Cyprus Business Attraction Action Plan
On 15 October 2021, the Cyprus Government presented its new Action Plan for attracting businesses to Cyprus with an emphasis, among others, on high technology, shipping, innovation, research and development, aiming to turn the island into an international high-growth business centre.
The pillars of the Action Plan are as follows:
Business Facilitation Unit (BFU)
As of 1 January 2022 the current fast-track business activation mechanism will be evolved into the Business Facilitation Unit (BFU).
The Unit will be responsible for the provision of the below mentioned services:
a) Facilitating the formation of corporate entities, namely providing the services for the
name approval and company registration, registration with the Social Insurance
Registry, the Employers’ Registry, VAT and Income Tax.
b) Guiding the formation and operation of corporate entities in Cyprus.
c) Assisting with the issuance of residence and employment permits in Cyprus.
Employment of Non-EU Nationals
The Companies of International Interest are allowed to employ Non-EU Nationals, provided that the below mentioned requirements are followed:
a) The foreign companies operating in Cyprus or desiring to establish presence in
Cyprus shall have a physical presence in Cyprus in suitable premises, being
separated by any private house.
b) A general minimum gross salary of €2,500 will be offered for employees with
required academic skills or at least 2 years of relevant experience.
c) Employment of Non-EU Nationals as supporting staff with gross salaries below
€2,500 only if the total employment of Non-EU Nationals does not exceed 30%
of the total supporting staff of the entity.
d) The work permits will be issued within one month from the date of application and
will last up to 3 years.
e) The maximum number of Non-EU Nationals is 70% of the total number of
employees in a 5-year period (starting from the date the company was included in
the business facilitation unit).
Employment of Non-EU Nationals spouses
An immediate and free access to the country's labour market will be provided to the spouses of non-EU nationals employed by a Company operating under the provisions of the Business Facilitation Unit and who receive a minimum gross monthly salary of €2,500. This provision is not applicable for the spouses of support staff.
Simplification of the process for obtaining Permanent Residency
The Ministry of Interior will amend the relevant regulations of the Aliens and Migration Law, to simplify the process and determine the criteria based on which work permits will be granted.
Digital Nomad Visa
A new type of permit, the so-called Digital Nomad Visa, will be introduced for those who wish to live in Cyprus but work remotely for companies operating abroad. This will benefit Non-EU Nationals who are self-employed or employees who work remotely using information and communication technologies, with employers or clients outside Cyprus. The initial allocation is for a maximum of 100 visas. The visa will be granted for the period of 1 year with the right to renew it for another 2 years. They may be accompanied by their family members, to whom a residence permit may be granted, upon request, that expires at the same time as that of the visa holder.
The spouse or partner and minor children of the digital nomad visa holder may not work or engage in any kind of economic activity in Cyprus. If they stay in Cyprus for a period that exceeds 183 days during the same tax year, they will be considered tax residents of Cyprus, provided they are not tax residents elsewhere.
To qualify for a visa, the individual must have a minimum income from overseas (evidenced by pay slips, bank statements, etc.) of at least €3,500 per month – increased by a further 20% for a spouse and by 15% for any minor child. Be holder of medical insurance and have a clean criminal record certificate from their country of residence.
Tax Incentives
A number of tax incentives are also proposed that will require legislative regulations. The aim is for the relevant legislation to be submitted to parliament by the end of December and to be approved during the first quarter of 2022. These include proposals to:
Expand the existing personal income tax exemption of 50% to cover new Cyprus tax resident employees with annual salary income of at least €55,000, while existing beneficiaries of the scheme with annual salary income between €55,000 and €100,000 will be able to extend the exemption from 10 to 17 years.
Extend the tax exemption of 50% for investment in certified innovative companies to corporate investors.
Introduce an enhanced tax deduction of 20% on research and development (R&D) expenses, i.e. 120% of the actual expenditure incurred may be deducted from taxable income.
Application for Cypriot Citizenship
Legislation will also be required to introduce two proposed changes to applications for citizenship:
Non-EU Nationals who are employed in Cyprus, will be able to apply for citizenship after 5 years of residency instead of 7.
For those who have a very good knowledge of the Greek language with a proof of certification, will be able to apply for citizenship after 4 years.
Social Insurance
The transfer of social security contributions will be ensured through Bilateral Agreements (currently under determination by the Ministry of Foreign Affairs) with third countries so that when a Non-EU National has paid social security contributions in Cyprus and he/she returns for permanent residence in his/her country, to be entitled to transfer the contributions paid, provided that he/she did not acquire any right to a pension of old age, incapacity, etc. with such contributions.
Promotional Actions
The competent officials of the Action Plan aim to proceed with the following promotional actions:
a) Promotion of the Action Plan abroad.
b) Campaign for attracting qualified Cypriots working abroad.
c) Targeted campaign to qualified workforce employed in countries with political
instability.
The above-mentioned provisions of the Action Plan will be entered into force as from the 1 January 2022 with the exception of actions on Tax Incentives and Application for Cypriot Citizenship which require legislative regulations. The target is to submit to the Cyprus Parliament the relevant legislation for the actions on Tax Incentives and Application for Cypriot Citizenship by the end of December so as to get approved by the first quarter of 2022.
For any further clarifications and/or assistance we are always at your disposal, so please do not hesitate to contact us.