On 15 October 2021, the Minister of Finance has presented a new integrated strategy for attracting new businesses to Cyprus and encouraging their operations in Cyprus (the “Strategy”) aimed at making Cyprus a Sustainable Business and Commercial Center in the region and across Europe.
The Strategy is in line with the European Union acquis and in accordance with the guidelines of the European Commission and the Cyprus’s recovery and resilience plan.
In preparing the Strategy, the government has considered best practices from other European countries.
The new plan is based on 9 action points and will be implemented in Q1 2022.
The key points of the Strategy are briefly summarised below:
A. Business Facilication Unit
Following the positive effect that the Fast-Track Business Activation Mechanism has had in the past year which has been in operation, the government has set out to enhance its role and transform it into the Business Facilitation Unit so that it can further promote and enhance the ease of setting up and operating a business in Cyprus. It will act as the central point of contact for all companies of international interest either operating in or wishing to operate in Cyprus, as well as Cypriot companies in specific areas of economic activity. In doing so, it should optimize its operation, making greater use of technology.
The responsibilities of the Business Facilitation Unit will be:
- The provision of services for the establishment of businesses:
- Registration of companies and name approval
- Registration in the Social Insurance Registry
- Registration with the VAT and Income Tax
- Guidance for the necessary permits to operate in Cyprus
- Accelerate the issuance and renewal of residence and employment permits
The actions taken by the Business Facilitation are:
- Publication of manuals / guides to inform international companies on all issues related to their activities.
- Coordination of the simplification and digitization of all procedures related to the operation of international companies
B. Permits to employ staff from third countries
Revision of the existing policy for the employment of staff from third countries employed by businesses / companies of foreign interests
- Businesses / companies of foreign interests operating in the Republic of Cyprus or businesses / companies of foreign interests intending to operate in the Republic of Cyprus and which operate independent offices in Cyprus, which are housed in suitable premises, separate from any private residence or other office
- Cyprus shipping companies
- Cyprus high-tech / innovation companies,
- Cyprus pharmaceutical companies or Cyprus companies active in the fields of biogenetics and biotechnology.
Employment of third-country nationals with high skills
The requirements for third-country nationals with high skills are the following:
- a minimum gross monthly salary of € 2500
- hold of a university degree or diploma or equivalent qualification or certificates of relevant experience in a corresponding employment position of 2 years duration.
- present employment contract of not less than two years
The maximum permissible number of third-country nationals that can be employed is set at 70% of all employees over a period of 5 years, from the date of accession to the Fast-Track Business Activation Mechanism. In case 5 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.
Employment third country nationals as support staff
- Gross monthly salary of less than € 2,500
- The number of support staff does not exceed 30 % of the total support staff
- The third country national and the employer have duly entered an employment contract ratified by the competent authority in accordance with current legislation
- The amount of their salary is determined by the current legislation.
Note: In order to obtain the relevant employment permits for personnel from third countries, companies/businesses must submit certificates of registration to the Registrar of Companies register and the Tax Department
Right of employment for family members of third country nationals
Direct and free access to the employment market to spouses who have obtained a residence and work permit in the Republic, and who receive a minimum gross monthly salary of €2,500 (not applicable to support staff)
Simplification and acceleration of the process of granting work permits
The Ministry of Interior is already working on an amendment to the Regulations of the Aliens and Immigration Law to simplify the process and determine the criteria on the basis of which the permits will be granted.
C. Digital Nomad Visa
Digital Nomad Visa (initial limit of 100 applications)
It concerns a residence permit in the Republic and not a work permit.
Globally there is the shift to remote work. This creates prospects for Cyprus where it can attract people who will reside in Cyprus but will work in companies operating abroad.
The program was prepared on the basis of the corresponding plans implemented in other European countries (Portugal, Croatia, Estonia, Germany, Czech Republic, Norway and Greece) for third-party nationals under the Digital Nomad Visa regime
Third country nationals self-employed or employees who work remotely using information and communication technologies with employers / clients outside Cyprus for a period of 12 months.
- They have the right to stay in the country for up to one year, with the right to renew for another two years.
