On the 15th of October, 2021, the Council of Ministers approved the introduction of the Digital Nomad Visa Scheme in Cyprus, with a cap of 100 visas to be issued. The scheme was officially launched on the 15th of February 2022.
The “Digital Nomad Visa” scheme allows nationals from non-EU and non-EEA countries, who use technology to work remotely, to reside temporarily in Cyprus and work for an employer registered abroad or for companies or clients located abroad.
Individuals granted a Digital Nomad Visa have the right to stay in Cyprus for up to 1 year, with the right to renew for an additional 2 years. Such visa holders will have the right of family re-unification for their family members whereby a residence permit would be granted, following a successful application. The family’s residence permit would then expire when the digital nomad’s visa expires, as the visa holder acts as the family’s sponsor.
During their stay in Cyprus, the spouse or the civil partner of the person who is granted a Digital Nomad Visa, and the minors of their family are not permitted to work or engage in any kind of economic activity in Cyprus.
The scheme aims to strengthen Cyprus’ development as a hub for digital nomads aiming to benefit of the island’s many advantages.
Who can benefit Non-EU or non-EEA nationals who:
Can perform work remotely digitally;
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).
What are the benefits
Individuals that are granted with a Digital Nomad Visa 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.
Family members
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 children below the age of 18.
Family members also need to obtain a temporary residence permit following the procedure below.
Examination time
The time of examination is between 5 – 7 weeks.
Duration of Digital Nomad Visa
The Digital Nomad Visa is issued with a validity of one year.
On renewal, the Digital Nomad Visa is issued with a validity of maximum two years.
What we do
Panayiotis Z. Toulouras LLC provides corporate services to clients worldwide. Our law firm, with it’s team of experts, provides strategic advice for individuals and entities, seeking the foreign interest company route, and ensures a smooth transition for all clients aiming to relocate an existing business or launch a new business in Cyprus.
Incorporation of a Cyprus company
Registration of a Foreign Interest Company
Digital Nomad Visa applications
Launch and Setting up consultation
Family reunification
Employment agreements
Purchase and/or rental of commercial and residential premises
Applications for permanent and temporary residence
Applications for naturalization
IP registration
Advice on all related tax aspects
Opening of corporate and personal bank accounts in Cyprus and abroad
On the 21st of December 2021, the Cyprus Parliament, approved legislative amendments to boost Cyprus’ tax framework. The majority of amendments draw attention and directly impact companies from jurisdictions that are included in the EU blacklist of non-cooperative jurisdictions for tax purposes, with an introduction of new provisions for withholding taxes on outbound payments of dividend, interest and royalties to blacklisted jurisdictions.
The current EU blacklist is currently composed of the following jurisdictions: American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, US Virgin Islands and Vanuatu.
Furthermore, the amendments introduce a key change to the definition of Cypriot companies’ tax residency, with the addition of the ‘incorporation test’.
The Law amendment will enter into force on 31 December 2022.
Cyprus Tax Residency
The current Income Tax law states that a Cyprus company is considered as a Cyprus tax resident if the management and control is exercised in Cyprus. The amendments expand the definition of corporate tax residency for Cyprus companies and includes the incorporation test, this means that Cyprus incorporated companies, with
management and control exercised outside Cyprus; and
not tax resident in any other jurisdiction, will now be considered as Cyprus tax residents and as such, taxed in Cyprus on their worldwide income.
The existing corporate tax residency test will continue to apply, so that a company that has its management and control in Cyprus will continue to be considered as a tax resident of Cyprus i.e. its tax residency status will not be affected by the Law amendment.
EU Blacklist Jurisdictions – Withholding Taxes
The new amendments also introduce withholding taxes for outbound payments of interest payments, dividends and royalty payments to jurisdictions of the EU Blacklist.
Interest payments
Interest payments by a Cyprus tax resident company to another company will be subject to withholding taxes at the rate of 30% if paid to a company which is:
resident in any jurisdiction which is included in the EU Blacklist, or
registered in any jurisdiction which is included in the EU Blacklist and is not a tax resident in any other jurisdiction which is not included in the EU Blacklist.
