New strategy for attracting business to Cyprus

Following an announcement made on 15^th October 2021 by the Minister of Finance of the Republic of Cyprus, Constantinos Petrides, the New Strategy for Attracting Companies for Operation and/or Expansion of their Activities in Cyprus has been launched, offering significant benefits with focus on companies of foreign interests with physical presence* in Cyprus, including Cyprus companies operating in:

• high technology sector;
• shipping;
• innovation;
• research and development;
• local pharmaceutical companies;
• local companies active in the fields of biogenetics and biotechnology.

Strategy overview

Entering into force in January 2022, the strategy includes the expedited residence and employment permits, tax incentives, and simplified digital procedures. Presenting the new strategy, Minister Petrides focused on further tax incentives and correcting some distortions in labour issues and in the immigration regime. Minister Petrides also stated that there’s competition between European countries in attracting such investments, with multiple countries promoting their own, similar programs.

President Nicos Anastasiades stated that “the implementation of the strategy and the establishment and operation of international companies in Cyprus will offer high and sustainable added value to the economy, through the creation of new jobs and increased demand for domestic services, but will also redefine the country`s development model”. President Anastasiades also added that “the new strategy aspires to turn Cyprus into a sustainable business and trade centre not only in Europe, but the wider region as well, and is fully in line with the European acquis and the Long-term Growth Strategy 2035, the new productive model for the future and the guidelines of the European Commission and the Recovery and Resilience Fund”.

1. Business Facilitation Unit

1.1 Under the scope of the strategy, the existing Fast Track Business Activation Mechanism, which has recorded estimated 500 temporary residence and employment permits granted for over 20 new companies registered under the Mechanism from Lebanon, Israel, Luxembourg, the UK, the USA, Russia and Ukraine, is now merging into the Business Facilitation Unit (BFU).

1.2 The BFU, which will function as the main point of contact for all companies of foreign interests, either operating in Cyprus or wishing to operate on the island, as well as for Cyprus businesses with aforementioned economic activities, will facilitate the following:

• • business registration;
  • VAT, Income Tax and Social Insurance setup;
  • working permits for high skilled non-EU employees with a minimum gross monthly salary of €2.5K, while an university degree, title, equivalent qualifications or certificates of relevant experience will also be required.

1.3 The employees’ spouses will also have access to the island’s labour market.

1.4 Work permits for non-EU nationals will be issued within 1 month with the duration of up to 3 years, and will be limited at up to 70%** of all employees per a company over a period of 5 years.

1.5 Following the efforts to conclude bilateral agreements with the non-EU countries, the transfer of Social Security Contributions will be ensured for the non-EU nationals employed on the island.

2. Digital Nomad Visa

2.1 Digital Nomad Visa is being made available for up to 100 individuals.

2.2 Non-EU nationals who wish to live on the island and are either self-employed, freelancers or working remotely for companies operating abroad, using information and communication technologies for employers and clients outside Cyprus, are eligible to apply for Digital Nomad Visa.

2.3 Digital Nomad Visa will be granted for a period of 1 year with the right to renew for another to 2 years, to individuals with a minimum gross monthly salary of €3.5K, health insurance and a clear criminal record from the country of residence.

2.4 Spouses and minor children’s residence permits (without a possibility of employment permit) will be granted for the duration of the Digital Nomad Visa holder’s permit, subject to income increase of 20% and 15% respectively.

2.5 Should Digital Nomad Visa holders reside on the island for a period exceeding 183 days during the same tax year, The Digital Nomad Visa holders will be considered tax residents of Cyprus, provided they are not tax residents in any other country.

3. Tax Incentives

3.1 Tax exemptions will be extended for investment in innovative business.

3.2 Tax incentives provide for an increased deduction for research and development expenditure, e.g. by 20%.

3.3 The existing tax exemptions for foreign high-skilled employees in Cyprus are extended from 10 to 17 years for beneficiaries with income between €55K and €100K, in addition to being extended to cover new residents-employees with a yearly salary from employment of €55K with a tax exemption of 50%. These tax incentives also apply to Cypriots who have lived abroad for at least ten years and wish to repatriate to the island.

4. Cypriot Citizenship

4.1 Non-EU nationals under this strategy will also have the right to apply for Cypriot citizenship after 5 years (instead of the current 7 years) of legally residing and working on the island, or after 4 years if they have an acknowledged certificate of very good knowledge of the Greek language.

For more information on new strategy for attracting business to Cyprus and how this may affect your business, please contact us at [email protected]

*Physical presence of the company is separate and/or other than the personal residence and/or shared office.

**The limit for support staff with a gross monthly salary lower than €2.5K is set at up to 30%. Also, family reunification is not included for the support staff.