The Council of Ministers approved on the 15th of October 2021, the “Strategy for Attracting Businesses for Activities or/and Expansion of their Activities in Cyprus” and the implementation of the strategy commenced on the 1st of January 2022 (the “Strategy”).

The Strategy is a very important initiative towards attracting both international investments and talent. It includes a series of actions and reforms in several areas of intervention, aiming to enhance Cyprus position as an international high-growth business centre.

We set out below the actions and reforms implemented as of the 1st of January 2022:

Transforming the existing Fast-Track Business Activation Mechanism into a Business Facilitation Unit for companies operating or wishing to operate in Cyprus

The already existing Fast Track Business Activation Mechanism is being simplified and transformed into a Business Facilitation Unit, with the intention of assisting businesses to set-up their operations in Cyprus through one point of contact. The following companies are eligible to apply through the Business Facilitation Unit:

  1. Companies where the majority of the company’s shares is held by third-country shareholders; or in cases where the percentage of foreign participation in the company’s share capital is equal to or less than 50% of the total share capital, in order for the company to be considered as eligible, then the foreign participation should represent an amount equal to or greater than the amount of € 200.000 as nominal capital.
  1. Public companies registered in any recognised stock exchange
  1. Former offshore companies that were operating in Cyprus by approval of the Cyprus Central Bank, before the change of their offshore status.
  1. Cyprus shipping companies.
  1. Cyprus companies of high technology / innovation.
  1. Cyprus pharmaceutical companies or companies operating in the fields of biogenetics and biotechnology.
  1. Companies where the majority of their shares is held by individuals who have acquired Cypriot citizenship by naturalization based on economic criteria, given that they will prove that the conditions under which they were naturalized are still met.

It is noted that in order for any of the abovementioned companies to satisfy the criteria they must establish independent offices in Cyprus, in suitable premises, separate from any private housing or other office, except in the case of business cohabitation.

Revised policy for employment of staff from third countries, employed by companies / enterprises of foreign interests

The introduction of the Strategy also included the revision of the policies relating to the employment of staff from third countries, simplifying the process for eligible companies, as these are set out below:

Eligible companies:

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

The abovementioned changes included the following:

  1. Employment of third-country highly skilled nationals provided that:
    • they will be paid a minimum gross monthly salary of € 2,500.
    • they will hold a university degree or diploma or equivalent qualification or confirmation of relevant experience in a corresponding employment position of at least 2 years duration.
    • submit an employment contract of not less than two years.

 The maximum number of third-country nationals that can be employed is set at 70% of all employees over a period of 5 years, from the date of joining the Business Facilitation Unit. After the lapse of 5 years if it is not possible to employ 30% of Cypriot workers, the matter will be re-examined on a case-by-case basis

  1. Employment of third country nationals support staff (with a gross monthly salary of less than € 2500), is permitted provided that it does not exceed 30% of the total support staff and provided that there is an employment contract between the third-country national and the employer which is duly validated by the competent authority in accordance with current legislation.

It is noted that the permits will have a duration of three (3) years.

Right for Family reunification of third-country nationals working for eligible companies

Immediate and free access to the labour market, with remunerated employment for spouses whose family member has obtained a residence and work permit in the Republic of Cyprus, and who receive a minimum gross monthly salary of € 2,500 (excluding support staff).

Existing holders of residence permits under family reunification will benefit from the new Strategy. In this respect, with existing family reunification permits will be entitled to free access to paid employment without undergoing a market test (stamped contract by the Department of Labour).

Simplification and speeding up of the procedure for granting work permits (Category E)

It has been announced that the Ministry of Interior is currently working on an amendment to the “Aliens and Immigration” Law with the purpose of simplifying the procedure and determine the criteria on the basis of which the permits will be granted.

Digital Nomad Visa 

Through the Strategy a digital nomad visa was introducer, through which Non-EU or non EEA nationals who satisfy the following criteria may benefit:

  • Can perform work remotely through telecommunications technology;
  • Are employed in a company registered abroad, for which they can work location-independently, or are self-employed offering services remotely for clients located abroad;
  • Can prove that they have stable and sufficient monthly net income of at least €3500 (after the deduction of contributions and taxes).

Individuals that are granted with a Digital Nomad residence permit will benefit from the following:

  • Right of residence for a year in Cyprus, with a possibility of renewal for further two years.
  • Right of residence for family members, for the same period as the Digital Nomad, without the right to be employed of perform economic activity in Cyprus.
  • If they reside in the Republic for one of more periods that in total exceed 183 days within the same tax year, then they are considered tax residents of Cyprus, provided they are not tax residents in any other country.

The family members of digital nomads will also benefit from the digital nomad visa as follows:

  • Digital Nomad’s family members can reside in Cyprus for the same period as the Digital Nomad, without the right to be employed of perform any economic activity in Cyprus.
  • Family members include the spouse/ partner in a civil union and underaged children.
  • Family members also need to obtain a temporary residence permit following the procedure below.

Extension and expansion of tax exemption for investment in innovative companies

Extension of tax incentives for natural persons investing in an innovative small and medium-sized enterprise (SME) either directly or indirectly through an investment fund or through an alternative trading platform for venture capital investment, in the context of the expansion of the legislation that amends the Taxation Law until 30.6.2024.

Expanding of the existing tax benefit applicable to non domicile employees

The existing tax exemption of 50% is expanded for 10 years from the year of employment, to cover new entrants in Cyprus who are non-domicile employees with income from employment of EURO 55,000 and above.

Existing non domicile employees (that are in Cyprus), with income above EURO 100,000, have the opportunity to take advantage of the tax benefit for an extended period of 17 years.  For existing beneficiaries with income between EURO 55,000 and EURO 100,000, the tax benefit will be provided for 10 years, from the year of employment in Cyprus.

Increase in the tax deduction for research and development expenditure

The Strategy has introduced an increase in the 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.

Right to Cyprus naturalization

The process of obtaining Cyprus naturalization has changed, as eligible persons can now submit an application for naturalization after 5 years of residence and work in the Republic of Cyprus or after 4 years if they fulfil the criteria for holding a recognised certificate of Success in very good knowledge of Greek language

The Strategy has been implemented as of the 1st of January 2022, with the exception of some actions which require legislative amendments.

Disclaimer: The above article does not constitute legal advice, it is a reflection of the announcements made by the competent authorities in the Republic of Cyprus. 

For further information or advice contact our team – info@papakyriacoulaw.com