Exclusions apply to situations where:
Interest payments are completed in relation to securities listed on a recognized stock exchange, and
Interest payments are made by an individual.
Dividends
Dividends paid by a Cyprus tax resident company to another company will be subject to 17% special defence contribution if paid to a company which is:
resident in any jurisdiction which is included in the EU Blacklist, or
registered in any jurisdiction which is included in the EU Blacklist and is not a tax resident in any other jurisdiction which is not included in the EU Blacklist.
Further, either of the below conditions must also apply:
The company receiving the dividend holds over 50% of the capital of the Cyprus resident company issuing the dividend, holds over 50% of the voting rights or is entitled to receive more than 50% of the profits in the company paying the dividend.
Royalty payments
Royalty payments by a Cyprus tax resident company to another company will be subject to withholding taxes at the rate of 10% if paid to a company which is:
resident in any jurisdiction which is included in the EU Blacklist, or
registered in any jurisdiction which is included in the EU Blacklist and is not a tax resident in any other jurisdiction which is not included in the EU Blacklist.
Exclusions apply to situations where:
Royalty payments are made by individuals.
What we do
Panayiotis Z. Toulouras LLC provides corporate services to clients worldwide. Our law firm, with it’s team of experts, provides strategic advice for individuals and entities, seeking the foreign interest company route, and ensures a smooth transition for all clients aiming to relocate an existing business or launch a new business in Cyprus.
Incorporation of a Cyprus company
Registration of a Foreign Interest Company
Business visa applications and other visas
Launch and Setting up consultation
Corporate Structuring
IP registration
Advice on all related tax aspects
Opening of corporate and personal bank accounts in Cyprus and abroad
The 31st of December 2021 saw the end of the previous scheme regarding the registration of foreign interest companies and the issuance of immigration permits for employees of foreign interest companies registered in the Republic of Cyprus.
January 2022 sees the commencement of the new Government Strategy aimed in attracting foreign interest companies to relocate their activities to Cyprus or allow existing companies to expand their activities in Cyprus.
The new policy ends the requirement of transferring €200,000 from abroad, for Cyprus companies that are majority owned by third country nationals. The new policy also removes the €4,000 and €2,000 minimum monthly salary for different categories of personnel, with the new scheme setting the salary for highly skilled personnel at a minimum €2,500 per month.
Key things to know:
Which companies are considered as ‘’foreign interest’’ in order to be eligible for new incentives?
Third Country Shareholders – Majority Owned Company
Third-country shareholders should own the majority of the company’s shares.
The new policy no longer requires third country shareholders who own the majority of the foreign interest company to transfer an amount equal to or greater than the amount of € 200.000 to a Cyprus corporate bank account from abroad.
OR
Third Country Shareholders – No Majority Owned Company
In cases where the percentage of the foreign participation (third-country shareholders) 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 eligible, the foreign participation should represent an amount equal to or greater than the amount of €200.000 as nominal capital stated in the Company’s Memorandum of Association.
OR
Companies that fulfil the following criteria:
Public companies registered in any recognised stock exchange
Former offshore companies that were operating in Cyprus by approval of the Cyprus Central Bank, before the change of their offshore status.
Cypriot shipping companies.
Cypriot companies of high technology / innovation – this relates to companies which meet the below criteria
The company is established and present in the tech market, and
The company has high levels of Research and Development intensity, and
The company focuses on products that are included in the below categories:
i. Space industry
ii. Telecommunication, electronic products or computers
iii. Pharmaceutical or biomedical
Cypriot pharmaceutical companies or companies operating in the fields of biogenetics and biotechnology.
Persons 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.
AND
The company has established and operates independent offices in Cyprus, in suitable premises, which are separate from any private housing or other office – except in the case of business cohabitation.
Temporary Residence, Immigration Permits and Family Reunification
Employment of highly skilled personnel
Positions based on categorisation of employment such as Directors, Specialists, Managers Key Personnel, Specialists and on minimum gross monthly salaries such as €4,000 and €2,000 will no longer apply. The new policy enacted, introduces a minimum gross monthly salary of €2,500 for all highly skilled employees provided that:
they have the proven required academic skills or at least 2 years of relevant experience; and
a minimum of 2-year employment contract.
