step forward, but additional actions are needed to ensure sustainable growth,” she explained.
Reduce VAT on school construction
Since schools, hospitals, and museums typically do not charge VAT to customers, it is fair to reduce VAT-related expenses in these sectors, eliminating a major barrier to investment, Romanyukha pointed out.
Additionally, when an investor constructs a school building and leases it to an operator, the high VAT rate creates a significant financial burden, she added, as the investor must pay the VAT upfront and then attempt to recover it through rent, making the arrangement financially unfeasible.
“Lowering VAT from 19% to 5% or 0% for 10 years would incentivise investment in school expansion, as seen in other EU countries,” said Romanyukha.
Belgium, for example, unlocked €160 million for 182 new school projects by reducing VAT from 21% to 6% under the Scholen van Morgen. France (5%) and Spain (4%) also introduced VAT reductions for social purposes.
“This VAT reduction should also extend to universities, museums, hospitals and sports facilities to encourage investment in broader social infrastructure,” she suggested.
Additional measures proposed by TechIsland’s General Manager:
● The incentives that have been included concerning the density are towards the right direction. However in addition to that, there could be density incentives that allow for the transfer of unused development density from school construction to other projects, similar to the system used for renovating listed buildings.
● Additionally, in cases where agricultural land is utilised, increase the allowable density from the current 30% to potentially 50%.
Ease employment requirements for international teachers
She also suggests the country eases employment requirements for international teachers. Specifically, allowing schools to hire foreign educators more quickly and efficiently, particularly native English speakers; and including them under the BFU framework to streamline hiring processes and meet growing demand.
“Private school availability is a critical component of Cyprus’ competitiveness against other EU business hubs,” Romanyukha said concluding. “It is therefore essential to recognise this as part of the broader strategy for further economic growth. We look forward to additional initiatives that will strengthen the country’s education infrastructure and reinforce its position—not only as a tech and business hub but also as an education hub.”
Marios Tannousis: This will encourage those thinking of relocating
Speaking to InBusinessNews, the CEO of Invest Cyprus, Marios Tannousis, stressed the significance of the plan approved by the Council of Ministers. He expressed confidence that it will contribute to attracting investments and further modernising private schools in line with best practices.
“As Cyprus,” he pointed out, “we face challenges in meeting the needs of the families of highly skilled foreign workers, which arise from the high demand combined with the limited capacity of educational institutions.”
He added that such incentives are highly beneficial in the effort to attract investments and talent. “This is crucial for the further development of a country’s economy and the modernisation of school infrastructure,” he noted.
When asked, Tannousis noted that there is increasing demand for placements in private primary and secondary educational institutions in Nicosia, Limassol, and Larnaca. He also expects this demand to expand to Paphos and the Free Famagusta region.
“No one wants to lose foreign investments; however, if highly skilled professionals are unable to enrol their children in high-quality schools, they will not come to Cyprus.”
Invest Cyprus’ CEO concluded: “This issue has been and continues to be a concern, and such initiatives will help those considering relocating to Cyprus.”
(Source: InBusinessNews)
