Cyprus’s corporate, legal and regulatory environment
alongside its wide network of tax treaties with EU and third
countries are just some of the reasons why it is considered an
attractive jurisdiction to locate corporate headquarters. In
addition to the above the government has adopted a new action plan
under the name Strategy for Attracting Businesses for
Activities or/and Expansion of their Activities which aims at
attracting both international investments and talent. The plan
includes a series of actions and reforms in several areas of
intervention, aiming to enhance Cyprus position as an international
high-growth business centre.

In this article we shall examine the new regime/incentives for
relocating and headquartering in Cyprus.

A.BUSINESS FACILITATION UNIT

As from 1^st January 2022, a Business Facilitation
Unit (BFU) has been introduced by the Ministry of
Energy, Commerce and Industry, which is being used as a single
point of contact between eligible companies and the relevant
Authorities in Cyprus.

The purpose of the BFU is the facilitation of the establishment
and/or the expansion of the existing activities of foreign
companies in Cyprus. The BFU offers services pertaining to the
establishment of a company in Cyprus including company
registration, registration with the social insurance registry and
the employer’s registry, registration with the VAT registry and
to income tax, licensing facilitation for establishment and
operation of companies, facilitation for the issuance of residence
and employment permits in Cyprus.

Eligible companies can register with the BFU, as foreign
companies, in a fast and efficient manner. Once this
registration is completed, the relevant companies may proceed
through the fast-track process with the submission directly to the
Civil Registry and Migration Department (CRMD) of
applications for the issuance of residence and employment work
permits in respect of their third country employees.

Important note: Companies already registered
with the CRMD as companies of foreign interest, will not have to
re-register with the BFU, as the new policy automatically applies
to these companies.

B.REVISED POLICY FOR THE EMPLOYMENT OF THIRD COUNTRY (NON-EU)
NATIONALS

The new governmental policy contains clear and simplified
criteria as to the eligibility of the companies entitled to
employee third country nationals and of the criteria of the
prospective employees.

Important note: the requirement for foreign
companies to open a bank account in Cyprus and remit to that
account from abroad the sum of €200,000 has been
abolished.

Eligibility criteria for registration with the BFU as a foreign
company

(i)Eligible businesses must meet one of the following
conditions:

• Foreign companies/undertakings operating or intending to
  operate in Cyprus in which the majority of the company’s shares
  (i.e. >50%) is owned by third-country nationals. It is noted
  that in case where the percentage of the foreign participation in
  the share capital of the Company is equal to or below 50% of the
  total share capital, the Company can still be considered as
  eligible, if the foreign participation in the share capital
  represents an amount equal to or greater than €200.000.
  OR




• Public companies registered in any recognised stock exchange.
  OR




• International business companies (ex-offshore companies that
  were operating in Cyprus under an older policy by approval of the
  Cyprus Central Bank and the particulars of which are held by the
  Central Bank).




• Cypriot shipping companies. OR




• Cypriot companies of high technology / innovation.
  OR




• Cypriot pharmaceutical companies or companies operating in the
  fields of biogenetics and biotechnology. OR




• Companies which belong by majority to persons who have obtained
  Cypriot citizenship on the basis of economic criteria provided such
  persons are in a position to show that they still meet the
  conditions under which they had obtained Cypriot citizenship.

AND

(ii) Eligible businesses must have offices in Cyprus

Eligible businesses must operate from independent offices in
Cyprus, in suitable premises, separate from any private housing or
other office, except in the case of business co-habitation.

Eligible Employees

The new governmental policy differentiates between highly
skilled employees and non-highly skilled employees.

• Employment of third country highly skilled
  nationals is subject to the following conditions:




• a minimum gross monthly salary of €2,500.




• That they 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.

Important note: 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
BFU. 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

• Employment of third country nationals support
  staff is subject to the following conditions:




• a gross monthly salary of less than € 2,500 determined by
  current legislation.




• an employment contract between the third country national and
  the employer duly validated by the competent authority in
  accordance with current legislation

Important note: employment of third country
nationals as support staff cannot exceed 30% of the total support
staff.

Additional criteria that apply to both highly skilled and
support staff are:

• valid passport for at least 2 years;




• legal residence in the Republic of Cyprus;




• an employment contract duly ratified where required;




• qualifications to practice the profession;




• suitable accommodation;




• medical tests and health insurance;




• clear criminal record certificate;




• a personal declaration undertaking responsibility for the costs
  of repatriation.

Important Note: The duration of work permits
for both highly skilled employees and support staff are issued
within 1 month and for a period of up to 3
years.

Right for Family reunification of third
country nationals

The spouses of highly skilled employees have an immediate right
to free access to the labour market. The aforementioned right is
not afforded to the spouses of support staff.