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 registration of the company as a foreign interest company by the Business Facilitation Unit.
This is a great shift from the previous policy which permitted foreign interest companies the ability to employ a maximum number of 15 third-country nationals, with the exemption of employing more than 15 employees if certain conditions applied.
Employment of support personnel
Companies can employ third country nationals as support personnel, with a maximum gross monthly salary of €2,500 provided that the number of third country nationals employed does not exceed 30% of all the support personnel.
Duration
All Residency and work permits will be issued within 1 month and will have a validity period of up to 3 years.
Family re-unification rights of third country nationals
Spouses, of third country nationals that obtain a temporary residence and work for foreign interest companies and receive a minimum gross monthly salary of €2,500 (i.e. other than for support staff), are able to enjoy immediate and free access to the Cyprus labour market and have the right to work in Cyprus. The dependents of third country nationals employed at a foreign interest company (i.e. minors under the age of 18) can live and attend school in Cyprus.
The Cyprus Digital Nomad Visa
In accordance with practices employed by other European countries regarding remote work, the government has introduced the Digital Nomad Visa scheme, allowing third country nationals who are self-employed, freelancers or employees working remotely for employers/clients based outside of Cyprus to reside and work in Cyprus. A maximum limit of 100 beneficiaries will benefit from the Digital Nomad Visa scheme, however this number may increase in the future if the scheme proves successful.
Individuals granted a Digital Nomad Visa have the right to stay in Cyprus for up to 1 year, with the right to renew for an additional 2 years. Such visa holders will have the right of family re-unification for their family members whereby a residence permit would be granted, following a successful application. The family’s residence permit would then expire when the digital nomad’s visa expires, as the visa holder acts as the family’s sponsor.
During their stay in Cyprus, the spouse or the civil partner of the person who is granted a Digital Nomad Visa, and the minors of their family are not permitted to work or engage in any kind of economic activity in Cyprus.
Tax incentives
A number of tax incentives are currently being considered, which if approved will come in effect in 2022:
Expansion of the 50% income tax exemption to new employees with a salary of minimum €55.000 per annum. This exemption, already in effect for annual salaries over €100.000 per annum, will be extended from 10 to 17 years (covering existing employees who currently enjoy this benefit). Existing employees who earn between €55.000-€100.000 per annum can benefit for the remaining period of the 17 years;
Extending the 50% tax exemption for investment in certified innovative companies and by corporate investors;
Increased deduction of research and development costs from taxable income to an amount equal to 120%;
Right to transfer social insurance contributions based on bilateral agreements to come into force.
Cypriot naturalisation
A draft bill amending the Aliens and Migration Law Cap. 105 will be presented proposing:
the reduction in the eligibility period for applying for the Cypriot citizenship from 7 years of residence and work in Cyprus to 5 years; and
the further reduction to 4 years for holders of certifications proving that they are fluent in the Greek language.
Summary
This strategy aims to strengthen the island’s position as a key business hub in the European Union. The incentives given at a corporate and individual level will allow international companies to relocate and operate in Cyprus, along with their key personnel, which will add great value to the Cyprus economy and boost its reputation as a key business destination. The strategy’s focus on high innovation/tech companies, pharmaceutical companies and shipping companies, shows that the scheme enacted, aims to reach out to 3 key industries that can drastically boost the country’s business model and attractability across the globe.
What we do
Panayiotis Z. Toulouras LLC provides corporate services to clients worldwide. Our law firm, with it’s team of experts, provides strategic advice for individuals and entities, seeking the foreign interest company route, and ensures a smooth transition for all clients aiming to relocate an existing business or launch a new business in Cyprus.
Incorporation of a Cyprus company
Registration of a Foreign Interest Company
Business visa applications and other visas
Launch and Setting up consultation
Family reunification
Employment agreements
Purchase and/or rental of commercial and residential premises
Applications for permanent and temporary residence
Applications for naturalization
IP registration
Advice on all related tax aspects
Opening of corporate and personal bank accounts in Cyprus and abroad
Since the end of the Special Permission requirement for the Lebanese traveling to Cyprus, on the 1st of April 2021, the island has received a large influx of Lebanese individuals, families, and companies seeking a new home away from the current turmoil plaguing Lebanon’s economy and society.
