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Ministry of Finance announces new measures for attracting business in Cyprus

Contributed by Oxford Tax Solutions
19 November, 2021


On 15 October 2021, a new action plan was announced by the Ministry of Finance to attract companies to operate and expand their activities in Cyprus. This new plan is in line with the guidelines of the European Commission and it is expected to be fully implemented in the first quarter of 2022.

The main goal of these measures is to establish Cyprus as a sustainable business and trade centre in Europe. This will also help the economy, with the creation of new jobs and demand of domestic services. Another goal is the connection of education or training with the labour market. Emphasis is particularly given on domains related to high technology, shipping, innovation, research and development, biogenetics and biotechnology, without excluding any other companies that choose Cyprus as their place of operation and business. Finally these measures offer further tax incentives and correct some distortions in labour and immigration regimes.

A. Transformation of the existing Fast Track Business Activation Mechanism into a Business Facilitation Unit (BFU)

Eligible Companies:

  • Businesses / Companies of foreign interested established in Cyprus or wishing to established in Cyprus and have a physical presence including the establishment/operation of independent offices that are separate from any private residence.
  • Cyprus shipping companies.
  • Cyprus technology and innovation companies.
  • Cypriot pharmaceutical companies or companies operating in the fields of biogenetics and biotechnology.

The BFU will have the following responsibilities:

  • Provision of services for the establishment of corporate entities
    • Company registration and name approval;
    • Registration to Social Insurance Registry and Employers' Registry;
    • Registration to VAT Registry and Income Tax.
  • Guidance for the establishment and operation of companies in Cyprus;
  • Facilitation for the issuance of residence and employment permits in Cyprus.

B. Revised Policy for the issuance of temporary residence and work permits to third country nationals

Eligible Companies:

  • Businesses / Companies of foreign interested established in Cyprus or wishing to established in Cyprus and have a physical presence including the establishment/operation of independent offices that are separate from any private residence.
  • Cyprus shipping companies.
  • Cyprus technology and innovation companies.
  • Cypriot pharmaceutical companies or companies operating in the fields of biogenetics and biotechnology.

Issuing of temporary residence and employment permits in Cyprus for third country nationals with minimum acceptable gross monthly salary of EUR 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 corresponding employment position lasting at least 2 years.
  • Presentation of an employment contract of not less than two years.
  • The maximum allowed number of third country nationals should not exceed 70% of the total number of employees in a period of 5 years, from the date of joining the BFU.

Employment of support staff with gross monthly salary less than EUR 2,500

The employment of third-country nationals is permitted provided that it does not exceed 30% of all support staff and provided that the third-country national and the employer have entered into an employment contract duly approved by the relevant authority in accordance with the applicable law.

Duration of residence and employment permits

The permits will be issued immediately within 1 month and will last up to 3 years.

The right to family reunification of third-country nationals who are part of the third-country employment policy

Spouses of those obtained a residence and work permit in the Republic, through BFU, and who receive a minimum gross monthly salary of EUR 2,500 (not applicable for support staff) will have direct and free access to the employment as paid employees.

Moreover, the Ministry of Interior undertook the responsibility to amend the relevant legislation to simplify the process that the above permits will be granted.

C. Digital nomad visa

A new type of residence permit shall be introduced specifically for people who wish to live in Cyprus but work in companies operating abroad. Specifically, the beneficiaries are third country nationals who are self-employed or employees that work remotely using information and communication technologies, with employers/clients outside Cyprus and they wish to live in Cyprus. A maximum limit of 100 beneficiaries will initially exist.

Residency status:

  • 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, upon request, a residence permit that expires at the same time as their dependent's is granted. During their stay in Cyprus, the spouse or partner 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 live in the country for one or more periods that in total exceed 183 days within the same tax year, then they are considered Cyprus tax residents, meaning they are not tax residents in any other country.

Main prerequisites:

  • Evidence (supported by salary, employment contracts, bank statements, etc.) that the applicant has sufficient resources, at a fixed income level, to cover his/her living expenses during his/her stay in the country in order not to burden the social welfare system. The acceptable threshold of sufficient resources is set at EUR 3,500 per month (increased by 20% for the spouse or partner and by 15% for any minor);
  • Medical insurance;
  • Clean criminal record certificate from the country of residence.

D. Extension of the tax exemption that applies to the employees in Cyprus

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 EUR 55,000;
  • Current beneficiaries having the right to extend the benefit from 10 to 17 years.

E. Extension of the tax exemption for investment in innovative companies

Consideration of the possibility to grant the tax exemption of 50% for investment in certified innovative companies to corporate investors.

F. Increased tax deductions for Research & Development (R&D) expenses

Granting an increased tax deduction on R&D expenses (e.g. by 20%). Eligible R&D expenses will be deducted from taxable income equal to 120% of the actual.

G. Application for Cypriot citizenship

The period of eligibility for applying for citizenship will be reduced from seven years of residence and work in Cyprus to five years. Also holders of certification of very good knowledge of the Greek language can apply in four years of residence and work in Cyprus.

For professional assistance and advise you may contact us at solutions@oxfordcy.com .




 


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