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 is geared to ramp up interest for companies to set up headquarters in the country. The plan has taken into account the best practices from other European countries, with emphasis on domains related to technology, shipping, innovation, research and development, biogenetics and biotechnology, 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 on January 1, 2022.
The Business Facilitation Unit
The existing Fast Track Business Activation mechanism for companies of foreign interest will be 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 new Unit will be responsible for the various services required for the establishment of corporate entities:
- new company name approval and registration
- registration with Social Insurance and VAT authorities, and with Income Tax authorities
- guidance in relation to the establishment, licensing and operations of companies
- issuance and renewal of residence and employment permits for staff employed by foreign companies
Residence and employment permits to highly skilled third-country nationals and supporting staff
The government has revised the policy for the employment of highly skilled 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.
- companies operating in Cyprus and are of foreign interest/shareholding and maintain fully fledged offices
- Cyprus shipping companies
- Cyprus companies involved in innovation and technology
- Cyprus pharmaceutical companies or companies that operate in the fields of biogenetics or biotechnology
Eligible companies can employ highly skilled 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
- work permits will be issued within a one-month period and will be valid for three years
- a work permit can also be granted to the spouse of the eligible individual that obtains a visa with this scheme
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 five years from the date of joining the Business Facilitation Unit. In case five 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 €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 in accordance with the applicable law. The amount of their salary is to be determined by the current legislation.
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 the labour market as paid employees is granted to spouses of the third-country nationals who have obtained a residence and work 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.
Simplification 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.
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 100 beneficiaries.
Who is eligible: 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.
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 and welfare system (the amount is increased by 20% in case they have a wife/husband/partner and another 10% per child)
- must have insurance coverage and a clean criminal record
- 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 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.
Proposed tax incentives
The new Action Plan includes legislative proposals concerning the granting of tax benefits and tax breaks which were submitted to the House of Representatives in December 2021. The government is hopeful that these proposals shall be approved by the first quarter of 2022.
- a 50% tax exemption to be granted to new residents/employees who receive an annual income from their employment of €55,000
- extension of the tax exemption applicable to eligible employees in Cyprus 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
- beneficiaries of this tax benefit with an income of €55,000-€100,000 should be entitled to benefit from this exemption for the remaining period of the 17 years
- 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
- a 120% capital allowance on expenses that relate to R&D
The government is also proposing the right to submit an application for naturalisation after five years of residency and employment in Cyprus instead of the current seven-year rule or a further reduction to four years if the potential applicants meet the criteria of holding a recognised certificate of very good knowledge of the Greek language.
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Updated December 2021