Our firm has been advising and assisting Lebanese clients as they embark on shifting their residency and business activities to the robust economy of Cyprus.
Cyprus has strategically established itself as an attractive destination, both within the EU and globally, through its competitive, modern, and transparent legal, financial and regulatory framework. The country’s advantageous tax policy and strong banking system have made Cyprus attractive for all types of businesses and individuals.
Individuals and Families
Temporary Residence
Valid for 1 year & renewed yearly,
Holders are allowed to live in Cyprus as visitors without the right to work,
A spouse, children (under 18 years old), and parents (parents of the couple) are able to apply as dependents,
Eligible through renting or purchasing a property.
Main applicants and qualifying dependents can apply and stay as permanent residents in Cyprus indefinitely,
Approval within 2 months,
The P.R. does not expire and the holder does not need to renew it,
Eligible through purchasing investing at least €300,000 (excluding VAT) in one of the following options (a) residential properties (b) commercial properties (c) company share capital and (d) Cyprus investment funds,
Option (c) investing at least €300,000 (excluding VAT) in a company share capital gives the right to the main applicant to work in Cyprus,
All options give the right to applicants to be shareholders in Cyprus.
Personal or Joint Bank Account in a Cyprus bank
Lebanese individuals, both residents, and non-residents are eligible to open a personal or joint bank account in Cyprus at one of the local banks our firm cooperates with.
Companies
Register a Cyprus Company
A company registered in Cyprus enjoys all the advantages of operating in an E.U. country
Registration of a Company is quick and easy for all Lebanese clients
A Cyprus company benefits from an advantageous 12.5% corporate tax (one of the lowest in Europe) on profits, with possibilities for further reductions in taxation
Shareholders benefit from no withholding tax on dividends paid to them (if non-residents)
A Cyprus company with a majority of non-EU shareholders (over 51%) is eligible to employ up to 15 non-EU employees (including the shareholders themselves),
All 15 non-EU employees are able to work and live freely in Cyprus whilst they are employed for the Cyprus Company through receiving residency cards,
A direct deposit of capital amounting to at least €200.000, deposited into the Cyprus company’s bank account from abroad, is required to be eligible. This amount can then be used for company activities in Cyprus and abroad,
The company can also employ additional Specialists that have specific skills (click here for more info),
Family members (spouse, children, parents, and in-laws) of the Employees can also work and reside in Cyprus through family reunification,
The foreign interest company benefits from an advantageous 12.5% corporate tax (one of the lowest in Europe)
Corporate Bank Account for a Lebanese Company
Lebanese companies are eligible to open a corporate bank account in Cyprus at one of the International Business Units that our firm cooperates with.
Our areas of work include:
Real Estate acquisition or rental
Company Registration and Nominee Services
Investment Advice
Permanent and Temporary Residence Applications
Employment permits
Registration of foreign interest companies for the employment of Lebanese nationals in Cyprus
British expats in Cyprus face losing their UK bank accounts post-Brexit!
UK Banking Institutions have recently announced the likely closure of bank accounts held by British Nationals currently living in Cyprus, and all other EU nations, at the end of the ‘Transition Period’ on the 31st of December 2020.
Once the Transition Period ends, on the 1st January 2021, the United Kingdom will officially depart from the European Economic Area (EEA).
With no trade agreement yet reached between the EU and UK to set new revised banking rules, this will likely result in the subsequent closure of bank accounts of British expats.
According to EEA policy as it stands, the UK banking institutions will not be allowed to accommodate the banking needs of British Nationals living permanently in the EU. UK banking institutions will need to apply for new banking licenses, if they wish to resume providing banking services for British clients living in the EU. As an EU member, the UK institutions would have been able to provide banking services in other EU nations through the EU passporting rules. However, this will all change once the UK has officially exited the EU at the end of the Transition Period.
On the contrary, this may all change if a trade agreement is reached to permit the UK banking institutions to conduct such banking activities within the EU.
