News

In Brief

On 15 October 2021 the Cyprus government presented its Action Plan to attract companies that operate or wish to expand their activities to Cyprus, in an attempt to make the island a regional sustainable business centre.

The Action Plan will be implemented as from 1 January 2022 with the exception of actions 6 and 7 below for which the enactment of relevant new legislation is required. It is expected that the relevant legislation will be submitted to Parliament by the end of December and receive approval by the first quarter of 2022.

We expect that, the Competent Authorities, shall provide further details / guidance on the above in due course.

Main Actions

The action plan comprises reforms related to migration, tax and social insurance:

1. Transformation of the existing fast-track Business Activation Mechanism into a Business Facilitation Unit

The unit will function as the contact point for all companies of international interest, either operating in Cyprus or wishing to transfer their operations to the country, as well as for Cyprus companies in certain areas of economic activity:

• shipping companies,
• high-tech/innovation companies,
• pharmaceutical companies,
• companies operating in the fields of biogenetics and biotechnology.
  

Main responsibilities:

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

2. Revised policy for the issuance of temporary residence and work permits to third country nationals

Eligible Companies:

• Foreign companies operating in Cyprus or foreign companies wishing to establish presence in Cyprus,
• Cyprus shipping companies,
• Cyprus high-tech/innovation companies,
• Cyprus pharmaceutical companies or companies operating in the fields of biogenetics and biotechnology.
  

Main provisions:

• A minimum gross monthly salary of €2,500 is introduced for employees who have the required academic skills or at least two years of relevant experience:
  • Possession of a university diploma or title or equivalent qualification or certificates of relevant experience in a corresponding employment position for at least 2 years.
  • Presentation of an employment contract of no less than two years.
• Companies will be able to employ third country nationals as support staff (with gross monthly salary below €2,500) provided that the employment of third-country nationals does not exceed 30% of all support staff and the employer has entered into an employment contract duly approved by the relevant authority in accordance with the applicable law.
• The duration of the residence and work permit can be up to three years and will be issued within one month from the application date
• The maximum number of third country nationals is 70% of the total number of employees in a 5-year period from the date of the inclusion of the company in the Business Facilitation Unit.
  

3. Right to employment for family members of third country nationals who are part of the third country employment policy

Spouses of the individuals obtained a residence and / or work permit in the Republic, and who receive a minimum gross monthly salary of €2.500 (not applicable for support staff) will be eligible for direct and free access to the labor market as paid employees.

4. Simplification of the process for granting work permits

The Ministry of Interior will amend the relevant laws and regulations in order to simplify the process and determine the criteria based on which work permits are granted.

5. Digital nomad visa (quota for a maximum of 100 people)

• Beneficiaries
  Third country nationals self-employed or employees who work remotely using information and communication technologies, with employers / clients outside Cyprus.
• Residence status
  • Right to stay in the country for up to one year, with right to renew for another two years.
  • They can be accompanied by their family members, to whom, a residence permit that expires at the same time as their dependent’s is granted. During their stay in Cyprus, the spouse / partner is not allowed to provide dependent work or to engage in any kind of economic activity in the country.
  • If they live in the Republic for one or more periods that in total exceed 183 days within the same tax year then they are considered tax residents of Cyprus.
• Main Prerequisites, but not limited to:
  Evidence that they have sufficient resources, at a fixed income level, to cover their living expenses without burdening the national social welfare system. The amount of sufficient resources is set at €3.500 month and it can be supported by specific evidence.
  The above amount is increased by 20% for the spouse or cohabitant and by fifteen percent 15% for each child.
• Medical Insurance
• Clean criminal record certificate from the country of residence

6. Expansion of the existing tax incentives

• Expansion of the existing income tax exemption of 50% for taking up employment in Cyprus.
  • Personal Income Tax exemption of 50% to new residents-employees with income of €55.000.
  • Existing beneficiaries of the scheme should be able to extend the benefit from 10 to 17 years. Potential beneficiaries are individuals with income between €55K- €100K for the remaining period of 17 years.
• Extension of the tax exemption for investment in innovative companies.
  • Consideration of the possibility of extending the tax exemption to 50% for investment in certified innovative companies and by corporate investors.
• Increased tax deductions for Research & Development (R&D) expenses.
  • Granting an increased tax exemption on research and development expenses (e.g. by 20%). Eligible R&D expenses will be deducted from taxable income equal to 120% of the actual.
    

7. Naturalization.

Right to submit an application for naturalization after 5 years of residence and work in the Republic of Cyprus, compared to 7 applicable today. Further reduction to 4 years applies to individuals holding a recognized certificate of very good knowledge of the Greek language.

Further to the above, a series of promotional activities to raise visibility were also announced:

• Promotion of the Action Plan abroad
• Campaign to attract qualified Cypriots working abroad
• Campaign to attract qualified workforce employed in countries with political instability
  

Let’s talk

Feel free to get in touch with our expert lawyers for an in depth discussion on how these reforms might affect your business.

Athos Demetriou Associates LLC

Athos Demetriou Associates LLC is an award-winning commercial legal firm that offers clients high-end legal advice. Our team of lawyers have extensive experience in handling complex and sophisticated cases and transactions and deliver real value to clients.

The Firm has strengthened its footprint in the Cypriot Financial Services Market with the legal representation and counselling of a number of Cyprus Investment Firms and Alternative Investment Funds and it is considered as being amongst the market leaders in this field. It has also strengthened its network of professionals with regards to Commercial, Corporate and M&A issues.

We pride ourselves in our dedication to offering our clients stellar legal services. This not only translates to our knowledge, skill and expertise but also to our ability to be readily available to our clients. A new office brings us closer to you and allows us to efficiently operate in the two most commercially prominent cities in Cyprus. At the same time, the new space makes it more convenient both for our local and international clients operating in Limassol, to visit us when needed.