Cyprus has launched a new action plan to attract foreign businesses to establish or expand their activities on the island. Cyprus already provides many competitive advantages, but this new set of incentives aims to ramp up the number of companies establishing headquarters on the island. The plan has considered the best practices from other European countries, with emphasis on domains related to technology, shipping, innovation, research and development, pharmaceuticals, biogenetics and biotechnology and tertiary education without excluding any other companies that choose Cyprus as their place of business. The new strategy which aims to promote foreign investment and stimulate economic activity was implemented in January 2022. 

THE BUSINESS FACILITATION UNIT

The previous Fast Track Business Activation mechanism for companies of foreign interest has been transformed into a Business Facilitation Unit for foreign companies operating in Cyprus, or for foreign companies that wish to expand their operations in the country. The Unit is responsible for the various services required for the establishment of corporate entities: 

·       expedite new company name approval and registration

·       facilitate registration with Social Insurance Services, direct (income) and indirect (VAT) tax authorities  

·       guidance in relation to the establishment, licensing and operations of companies

RESIDENCE AND EMPLOYMENT PERMITS TO HIGHLY PAID THIRD-COUNTRY NATIONALS AND SUPPORTING STAFF

 The government has revised the policy for the employment of highly paid personnel from third countries employed by companies of foreign interests, as well as for those employed by Cypriot companies which give added value to the economy and the local workforce. 

Eligible companies: 

·       companies operating in Cyprus and are of foreign interest/shareholding and maintain fully-fledged offices

·       public companies registered on any recognised stock exchange

·       Cyprus shipping companies

·       Cyprus companies involved in innovation and technology 

·       Cyprus pharmaceutical companies or companies that operate in the fields of biogenetics or biotechnology

·       Cyprus Private Institutions of Tertiary (Higher) Education

Eligible companies can employ highly paid third-country nationals in key positions if the following criteria is met: 

·       a minimum monthly gross salary of €2,500 

·       candidate must hold a university degree or equivalent, or have a minimum 2 years’ relevant experience

·       minimum two-year contract

All companies under the Strategy commit to invest 30% of their total staff in Cypriots/EU citizens over a period of five years. In five years from the date of the enforcement of the Strategy, that is after 2.1.2027, the ratio for new hires will be checked. If a company does not adhere to the 70:30 ratio, cases will be evaluated on their own merits.

Eligible companies will also be allowed to employ third-country nationals as support staff with a gross monthly salary of less than €2,500. The employment of third-country nationals as support staff is allowed, provided that it does not exceed 30% of the total support staff and provided that the third country nationals and the employers have entered into an employment contract approved by the relevant authority, the Department of Labour, in accordance with the applicable law. The amount of their salary is to be determined by the current legislation. 

Benefits for third country nationals: 

·       work permits will be issued within a one-month period and will be valid for up to three years

·       a work permit can also be granted to the spouse of the eligible individual that obtains a visa with this scheme

CASE STUDY: THREE-STEP PROCEDURE TO REGISTER AN ENTITY, ENTER THE BFU REGISTER AND EMPLOY THIRD-COUNTRY HIGH SKILLED PERSONNEL 

Company registration in Cyprus is simple and efficient. This is an example of the required steps for a simple and straightforward set up in Cyprus for a small or medium sized company.  

Three Easy Steps: 

1.     REGISTRATION OF THE COMPANY
Registration must be done at the Department of Registrar of Companies and Intellectual Property. It is advised to seek professional advice and once your lawyer has filed for registration, it can be expedited and completed in one (1) business day. The administrative cost is €465, lawyer’s or administrative service provider’s fees not included. Breakdown of registration fees, typical example for a Private Limited Liability Company: €165 registration fee + €100 accelerated procedure + €200 company’s full set of certificates by accelerated procedure.

2.     SUBMIT AN E-APPLICATION TO THE  BFU
An online application form must be submitted supported by a ‘Letter of Intent’ and other relevant documents required to the Business Facilitation Unit (BFU) to register the company as Company with Foreign Interests. This takes no more than seven (7) business days. 

3.     VISIT THE CIVIL REGISTRY & MIGRATION DEPARTMENT FOR OBTAINING PERMITS FOR THE EMPLOYEES
Finally, you must prepare the documentation and go through the application procedure to register the company’s employees with the Civil Registry & Migration Department (CRMD). For registration of the first employees of new companies registered as Companies with Foreign Interests by the Business Facilitation Unit, service at the CRMD will be on a first come-first served basis, without an appointment. For the rest of the applications, predetermined fixed weekly appointments for specific providers have been set, based on volume and frequency of applications submitted. In such appointments, it is expected that approximately 3-5 applications may be submitted. Smaller offices and individuals will be served daily on a first come-first served basis, without an appointment. In such cases, it is expected that no more than 3 applications are submitted. Applicable fees per case can be found on the website of the CRMD which do not exceed €330 per employee, lawyer’s or administrative service provider’s fees not included. The residence permit of the employee for temporary residence and employment takes approximately 40 days to be issued, in the case of a positive review.

FAMILY REUNIFICATION RIGHTS 

Family reunification rights are granted to third-country nationals employed by this revised policy and regulated by the Business Facilitation Unit. Direct and free access to paid employment (excluding self employment) is granted to spouses of the third-country nationals who have obtained a residence and employment permit in Cyprus, through this revised policy and who receive a minimum gross monthly salary of €2,500. This right does not extend to supporting staff who receive a monthly salary of less than €2,500. 

DIGITAL NOMAD VISA 

Significantly, the new Action Plan provides for the introduction and the issuing of Digital Nomad Visas with a maximum initial limit of 500 beneficiaries. 

Who is eligible: 

Third-country nationals who are either self-employed or employees who work remotely using information and communication technologies to communicate with their clients or employers who must be outside Cyprus. 

What rights do you get: 

·       right to stay in the country for up to one year, with the right to renew their visas for another two years 

·       can be accompanied by family members, to whom a residence permit is granted upon request, which will expire at the same time as that of the main applicant

·       during their stay in Cyprus, the spouse or partner and the minor members of the main applicant’s family are not allowed to engage in any kind of economic activity in the country

What are the conditions: 

·       must show evidence of sufficient resources at a fixed income level of a minimum €3,500/month to cover living expenses during their stay without burdening the national welfare system (the amount is increased by 20% in case they have a spouse/partner and another 15% per child)

·       must have a clean criminal record and healthcare insurance coverage 

·       the aforementioned prerequisites are indicative and additional requirements are applicable

In the event that the holders of Digital Nomad Visas reside in the Republic for one or more periods that cumulatively exceed 183 days, within the same tax year, they are considered tax residents of Cyprus provided that they are not tax residents in any other state.

TAX INCENTIVES 

The incentives also include the introduction of new tax benefits and tax breaks.  

Broadening tax incentives:

·       a 50% tax exemption to be granted to new and existing employees relocating/relocated to Cyprus with employment remuneration of €55,000 and above (with the requirement that they were not Cyprus residents during the previous 10 years),  

·       beneficiaries of this tax benefit should be entitled to this benefit for a period of 17 years from the year of employment.

Tax exemption extension for investments in innovative companies: 

·       extension of the 50% tax exemption for equity investment in certified innovative companies to corporate investors.

Increased (compared to the real) tax deduction for research and development expenditure:

 ·       granting an increased discount on research and development expenditure (e.g., by 20%). Eligible research and development expenses will be deducted from taxable income at 120% of actual expenses.

NATURALISATION 

A law proposal to change the naturalisation criteria is currently being discussed in Parliament.

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December 2023