News and developments
HEADQUARTERING AND BUSINESS RELOCATION TO CYPRUS
The answer is affirmative.
The Government of the Republic of Cyprus has launched a new action plan which has been implemented from the 1st of January 2022 to attract foreign businesses to establish or expand their activities in Cyprus. The aim of this report is to analyse this Governmental action plan. Further to highlight the headquartering investment option introduced under the permanent residency permit pursuant to regulation 6(2) of the Aliens and Immigration Regulations.
NEW POLICY FOR THE EMPLOYMENT OF THIRD COUNTRY NATIONALS
The policy for the employment of third country nationals by eligible companies in Cyprus has been simplified and thus has become more attractive. As financial issues along with human element considerations are the core of every decision to be taken, we highlight the fact that as from the 1st of January 2022 it is no longer obligatory for eligible employer companies in Cyprus to establish a bank account in Cyprus and remit to such a bank account from abroad an amount of Euro 200.000. This abolition has been most welcomed by the business world. There are criteria to be met both at the level of the eligible company which will act as the employer in Cyprus and for the third country national employees to be employed. Eligible companies for the employment of third country highly skilled nationals The Business Facilitation Unit (BFU) of the Ministry of Energy, Commerce and Industry in Cyprus will need to give its approval that the prospective employer company is indeed eligible under this policy. Eligible companies fall under the following categories:- Foreign companies/undertakings operating in the Republic of Cyprus or foreign companies/undertakings intending to operate in the Republic of Cyprus, that operate in appropriate independent offices in Cyprus, separate from residences or other offices
- Public companies listed on any recognised stock exchange
- International business companies (ex -offshore companies) which operated under an older policy and the particulars of which are held by Central Bank of Cyprus
- Cypriot shipping companies
- Cypriot high-tech innovative companies
- Cypriot pharmaceutical companies or companies active in the sectors of biogenetics and biotechnology
- Companies which belong by majority to persons who have obtained Cypriot citizenship on the basis of economic criteria provided such persons are in a position to show that they still meet the conditions under which they had obtained Cypriot citizenship.
- need to have a minimum gross monthly salary of Euro 2.500
- have a university diploma or degree or equivalent qualification or confirmation of relevant experience in a corresponding job of at least 2 years duration
- The employment contract of highly skilled personnel is of duration of not less than two years
- The duration of work permits issued is up to three years (before it was up to two years)
- The issuance of the work permit (the actual card) is ready for collection within 1 month from filing of the relevant application with the Migration department.
- Employment of third country nationals is permitted as support staff, provided their number does not exceed 30% of all support staff employed and provided that the third country national and the employer have entered into an employment contract duly ratified by the competent Authority in accordance with the existing applicable law. The salary level is determined on the basis of the existing applicable legislation.
- Duration of employment permits are up to 3 years
DIGITAL NOMAD VISA
This is an entirely new type of residence visa which is available to third country nationals. It is targeting third – country nationals that are self-employed or salaried employees, working remotely with employers/clients outside Cyprus, through the use of information and communication technologies. The very essence of this type of visa is the fact that it is merely a residence visa, not an employment visa. It gives the right to holders to stay in Cyprus for up to one year with the right to renew for another two years. Applicants can be accompanied by family members who are granted a residence permit that expires at the same time as that of the financial supporter. Unlike the spouses of highly skilled employees of who work at companies which have been approved by the BFU, the spouses of a holder of digital nomad visa are not allowed to engage in any form of economic activity in Cyprus. The holder of a digital nomad visa and his/her spouse will be considered as tax residents of Cyprus if they reside in Cyprus for one or more periods totalling more than 183 days within the same tax year, provided that they are not tax residents in any other country. Main pre-conditions that will need to be met for a successful application for a digital nomad visa are:- Evidence that he/she has sufficient funds, a stable income to cover living expenses during the stay in Cyprus without recourse to the national social welfare system. The amount of sufficient funds is set at a net of Euro 3.500 per month which is proved by:
- the employment or works contract or proof of employment for the duration for which the digital nomad visa will be issued
- bank statements for at least 6 months showing the secured monthly net income of Euro 3.500.
