The Cyprus government new measures to attract foreign investment in Cyprus
The Cyprus government announced on Friday, October 15 2021, its new measures for attracting foreign companies to establish or relocate their operations in Cyprus. The announcement occurred one year after the previous investment program was terminated.
The newly stated strategy intends to turn the page by attracting foreign companies to the island and stimulating economic activity through foreign investment promotion.
As of 1.1.2022, the action plan will be implemented.
Set up the Business Facilitation Unit
The new policy aims to make it easier for foreign companies to operate, relocate their headquarters and extend their business activities in Cyprus. In order to achieve this goal, the existing Fast Track Business Activation mechanism for foreign-interest firms will be changed into a “Business Facilitation Unit” for foreign companies operating in Cyprus or wishing to expand their operations in Cyprus.
The Business Facilitation Unit will be in charge of providing various services necessary for the formation of corporate entities. It will be responsible for new company name approval, registration, and registration with the Social Insurance and VAT authorities, as well as the Republic’s Income Tax authorities. It will also provide guidelines on the formation, licensing, and operations of such firms, as well as make the issuing and renewal of residency and employment permits for foreign interest company employees easier.
Issuance of Residence and Employment Permits to highly skilled third country nationals
The Cypriot government has revised its policy on the employment of highly skilled workforce from third countries who are employed by companies of foreign interests, as well as those employed by Cypriot companies that contribute added value to the economy and local workforce.
The eligible companies that can benefit from this revised policy are as follows:
- Foreign businesses/companies operating in Cyprus or foreign business/companies intending to operate in Cyprus and who operate independent offices in Cyprus, which are separate from any private residence or other office;
- Cyprus shipping companies;
- Cyprus companies relating to high-end technology and innovation;
- Cyprus pharmaceutical companies or Cyprus companies who are engaged in the fields of biogenetics and biotechnology.
Eligible companies can hire highly skilled third-country nationals in key positions who have a university degree or title or, equivalent qualification or, a certificate of relevant experience in a corresponding employment position for at least two years with a minimum gross monthly salary of €2500 and a two-year employment contract.
Relevant work permits for personnel covered by this updated policy will be issued within one month and will be valid for up to three years.
This regulation allows for a maximum number of third-country nationals to be employed. Only 70% of all employees may be employed under it in the first five years after joining the Business Facilitation Unit. After five years have passed, it is still not possible to employ 30% of Cypriot employees, 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 three years.
Family reunification rights to third country national employees
It’s important to note that this updated policy grants family reunification rights to the third-country national employees, which are managed by the Business Facilitation Unit.
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, will have direct and free access to the labour market as paid employees.
This right does not extend to supporting staff who receive a monthly salary of less than €2500.
Simplifying the process of granting work permits
The action plan calls for the issue of immigration and work permits under CATEGORY E – Long-Term Resident Status to those who have been offered permanent employment and whose employment does not create undue local competition, to make it simplified and accelerated.
Digital Nomad Visa
Cyprus will ease residency requirements for third-country nationals who are self-employed/freelancers or, employees who work remotely with employers/clients outside of Cyprus for a period of 12 months, in line with other European countries introducing similar arrangements for professionals who would like to work remotely.
Residency status would cover:
- 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;
- Family members of digital nomads can accompany them. However, their residency permits will expire at the same time as the digital nomad who will be acting as their sponsor. The spouse/partner and the sponsor’s dependents are not permitted to work or engage in any economic activity in Cyprus throughout their stay.
If the beneficiaries of this programme reside in Cyprus for one or more periods which in total exceed 183 days within the same tax year, then they are considered tax residents of Cyprus, provided that they are not tax residence in any other country.
Tax incentives for employees
Expansion of the tax exemption applicable to employees in Cyprus (provided that they were non-residents in Cyprus prior to the start of their employment) for a period of 17 years. The new measures will result in:
- 50 per cent tax exemption to new residents-employees with employment remuneration of more than €55,000;
- Current beneficiaries having the right to extend the benefit from 10 to 17 years.
Other tax incentives
There are additional tax incentives for corporate entities which are as follows:
- Extension of the tax exemption for investment in innovative companies, whereby the Ministry of Finance is considering the possibility of extending the 50 per cent 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 R&D expenses (eg by 20 per cent) so that eligible R&D expenses may be deductible from taxable income in an amount equal to 12 per cent of the actual taxable income.
Proposal regarding citizenship
The government is also proposing the right to submit an application for citizenship 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.