Lloyds, Barclays and Coutts have already informed their clients living in parts of the EU about the closure, whilst Natwest and Santander are still considering how to handle the current situation.
What we do
Panayiotis Z. Toulouras can assist UK Citizens, living in Cyprus and the rest of the EU, in finding the right bank institution suiting their banking needs and assist them in opening bank accounts in Cyprus and the rest of the EU.
Our Trusts specialist team consults private individuals, families and international institutions on the creation of Cyprus International Trusts (CIT) and offshore trusts. We advise clients on the appropriate jurisdiction that best caters their needs, focusing on meeting their asset protection and taxdemands.
Our team provides expert consultation regarding all ongoing trust issues affecting settlors, trustees and beneficiaries, appearing before courts and government authorities when necessary.
We act as trustees, protectors and represent international institutions, HNW families and individuals in the acquisition and disposal of property, globally, and advise our clients on all the associated legal and tax issues.
”CITs are used to benefit from the Cyprus advantageous tax system and allows entities acting as investment vehicles to maintain a level of privacy and confidentiality.”
Trust Requirements
For a valid trust to be created, the following three certainties must be present:
a) Certainty of intention –evidence of the express intention of the Settlor to create the trust
b) Certainty of subject matter – the assets part of the trust property must be easily identifiable
c) Certainty of objects – the identity of the trust beneficiaries must be ascertained or ascertainable at the time of setting up the trust
Trust Conditions
The restrictions imposed by the Law mainly focus on the residency status:
• The Settlor –Can be either a natural or legal person but must not be resident of the Republic of Cyprus during the calendar year immediately preceding the creation of the trust
• The Trustee – At least one of the Trustees must be resident of the Republic of Cyprus* for the whole duration of the Cyprus International Trust
• The Beneficiary – Must not be resident/s of the Republic of Cyprus during the calendar year immediately preceding the creation of the trust and that applies equally whether the beneficiary is a natural or legal person
*The term “resident of the Republic of Cyprus” has the same meaning as under the Income Tax Laws of Cyprus
i.e. physical person considered a resident in Cyprus if they reside in Cyprus for a period exceeding in aggregate 183 days in any calendar year. A company is considered a resident provided its management and control are exercised in the Republic of Cyprus.
”Our Trusts specialist team consults private individuals, families and international institutions on the creation of Cyprus International Trusts and offshore trusts.”
Power of Settlor
New amendments of the Law provide more protection and flexibility for the CIT as the Settlor is able to reserve certain powers for himself, rights over or in the trust property either in his capacity as a Settlor, as Protector or Enforcer of the Trust without it affecting the validity nor the execution of the Trust:
a) The revocation, amendment of the terms of the trust or any trusts or powers arising wholly or partly from the trust
b)The allocation, distribution, payment or other disposition of income or capital from the trust property or issuance of directions to conduct anyof these actions
c) The exercise of powers of a director or officer or the issuance of binding directions regarding the appointment or removal of any Board member or officer of any company, which is owned by the trust, either wholly or partially conferred on such property
d) The issuance of binding directions to the trustee in connection with the purchase, retention, sale, management, loan, pledge or charge over property of the trust or the exercise of any powers or rights
e) The appointment or termination of any investment manager or investment adviser
f)Changing the applicable law governing the trust or place of management of the trust
g) The restriction of the exercise of any power or the discretionary power of the trustee(e.g. requesting that these be exercised only with the approval of the settlor or any other person expressly mentioned in the terms of the trust
Power of Trustees
Trustees are appointed by the Settlor. There are no rules as to how many trustees should be appointed.
Main Duties:
a) To administer the trust property prudently, and
b) To comply strictly with the terms of the trust
Trustees do not have the power to vary the terms of the trust under any circumstances. However, all beneficiaries of full age and capacity can authorise all together to alter the trust. Trustees in their private lives may not act in any way that brings them in conflict with their duties as trustees.
Under the Law, the Trustees can have extensive investment powers, e.g. to make capital distribution, to borrow, to guarantee, to mortgage, to employ, to invest/lend money. They may also hold, maintain or invest in movable and immovable property in Cyprus and abroad, including shares in companies incorporated in Cyprus.