- evidence of receipt of funds of net amount of Euro 3.500 per month
NEW OPPORTUNITIES UNDER THE REVISED INVESTMENT CRITERIA - PERMANENT RESIDENCY PERMIT (PURSUANT TO REGULATION 6(2) OF THE ALIENS AND IMMIGRATION REGULATIONS
Up to March 2021, only investors who were interested in investing in residential properties in Cyprus would even consider the permanent residency permit pursuant to regulation 6 (2) of the Aliens and Immigration regulations. In March 2021 three more investment options were introduced widening the options to potential investors. For the purposes of this report we shall focus one of the four alternative investment options under this category, being the investment of Euro 300.000 in the share capital of a Cyprus company which operates in Cyprus, has proved physical presence in Cyprus and employs at least five persons in Cyprus. There is no limitation whether these 5 persons employed to be third country nationals/EU citizens/Cypriots. An expected question would be the following: Why would a third country national investor make the expense of investing Euro 300.000 in the share capital of a Cyprus company when he/she may, by registering a Cyprus company which will be owned by more than 50% by third country nationals and by obtaining the approval of the BFU as explained in point B above, to proceed to employ third country nationals with no obligation to make a cash investment from abroad? A reply to the above question would be that under point B the work permit to be issued to third country nationals working in Cyprus are temporary permits subject to renewal. An investor who invests Euro 300.000 in the share capital of a Cyprus company would obtain a permanent residency permit, such permit not being subject to renewals, the only obligation being to visit Cyprus at least once every two years to avoid the automatic cancellation of the permanent residency visa. So a third country national investor may invest in his/her own company, become employed by his/her company as director and hold a permanent residency permit. An option giving the investor the best of both worlds. Additional considerations for the permanent residency permit under regulation 6(2)- An applicant for a permanent residency permit under regulation 6(2) will need to show that he/she has a secured annual income of Euro 30.000, such amount increased by Euro 5.000 for each depended family member and by Euro 8.000 for each depended parent or parent of his/her spouse. The advantage offered to applicants who choose to invest Euro 300.000 in the share capital of a Cyprus company as opposed to investing Euro 300.000 in residential properties is the fact that such applicants are allowed to provide evidence that the annual income they have of Euro 30.000 emanates from sources within Cyprus.
- the applicant and/or spouse of the applicant may hold the position of director in their company in which they invested Euro 300.000
- children of the applicant aged between 18-25 may also obtain a permanent residency permit and retain it after becoming 25 years old provided certain conditions are met.
TAX INCENTIVES
Tax incentives have been broadened, applicable to third country national employees in Cyprus. In particular the tax incentives introduced are the following:- Exemption of 50% from personal Income tax to new employees with employment remuneration of Euro 55.000 and above for a period of 10 years. This exemption will also be granted to existing employees with employment remuneration between Euro 55.000 and Euro 100.000.
- Exemption of 50% from personal income tax to existing employees with employment remuneration of Euro 100.000 and above for a period of 17 years (before applicable only for 10 years).
ADDITIONAL INCENTIVES EXPECTED TO BE IMPLEMENTED BY THE CYPRUS GOVERNMENT AS PART OF THE STRATEGY FOR ATTRACTING BUSINESSES AND TALENT IN CYPRUS
The intention of the Cyprus Government in making Cyprus an attractive hub for headquartering of business in Cyprus can be seen by various other incentives expected to be implemented in the near future, indicatively mentioning the following:- simplification and speeding up of the procedures for granting work permits under category E
- extend by 31/12/2023 the existing regime of 50% exemption for investments in an approved innovative company by an individual or through an investment fund or through an alternative trading platform. The existing regime was terminated on 30/6/2021.
- incremental tax allowance on research and development expenditure (e.g by 20%). Eligible research and development expenditure will be deducted from taxable income at 120% of the actual expenditure.
- having the right to submit an application for naturalization after 5 years of residence and work in Cyprus or after 4 years if they fulfil the criteria for holding a recognised certificate of success in very good knowledge of the Greek language
- Intensifying efforts for concluding Bilateral agreements with third countries that will be determined by the Ministry of Labour and Social Insurance, so that when a third country national who has paid social security contributions in Cyprus returns to his/her country of permanent residence he/she will be allowed to transfer the contributions paid, on the condition that with these contributions he/she did not acquire any right to a pension for old age, disability or other.
- upgrading of the infrastructure for information and communication technologies and broadband connectivity.