New Action Plan for Attracting Companies in Cyprus

 

On the 15th of October, the Cyprus government presented its new strategy for attracting companies to transfer or extend their operations in the island in an attempt to enhance Cyprus position as a sustainable business and trade center. The implementation of the new action plan will commence from January 2022.

 

The main measures of the new action plan are the following:   

 

1.    Business Facilitation Unit

The existing Fast Track Business Activation Mechanism will be transformed into a Business Facilitation Unit which will liaise with companies operating or expressing interest to operate in Cyprus and will have the following responsibilities:

  1. Provision of services for the establishment of companies including, among others, name approval, registration with the Social Insurance and VAT Registries and registration with Income Tax Department.
  2. Guidance for obtaining the necessary licenses for the facilities and operation of companies in Cyprus.
  3. Facilitation for the issuance and renewal of residence and employment permits.

 

2.    Revised Policy for the issuance of Temporary Residence and Employment Permits for Third Country Nationals

2.1.  Eligible companies

The companies eligible to utilize the revised policy are companies of foreign interests which are operating or expressing interest to operate in Cyprus and which have physical presence in Cyprus with focus on shipping, high technology, pharmaceutical, biogenetics and biotechnology.

2.2   Criteria for the employment of third-country nationals

  1. Minimum gross monthly salary of EUR 2,500.
  2. Possession of a university degree, equivalent qualification or certificates of relevant experience in a corresponding employment position of at least 2 years.
  3. Submission of an employment contract of at least 2 years.

2.3   Main provisions

  1. The maximum number of third-country nationals that may be employed is 70% of the total number of all employees in a 5-year period from the date of the inclusion to the Business Facilitation Unit.
  2. The validity of the temporary employment and residence permit can be up to 3 years.
  3. Eligible companies will be able to employ third-country nationals as support staff with a gross monthly salary of less than EUR 2,500, with a maximum of 30% of the total supporting staff of the company.

 

3.    Family Reunification right

Spouses of third-country nationals who have obtained a residence and work permit in Cyprus will be granted with direct and free access to the labor market as paid employees, provided that they receive a minimum gross monthly salary of EUR 2,500. This right does not extend to supporting staff who receive a monthly salary of less than EUR 2,500.

 

4.    Digital Nomad Visa1

A new type of permit will be introduced which does not include any employment rights for the holders of the permit. Individuals entitled to a digital nomad visa will be third country nationals who are either self-employed or are employees who work remotely using communication technologies, with employers and clients outside Cyprus.

4.1   Residence Status

  1. The permit will be valid for one year, with the right to renew it for another two years.
  2. Digital nomads will have the right to be accompanied by their family members to whom a residence permit is granted and provided that they do not engage in any kind of economic activity in the country.
  3. In the event that holders of digital nomad visas reside in the Republic for one or more periods that exceed 183 days within the same tax year, then they will be considered tax residents of Cyprus, provided that they are not tax residents in any other country.
  4. Among other prerequisites, digital nomads must provide evidence that they have sufficient resources at a fixed income level of a minimum EUR 3,500 per month, plus an additional 20% for the spouse and 15% for any minor.

 

 5.    Tax Incentives2

  1. New residents-employees with an annual income of EUR 55,000 will benefit from a 50% income tax exemption.
  2. Existing beneficiaries of the scheme will be able to extend the tax exemption from 10 to 17 years.
  3. Potential beneficiaries of the tax exemption with an income between EUR 55,000 – EUR 100,000 will be entitled to this exemption for the remaining period of the 17 years.
  4.  Extension of the 50% tax exemption for investment in certified innovative companies to corporate investors. The previous regime that was in force until June 2021 allowed the exemption only for natural persons.
  5. Provision of an increased discount on research and development expenses, for example by 20%. Eligible research and development expenses will be deducted from taxable income equal to 120% of the actual.    

 

6.    Naturalization

Right to submit an application for naturalization after 5 years of residency and employment in Cyprus, instead of 7 years applicable today, or after 4 years provided that the applicant holds a recognized certificate of very good knowledge of the Greek language.

 


 

Maximum quota of 100 applications.

The new strategy includes a number of legislative proposals regarding the provision of tax incentives which are expected to be approved by the House of Representatives in early 2022.

 


 

The author of the article is Varvara Georgiou.

Varvara is a Digital Marketing Assistant at Royal Pine & Associates. She is a holder of an L.L.B from the University of Essex and an LL.M from the University of Leeds.

 

* This publication has been prepared as a general guide and for information purposes only. It does not purport to be comprehensive or to render professional advice. Before making any decision or taking any action that may affect your business, bespoke advice should be obtained.

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