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
- VAT and TAX registrations
- Processing of investment and lending facilities
- Relocation assistance and advice