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Dec 18, 2021
|  Action Plan presented by the Cyprus Government for attracting foreign companies to Cyprus

In October 2021, the Cyprus government announced its new action plan for attracting foreign businesses to establish or expand their activities in Cyprus. The announcement came one year after the abolition of the previous investment program.

The new strategy announced aims to turn the page and attract foreign businesses to the island and to stimulate economic activity by promoting foreign investment. The action plan will be implemented as of 01.01.2022.

Setting up of the Business Facilitation Unit

The new policy aims to facilitate the establishment of foreign companies to operate and/or relocate their headquarters and/or expand their business activities in Cyprus. In light of this target the existing Fast Track Business Activation mechanism for companies of foreign interest shall be transformed into a “Business Facilitation Unit” for foreign companies operating in Cyprus or for foreign companies that wish to expand their operations in Cyprus.

The Business Facilitation Unit shall be responsible for the provision of the various services required for the establishment of corporate entities. It will oversee new companies’ name approval, companies’ registration, registration with the Social Insurance and VAT authorities and with the Income Tax Authorities of the Republic. It shall also provide guidance in relation to the establishment, licensing and operations of such companies and shall facilitate the issuance and renewal of residence and employment permits for staff employed by foreign interest companies.

Revised Policy for Issuance of Residence and Employment Permits to highly skilled third country nationals and supporting staff

The Cypriot government has revised once more the policy for the employment of highly skilled personnel from third countries which are 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.

The eligible companies that can benefit from this revised policy are the below:

Companies and businesses of foreign interests operating in Cyprus or companies of foreign interests wishing to establish their operations on the island, having physical presence in Cyprus and which operate or shall operate from independent offices on the island and are or will be housed in suitable premises, separate from any private residences including:

  • Cypriot shipping companies
  • Cypriot high technology / innovation companies,
  • Cypriot pharmaceutical companies or Cypriot companies which are active in the fields of biogenetics and biotechnology

Eligible companies can employ highly skilled third country nationals in key positions who are in possession of a university degree or title or equivalent qualification or a certificate of relevant experience in a corresponding employment position of at least 2 years with a minimum gross monthly salary of € 2500 and provided their employment contract is for a period of not less than two years.

The relevant work permits for employees falling under this revised policy will be issued immediately within 1 month and will last up to 3 years.

There is a maximum number of third country nationals that may be employed under this policy. Only 70% of the total number of all employees may be employed under it in a period of 5 years, from the date of joining the Business Facilitation Unit. In case 5 years have passed and it is not possible to employ 30% of Cypriot workers, it will be re-examined on a case-by-case basis.

Eligible companies will also be allowed to employ third country nationals as support staff with a gross monthly salary less than € 2500. 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 in accordance with the applicable law. The amount of their salary is to be determined by the current legislation.

The duration of their residence and work permits will be up to 3 years.

Family reunification rights to third country nationals employed under this revised policy

It is important to note that 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 the labour market as paid employees is granted, to spouses of the third country nationals who have obtained a residence and work permit in the Republic, through this revised policy and who receive a minimum gross monthly salary of €2500.

This right does not extend to supporting staff who receive a monthly salary of less than €2500.

Simplification of the process of granting work permits under category E

The action plan provides for the simplification and acceleration of the process of granting immigration and work permits under CATEGORY E – Long-Term Resident Status to persons who have been offered permanent employment and whose employment does not create undue local competition.

Introduction of Digital Nomad Visa.

Significantly the Action Plan provides for the introduction and the issuing of a DIGITAL NOMAD VISAS with a maximum initial limit of 100 beneficiaries.

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

The holders of a DIGITAL NOMAD VISAS shall have the right to stay in the country for up to one year, with the right to renew their visas for another two years. They can be accompanied by their 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 provide dependent work or to engage in any kind of economic activity in the country.

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

The DIGITAL NOMAD VISA is granted under certain conditions and prerequisites. For example, they must show evidence that they have sufficient resources at a fixed income level of a minimum €3500 per month to cover their living expenses during their stay without burdening the national and welfare system and must have insurance coverage and a clean criminal record. The aforementioned prerequisites are indicative and additional requirements are applicable.

Introduction of various tax incentives

Included in the new policy are certain legislative proposals concerning the granting of tax benefits and tax breaks which will be submitted to the House of Representatives by the end of December 2021. The government is hopeful that these proposals shall be approved by the first quarter of 2022.

The government has proposed a 50% tax exemption to be granted to new residents-employees who receive an annual income from their employment of € 55,000.

Furthermore, the government’s proposals provide for the extension of the tax exemption applicable to eligible employees in the Republic who have an income below €100.000 from 10 years to 17 years provided they were not domiciled in the Republic for a period of 17 years prior to the commencement of their employment.

Potential beneficiaries of this tax benefit with an income of € 55K- € 100K should be entitled to benefit from this exemption for the remaining period of the 17 years.

The government also proposes the extension of the 50% tax exemption for investment in certified innovative companies to corporate investors. The regime that was in force until the end of June 2021 allowed the tax exemption only to natural persons.

There is also a proposal put forward for the granting of an increased discount on research and development expenses for example by 20%. Eligible research and development costs will be deducted from taxable income at 120% of the actual.

Proposal regarding naturalization

The government is also proposing the right to submit an application for naturalization after 5 years of residency and employment in the Republic instead of the 7 years rule as applicable today or a further reduction to 4 years if the potential applicants meet the criteria of holding a recognized certificate of very good knowledge of the Greek language.

There is also a proposal put forward for the granting of an increased discount on research and development expenses for example by 20%. Eligible research and development costs will be deducted from taxable income at 120% of the actual.

Proposal regarding naturalization

The government is also proposing the right to submit an application for naturalization after 5 years of residency and employment in the Republic instead of the 7 years rule as applicable today or a further reduction to 4 years if the potential applicants meet the criteria of holding a recognized certificate of very good knowledge of the Greek language.

The overall benefit of the new Policy

There is no doubt that in addition to attracting foreign businesses to the island Cypriot companies and businesses whose objects fall within those specified in the eligibility criteria will also benefit from this new policy.

How can Fiduciana assist?

For more information and how this can benefit you and your business, feel free to contact our team at [email protected]