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New mechanism aiming to attract foreign companies & investments to Cyprus

On Friday 15/10/2021, the Cyprus Ministry of Finance announced an action plan for attracting foreign investment and enhancing business activity in Cyprus.

1. Business Facilitation unit:

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

The FTBA is operated by the Ministry of Energy, Commerce and Industry (MECI) and includes the following ‘service package’:

  • Guidance for establishment and operation of companies in Cyprus and provision of information for all the necessary permits required by the company in order to start operations.
  • Assistance and accelerated procedures from a single point of contact to obtain all necessary local registrations for the establishment or re-domiciliation of companies in Cyprus, including its name approval, registration, registration with the Employers’ Registry (ERGANI) and Social Insurance Registry, VAT and Income Tax registration.
  • Eligibility criteria available for employing third-country (non-EU) nationals under more favourable conditions and facilitation for an expedited issuance of all necessary residence and employment permits for third country nationals (and members of their family) required for the operation of companies in Cyprus.

2. Policy for Issuance of Temporary Residence and Employment Permits to highly skilled third country nationals and supporting staff

Cyprus government recommended the review, broadening and simplification of the existing policy requirements for the issuance of temporary residence/employment permit to third-country nationals employed by the following type of companies:

  • Foreign companies/undertakings operating in Cyprus or foreign companies intending to operate in Cyprus that operate independent offices in Cyprus, housed in in appropriate independent offices, separate from any private residence or other office.
  • Cypriot shipping companies.
  • Cypriot high-end technology / innovation companies.
  • Cypriot pharmaceutical companies or Cypriot companies operating in the fields of biogenetics and biotechnology.

According to the action plan policy, a temporary residence and employment permit shall be issued to third country nationals with minimum acceptable gross monthly salary of €2.500, provided that the following conditions are met:

  • Possession of a university diploma or degree or equivalent qualification or confirmation of relevant experience in a corresponding job of at least 2 years’ duration.
  • Possession of an employment contract of not less than 2 years’ duration.

The maximum number of third country nationals that can be employed under this policy is 70% of the total number of employees employed within a period of 5 years, from the date of joining the Business Facilitation Unit.

Employment of third-country nationals as support staff will be also permitted provided that it does not exceed the 30% of the total supporting staff employed by the company.

The permits shall be issued immediately within 1 month and shall have a duration of up to 3 years.

3. Simplifying and fast-tracking the process of granting work permits (CATEGORY E - Long-Term Resident Status)

The action plan provides for the simplification and acceleration of the process of granting immigration and work permits under CATEGORY E (Long-Term resident status) to persons who have been offered permanent employment and whose employment does not create unnecessary local competition.

4. Right to family reunification of third-country nationals

Immediate and free access to the labour market for the spouses whose financial supporter has obtained a residence and work permit in the Republic, and who receives a minimum gross monthly salary of €2,500 (excluding support staff).

5. Introduction of Digital Nomad Visa

Nomad visas are available to third-country nationals who are self-employed or employees working remotely using information and communication technologies, with clients or employer outside Cyprus for a period of 12 months.

Holders of Digital Nomad Visas will have the right to stay in the country for a period of up to 1 year with the right to renew their residency for another 2 years. They can be accompanied by their family members who, however, during their stay in Cyprus are not allowed to provide dependent work or to engage in any kind of economic activity in the country.

If the holder of a Digital Nomad Visa resides in Cyprus for one or more periods which in total exceed 183 days within the same tax year, then they shall be considered as Cyprus tax residents, provided that they are not tax resident in any other country.

6. Tax incentives:

  • Tax exemption of 50% to new non domicile employees with remuneration of €55,000 and above – period 10 years,
  • Tax exemption of 50% for existing non domicile employees with remuneration of €100,000 and above – extended period 17 years,
  • Tax exemption of 50% for existing non domicile employees with remuneration between €55,000 & 100,000 - period 10 years,
  • Tax exemption extension for investments in innovative companies: Examine the possibility of extending the 50% tax exemption for investment in certified innovative companies to corporate investors,
  • Increased (compared to the real) tax deduction for research and development expenditure: Granting an increased discount on research and development expenditure (e.g. by 20%). Eligible research and development expenses will be deducted from taxable income at 120% of actual expenses.

7. Citizenship/Naturalization

Third country employees shall have the right to apply for naturalization:

  • After 5 years of residence and work in the Republic, instead of the 7 years rule as applicable today,
  • Further reduction to 4 years if the criterion of holding a recognized certificate of very good knowledge of the Greek language is met.

The action plan/mechanism shall be implemented from 01/01/2022. Emphasis is placed on areas related to, inter alia, High Technology, Shipping, Innovation, Research and Development, Biogenetics and Biotechnology, without excluding any other companies that choose Cyprus for relocation purposes. Its implementation aims to turn Cyprus in the coming years into an international hub for such businesses, offering high and sustainable added value to the economy, through the creation of new job opportunities and increased demand for domestic services, making this sector an important pillar of the new development model designed for the country.