New scheme of action for business activity expansion in Cyprus
Scheme of Action/Strategy of attracting businesses
On Friday, 15/10/2021, the Cyprus Minister of Finance has officially presented the Scheme of Action/Strategy of attracting businesses for the initiation and/or expansion of their activities in Cyprus. The Scheme shall come into effect on the 1st of January 2022.
The incentives provided via the Scheme focus, amongst others, to matters related with taxation, simplification and digitalization of procedures, work and stay permits (with emphasis on the areas of High Technology, Shipping, Innovation, Research and Development and Biogenetics/Biotechnology) as well as to promoting the country as an attractive business destination.
The new Strategy is concentrating on the following:
- Business Facilitation Unit
- The Fast Track Business Activation Mechanism will be transformed into a Business Facilitation Unit (the “Unit”) which will be responsible for the companies’ incorporation and registration with the Social Insurance, VAT and Tax Departments. The Unit will provide guidance for the necessary permits for business operations in Cyprus and will be responsible for the expedience of issuance and renewal of work and residence permits.
- Third country national work and residence permits
- Revision, expansion and simplification of the current policy for third country nationals’ employment. Eligible employer of third country nationals can be:
- foreign interest companies/business that are operating in Cyprus or intend to operate in Cyprus and which hold offices in Cyprus in proper spaces separate of any private residence or other office;
- Cyprus shipping companies;
- Cyprus high tech/innovative companies; and
- Cyprus pharmaceutical companies or companies that are operating in the fields of biogenetics and biotechnology.
The work permits shall be valid for up to 3 years and will be issued within one month from the submission of the relevant application. The criteria that should be met are:
- Minimum gross monthly salary: EUR2,500;
- Holding of university diploma or similar title or certificate of relevant experience in similar position of at least two years; and
- Employment contract of not less than two years.
It is noted that the maximum allowed number of third country nationals that may be employed is set to 70% of the total number of employees in a period of 5 years from the date of joining the Unit. In case the 5 years pass, and it has not been made possible to employ 30% of Cypriot employees the case will be re-examined.
It is further noted that employment of supporting staff from third countries is allowed provided that the number does not exceed 30% of the total supporting staff and provided that there is an employment contract in place duly ratified by the competent authority. The salary in this case is set pursuant to the current legislation. Permit validity is also for up to 3 years.
- Family members of third country national work permit holders
- Immediate and free access in the employment market to the spouses of the third country national work permit holders (excluding supporting staff).
- Simplification and acceleration of the work permit procedures
- Simplification and acceleration of the work permit procedures (Category E - Long Term Resident status).
- Social Securities
- Ensuring the right to a pension through the Social Security Fund by intensifying the efforts to conclude Bilateral Agreements with third countries so that when a third country national has paid social security contributions in Cyprus, when he returns to his country for permanent residence, to be entitled to transfer the contributions paid, on the condition that, with these contributions, he did not acquire any right to retirement, disability or other pension.
- Digital Nomad Visa
- Introduction of the Digital Nomad Visa. This visa will be granted to third country national self-employed/freelancers or employees who work remotely with the use of information and communication technologies with employers / clients outside Cyprus.
- The holders of Digital Nomad Visa will have the right to stay in the country for up to a year with a right of renewal for more two years and they may be escorted by their family members to which a residence permit may be also granted, following an application. The spouse or partner and the minor members of the holder of this visa are not allowed to provide dependent employment or engage in any form of economic activity in the country.
- It is noted that if the holders of Digital Nomad Visa reside in the Republic for one or more periods of time, which in total exceed 183 days within the same tax year, then they will be considered as Cyprus tax residents provided that they are not tax residents in any other state.
- The requirements that need to be met for granting the Digital Nomad Visa are, amongst others:
- proof of sufficient resources at a stable income level, to cover the applicant’s living expenses during his stay in the country, without burdening the national social welfare system. The amount of sufficient resources is set at EUR3,500 per month and is proved by an employment or project contract or proof of employment relationship and bank account. If the sufficient resources derive from paid employment services, services or project, the above minimum amount refers to net income after payment of the required taxes in the country of employment. The amount of EUR3,500 shall be increased by 20% for the spouse or cohabitant and 15% for each child;
- Medical coverage (GESY); and
- Clean criminal record from the country of residence.
- Tax incentives
- Tax exemption of 50% to new residents-employees with remuneration from employment of EUR55,000.
- Existing employees with earnings of less than EUR100,000 can extend the benefit from 10 to 17 years. Eligible beneficiaries of this benefit can also include persons with income (EUR55,000- EUR100,000) for the remaining period of 17 years.
- Examination of the possibility of 50% tax exemption for investments in certified innovative businesses and from corporate investors.
- Increased allowances on research and development expenditure (e.g.: by 20%). Eligible research and development costs will be deducted from taxable income at 120% of the actual income.
- Citizenship
Right to apply for Cyprus citizenship after 5 years of work and residence in the Republic (instead of 7 years that applies today) with further reduction to 4 years if the applicant holds a certificate of very good knowledge of the Greek language.
- Promotional actions
Promotion of the Action Plan abroad, information campaign to attract qualified Cypriots working abroad and targeted information campaign on qualified workforce employed in countries with political instability.