On Friday 15th of October 2021, the Ministry of Finance of Cyprus announced its new action plan for attracting foreign investment and enhance business activity in Cyprus, encompassing various policies that will enter into force in the first quarter of 2022.
The new policies that will be implemented are as follows:
1. Establishment of the Business Facilitation Unit
According to the new action plan, the existing Fast Track Business Activation Mechanism for International Companies will be transformed into a Business Facilitation Unit for companies operating or expressing interest to operate in Cyprus.
The main responsibilities of the Unit will be:
- Provision of various services for the establishment of corporate entities, including, inter alia, company registration and name approval, registration of the company with the Social Insurance Registry and Employers' Register and registration of the company with the Tax Authorities.
- Provision of guidance for the establishment and operation of companies in Cyprus.
- Facilitation for the issuance of residence and employment permits to employees of companies of foreign interest in Cyprus.
2. Revised Policy for Issuance of Temporary Residence and Employment Permits to highly skilled third country nationals and supporting staff
The government proposed revision of the requirements for issuance of temporary residence/employment permit to third country nationals employed by:
- Companies/foreign of foreign interest operating in Cyprus or foreign companies wishing to operate in Cyprus which have a physical presence in Cyprus including operation of independent offices in Cyprus that are separate from any private residence or office.
- Cypriot shipping companies.
- Cypriot high-end technology / innovation companies.
- Cypriot pharmaceutical companies or Cypriot companies operating in the fields of biogenetics and biotechnology.
According to the action plan, a temporary residence and employment permit will be issued to third country nationals with minimum acceptable gross monthly salary of €2.500, provided that the following conditions are met:
- Possession of a university diploma or title or equivalent qualification or certificates of relevant experience in a employment position lasting at least 2 years.
- Presentation of an employment contract of not less than two years.
The maximum number of third country nationals that can be employed under this policy is 70% of the total number of employees employed within a period of 5 years, from the date the company joined the Business Facilitation Unit.
Employment of third-country nationals as support staff will be also permitted provided that it does not exceed the 30% of the total support staff employed by the company.
The permits will be issued immediately within one month and will have a duration of up to three years.
3. Simplifying and fast-tracking the process of granting work permits (CATEGORY E - Long-Term Resident Status)
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.
4. Introduction of DIGITAL NOMAD VISA (with a maximum initial limit of 100 beneficiaries)
Entitled to digital nomad visas will be third-country nationals self-employed or employees working remotely using information and communication technologies, with clients or employer outside Cyprus for a period of 12 months.
Holders of Digital Nomad Visas will have the right to stay in the country for a period of up to one year with the right to renew their residency for another two years. They can be accompanied by their family members who, however, during their stay in Cyprus are not allowed to provide dependent work or to engage in any kind of economic activity in the country.
If the holder of a Digital Nomad Visa resides in Cyprus for one or more periods which in total exceed 183 days within the same tax year, then they will be considered as tax residents of Cyprus, provided that they are not tax residence in any other country.
5. Introduction of various tax incentives
The government has proposed expansion of the 50% tax exemption applicable to employees in Cyprus to new residents-employees who receive an annual income of € 55,000 from their employment.
Furthermore, the government's proposal provide for the extension of the period of the tax exemption applicable to existing beneficiaries of the programme from 10 years to 17 years.
Additional tax incentives for corporate entities that are being considered by the government are:
- The extension of the 50% tax exemption for investment in certified innovative companies to corporate investors (currently, this is only applicable to natural persons).
- Grant of a further discount on research and development expenses (e.g. by 20%) so that eligible research and development expenses may be deductible from taxable income in an amount equal to 12% of the actual taxable income.
The government is also proposing the right to submit an application for naturalization after 5 years of residency and employment in Cyprus 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.
More information regarding the action plan will be released in the next weeks.
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