Unless the trust instrument expressly provides otherwise, trustees are not entitled to any payment for their services but can be reimbursed from the trust property for any expenses they incur in performing their duties. Action taken by the trustee that is in excess of their powers or contravenes the terms of the trust instrument is a “breach of trust”.
”The Cypriot international Trust regime is designed to make Cyprus more attractive to clients living outside Cyprus.”
Formalities
The formalities that need to be met for the creation of a Cyprus International Trust are:
a)Comply with the residency requirements of the International Trusts law
b) Provide the information related to the Trustees to the relevant competent authority
c) If the Cyprus International Trust is created by a will, the formal requirements indicated in the relevant law on wills must be complied with
d) Payment of stamp duty of €430
e) Make sure that the CIT satisfies the “Three Certainties”
Type of Trusts
a) Private Trusts (Express, Resulting, Constructive, Implied)
b) Charitable Trusts
c) Fixed Trusts
d) Discretionary Trusts
Purposes
Tax Planning
Protection of Assets
Preservation of Family Assets
Administration of Estate/Avoidance of Forced Heirship
Confidentiality Investment
Pension Schemes – Employees or Dependents
Charitable Initiatives
Reward Schemes – Employees or Dependents
Continuation of a Family Business
Divesting of personal assets – An individual who wishes to divest himself of personal assets can achieve this by transferring them to a CIT.
Investing in business overseas – An individual can invest in business overseas to ensure profits and dividends received are not remitted to the country of his residence, by setting up a CIT to invest in overseas business
Investment Holding company – A trust can be used in one country to own an underlying investment holding company in another. This can provide maximum protection for both settlor and beneficially alike.
Flexibility – The Cyprus law allows the removal of a trust from its jurisdiction and vice versa. This gives the necessary flexibility where transfer becomes advantageous because of change of circumstances.
”Confidentiality is of supreme importance as the law prohibits disclosure of any information or documents regarding the Trust by the Trustees or any other person.”
Benefits
Income
If the Beneficiary is not a Cyprus tax resident, the income CIT receives from outside of Cyprus will not be subject to tax. Income received from Cyprus is subject to tax.
If the Beneficiary is a Cyprus tax resident, the income CIT receives from outside/inside of Cyprus will be subject to tax.
CIT does not pay tax on income received from outside of Cyprus.
CIT does not pay tax on interest received, provided the beneficiary is not a Cyprus tax resident.
Double Taxation: International Trusts come under the scope of double taxation treaties with more than 60 countries.
Dividends: Dividends, interest and other income received by a trust from a Cyprus company are not subject to tax.
Payments to beneficiaries: No withholding tax on payments to beneficiaries provided that they are not resident in Cyprus.
Capital Gains: Any gains from asset disposal, other than immovable property situated in Cyprus, made by the CIT are not subject to capital gains tax in Cyprus.
Estate Duty: No estate duty is payable by a CIT that was formed for the purposes of estate duty planning.
Convenience
CIT laws does not require Settlor or Beneficiary to be resident of Cyprus and requires one trustee to be a Cyprus resident
CIT can last for an indefinite time
Confidentiality: Confidentiality is of supreme importance as the law prohibits disclosure of any information or documents regarding the Trust by the Trustees or any other person. Only the Court may order and result in disclosure of such information e.g. in cases of fraud.
Registration
Trusts must be registered to 3 competent authorities, one being the Cyprus Bar Association. To ensure confidentiality, only the 3 authorities will have access to trust information and it will not be made publicly available under any circumstances.
The Settlor and Beneficiaries are not registered and this is kept confidential. The Trustee’s responsibility is to notify the relevant competent authority fifteen (15) days after the creation of the Cyprus International Trust and to notify for any amendment made to the Trust.
What We Do
Trust creation
Trust management
Trust termination
Trust disputes
Trustee and Protector services
Preparation of Trust accounts and annual tax returns
Family asset protection and inheritance advice
Tailor-made wealth management structures
Opening, administrating and monitoring all bank accounts
