A new strategy aiming to attract foreign businesses to establish and expand their activities in Cyprus through a plan, was presented by the Cypriot Government and will be implemented from January 1, 2022.
The plan targets areas or fields interrelated to, inter alia, High Technology Companies, Innovation Companies, Shipping Companies, Pharmaceutical Companies, Biogenetics and Biotechnology Companies.
This plan aims to make Cyprus a Sustainable Business and Trade Center of the wider area and Europe that will be fully in line with the guidelines of the European Commission and the Recovery and Resilience Facility.
In this context, several incentives were prepared in order to attract foreign Companies to operate and/or relocate their headquarters and/or expand their business activities in Cyprus, which can be summarized as follows:
1. Business Facilitation Unit
A Business Facilitation Unit will be established which will act as the central point of contact for all Companies of international interest, which operate in Cyprus and/or relocate their headquarters and/or expand their business activities in Cyprus in specific areas of economy activity.
- Company creation (Company registration, name approval, registration in the Social Insurance register, Registration in the VAT register and in the Income Tax)
- Guidance for relevant permits for activation in Cyprus
- Acceleration in the issuance and renewal of residence and employment permits
2. Revised Policy for the issuance of Temporary Residence and Employment Permits to third-country nationals employed in Companies of foreign interests operating in Cyprus
The Government of Cyprus has revised the existing policy for the employment of staff from third-countries who is employed by Companies of foreign interests operating in the Republic of Cyprus and/or Companies of foreign interest which intend to operate and/or relocate their headquarters in Cyprus and/or expand their business activities in Cyprus and have a physical presence in Cyprus including establishment/ operation of independent offices that are separate from any private residence.
Furthermore, the issuance of employment permits is facilitated, and work permits will be issued immediately within 1 month from the submission of the application and will last up to 3 years.
The eligible Companies are the following:
- Cypriot shipping Companies.
- Cypriot high technology / innovation Companies.
- Cypriot pharmaceutical Companies or Companies operating in the fields of biogenetics and biotechnology.
The necessary preconditions for the third-country nationals to be employed in Cyprus are the following:
- Minimum gross monthly salary of €2.500,00.
- Possession of a university diploma or degree or equivalent qualification or certificate of relevant experience in a corresponding employment position of a 2-year duration and that the employee in question is presented with an employment contract of not less than two years.
The maximum number of third-country nationals that can be employed is set at 70% of the total number of employees of the Company over a period of 5 years.
The Company is also allowed to employ third-country nationals as support staff provided that it does not exceed 30% of the overall support staff. The aforementioned applies if there is a duly validated employment contract between the third-country national and the employer in question which is in accordance with current legislation.
In addition, there is the right of family reunification of third-country nationals who are part of the Business Facilitation Unit. Through this very Mechanism, the Labor Market will be directly and freely accessible to the Spouses of Employees who have Residency and Work Permits in the Republic. Said access will be limited however, to the Spouses who receive a minimum monthly salary of €2500, while, it does not apply at all to the family of the support staff.
3. Digital Nomad Visa
It should be noted that the Action Plan introduced the initiative of the "Digital Nomad Visa" according to which, Visas are granted to an initial maximum limit of 100 beneficiaries.
The Digital Nomad Visa concerns only residency permits in the Republic of Cyprus and not work permits, for people who live in Cyprus but work in Companies operating abroad.
Beneficiaries of the "Digital Nomad Visa" scheme, will be third-country nationals who are self-employed and/or are employees who work remotely using information and communication technology in order to communicate with their employers and/or clients. Said employers and/or clients must not be residents of the Republic. The Visa is valid for a period of 12 months, with the right of renewal for another 2 years once said 12-month period has lapsed.
The holders of Digital Nomad Visa can be accompanied by their family members, who are granted, upon their request, a residence permit that expires at the same time as the beneficiaries' does, but are not granted a work permit.
Moreover, if they have been residents of the Republic of Cyprus for a period of time which in total exceeds 183 days within the same tax year, then they are considered tax residents of Cyprus meaning they are not tax residents in any other Country.
They also have to present evidence which clearly indicate that they have sufficient resources, at a fixed income level, to cover their living expenses during their stay in Cyprus. The amount of resources required is set at €3.500.00 per month, together with medical coverage and a clear criminal record from the country of residence.
4. Tax Incentives
The possibility of extending the 50% tax exemption for investment in certified innovative Companies and by corporate investors is being considered. The regime that was in force until the end of June 2021 allowed tax exemptions only to natural persons. For this purpose, the opinion of the Directorate-General for Competition of the European Commission is expected and subsequently, the approval of the relevant bill is also expected by the Parliament.
In addition, the plan provides for the following:
- The extension of the tax exemption that applies to employees in the Republic, provided that they were non-residents of the Republic before starting their employment, for a period of 17 years.
- The expansion of the existing tax exemption to cover new residents-employees with a salary from employment of €55,000 and above with a tax exemption of 50%.
- Existing employees have the opportunity to extend the benefit from 10 to 17 years. Potential beneficiaries are persons with income (€55,000- € 100,000) for the remaining period of 17 years.
- At the same time, the abolition of the existing tax provision of 20% exemption from employment exercised in the Republic or €8,550 – whichever is lower – will be promoted, since incomes over €55,000 will receive a 50% income tax exemption.
- An increased deduction will also be granted for research and development costs and a deduction of taxable income equal to 120% of the actual cost.
These tax incentives also apply to Cypriots who have lived abroad for at least ten years, in order to persuade them to repatriate back to the Republic.
Furthermore, the right to apply for naturalization will be given to the employees of these Companies after five years of residence and work in the Republic or after four years if they meet the criterion of holding a recognized certificate of very good knowledge of the Greek language.
6. Social Insurance
Additionally, the transfer of social security contributions will be ensured so that when third-country nationals who have paid social security contributions in Cyprus, wish to return for permanent residence in their country, they will be entitled to transfer the contributions they paid, provided that they did not acquire any right in regards to age pension and/or disability etc.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.