- They can be accompanied by their family members, to whom a residence permit expires at their request, ending at the same time as the dependant. During the stay in Cyprus, the spouse or partner (concerns persons who have entered into a civil union agreement) and the minor members of the dependent’s family are not allowed to provide dependent work or to engage in any kind of economic activity in the country.
- If they 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 meaning they are not tax residents in any other State.
The residence permit is issued to the person concerned, provided that he / she submits:
- a solemn declaration, stating his intention to reside in the country with a residence permit for the provision of distance work and his commitment not to provide in any way work or services or work to an employer based in Cyprus,
- employment or work contract or proof of employment with an employer, natural or legal person, who is established outside the Republic of Cyprus, for an indefinite period or in the case of a fixed-term contract with a residual duration covering the period of the residence permit granted, or
- employment or work contracts of indefinite duration or, in the case of a fixed-term employment contract, with a residual duration covering the period of validity of the residence permit granted, if the third-country national is self-employed with more than one employer established outside the Republic of Cyprus, the information on the status of the applicant in the business, as well as information on the name, registered office, field of activity and corporate purpose of the business in case the third country national is self-employed in his own business, which is located outside the Republic
- evidence that he has sufficient resources, a stable income sufficient to cover his living expenses during his stay in the country, without burdening the national social welfare system. The amount of sufficient resources is set at 3,500 euros per month and is increased by twenty percent (20%) for the spouse or cohabitant and by fifteen percent (15%) for each child. The amount of sufficient resources needs to be evidenced from:
- the employment or project contract or proof of employment, in the case of dependent work, services or work or
- a bank account. If sufficient resources come from paid employment services, services or work, the above minimum amount refers to net income after payment of the required taxes in the country of employment.
- Medical coverage
- White criminal record from the country of residence
D. Tax Incentives
Extension of tax exemption for investment in innovative companies
Consideration of the possibility of extending the 50% tax exemption for investment in certified innovative companies by corporate investors. The regime that was in force until the end of June 2021 allowed the tax exemption only to natural persons.
Extension of the tax exemption applicable to employees in the Republic (meaning that they were non-residents in the Republic before starting their employment for a period of 17 years)
- Extension of the existing tax exemption to cover new residents-employees with employment salary over €55,000 with a tax exemption of 50%.
- Existing employees have the opportunity to extend the benefit from 10 to 17 years. Potential beneficiaries of the benefit persons with income (€55K- € 100K) for the remaining period of 17 years.
- At the same time, the existing tax provision of 20% exemption from employment exercised in the Republic or €8,550 (whichever is less) will be abolished as income over €55k will receive an exemption from income tax of 50%.
- Increased (compared to the current) tax deduction for research and development expenses.
- Granting an increased discount on research and development costs (e.g. by 20%). Eligible research and development costs will be deducted from taxable income at 120% of the actual income.
Application for Cypriot Citizenship
Right to submit an application for naturalization after 5 years of residence and work in the Republic or after 4 years if they meet the criteria for holding a recognized certificate of very good knowledge of the Greek language
F. Social Security
Ensuring the right to social security
Ensuring the transfer of social security contributions , through intensification of efforts to conclude Bilateral Agreements with third countries to be determined by the Ministry of Foreign Affairs so that when a third country national has paid social security contributions in Cyprus, when he returns for permanent residence in his country he is entitled to transfer the contributions paid on the condition that with these contributions did not acquire any right to a pension for old age, incapacity, etc.
G. Additional Actions
- Information campaign to attract qualified Cypriots working abroad and targeted information campaign to qualified labour employed in countries where there is political instability (Belarus, Lebanon and Armenia)
- Promote complete and correct branding
- Complete courts reform
- Modernization and reform of the “Companies Law”
- Passage of a bill to facilitate strategic investments
- Create an online platform for start-ups, innovative and high-tech companies
- Review a framework for spin offs to make it more attractive
- Upgrade employees’ skills to align them with market needs (cross-sectoral competences, specialized programs and professional certificates)
- Develop new school programmes that will further promote science and related vocational guidance
- Align the syllabus of university programmes with market needs, especially in the fields of information and communication technology