C.PERMANENT RESIDENCY PROGRAM

Regulation 6(2) of the Aliens and Immigration Regulations allow
non-EU investors to apply for permanent residency in the Republic
of Cyprus on a fast-track basis provided that certain criteria are
met. The main requirement used to be real estate investment in
Cyprus worth at least €300,000 but as a result of certain
amendments which entered into force on 24^th March 2021,
third country national investors have now available a variety of
investment options and can explore more business opportunities
combining those business opportunities with immigration
options.

In particular the investment criteria have been expanded to
include investment options that do not relate to acquisition of
real estate. The amended program now allows an investment worth a
minimum of €300,000 in the share capital of a Cypriot company
which (i) has a physical presence/operates in Cyprus and (ii)
employs at least five employees in Cyprus. Additionally,
investments in units of a Cyprus Collective Investment Organization
(type AIF, AIFLNP, RAIF) are also an eligible form of
investment.

Thus, a third country national investor may invest in his/her
own company, become employed by his/her company as director and
hold a permanent residency permit which is not subject to any
renewals the only obligation being to visit Cyprus at least once
every two years.

Additional Requirements

• Proof of residence in Cyprus

The applicant, may, by way of confirmation of residence in
Cyprus, present a contract of sale or a rental agreement of a
dwelling home.

• Declaration of No intention to work in
  Cyprus

It has been a requirement under the programme that when applying
under Regulation category 6(2), the applicant and his/her spouse
had to sign a declaration that they did not intend to work in
Cyprus.

Important Note: although this continues to be
the case, it is to be noted that under the amended regulations, the
declaration is not required in the cases where the applicant
chooses to be a director of the company in which he/she has
invested.

• Ability to hold shares in Cyprus companies

The applicant and/or the applicant’s spouse may hold shares
in Cyprus companies (other than a company in which the main
investment has been made). The income (by way of dividends) derived
from such shareholding shall not prevent the approval of the
applicant’s permanent residency application.

It continues to be the case that, in addition to making the
investment, the applicant should be able to demonstrate that he/she
has at his/her disposal a secure income of at least €30,000
per annum with an increase by €5,000 for each dependent family
member and €8,000 for each dependent parent of the applicant
or his/her spouse.

Where the applicant invests in a dwelling home, the applicant
must demonstrate that his/her income emanates from external
funds.

Important Note: it is to be noted that were the
applicant’s investments is in the additional permitted
investments, the applicant’s source of income may be derived
from sources from activities within Cyprus.

The applicant and all adult members of his/her family must
provide a certificate of clean criminal record from their country
of residency.

D,DIGITAL NOMAD VISA

The Cyprus Digital Nomad Visa Scheme allows nationals from
non-EU and non-EEA countries who can perform their work
location-independently using telecommunications technology, to
reside temporarily in Cyprus and work for an employer registered
abroad or perform work through telecommunications technology for
companies or clients located abroad.

The Scheme’s goal is to strengthen Cyprus as a center for
the provision of electronic services.

Eligibility

Third-country nationals that are self-employed professionals or
salaried employees, working remotely with the use of information
and communication technologies with employer /clients outside
Cyprus for a duration of at least 12 months.

Important Note: it is a residence permit in
Cyprus and not a work permit. There is a maximum ceiling of 500
beneficiaries.

Residence status

Eligible applicants will be granted the right to reside in
Cyprus for a period up to one year, with the right of renewal for
another two years. Eligible applicants can be accompanied by their
family members, who are granted, upon request, a residence permit
that is co-terminus to that of the eligible applicant. During the
stay in Cyprus, the spouse or partner and the minor members of the
family are not allowed to engage in any form of economic activity
in the country. If they reside in Cyprus for one or more periods
totalling more than 183 days within the same tax year, they shall
be considered tax residents of Cyprus, provided that they are not
tax residents in any other State.

Conditions of issuance:

• a declaration, stating the digital nomad’s intention to
  reside in the country with a residence permit for the purposes of
  carrying out work remotely and his/her commitment not to engage in
  work activities or provide services to an employer based in
  Cyprus;




• a contract of employment or proof of an employment relationship
  with an employer who is established outside of Cyprus of an
  indefinite period or in the case of a fixed-term contract with the
  remaining duration covering the period of the residence permit
  granted, or information on the status of the
  applicant in the business, as well as information on the business
  name, place of business, field of activity and corporate purpose of
  the business in case the third-country national is self-employed
  running his own business, which is located outside of Cyprus;




• evidence that he/she has sufficient funds, in terms of a stable
  income level to cover his/her living expenses during his/her stay
  in the country, without recourse to the national social welfare
  system. The amount of sufficient funds is set at €3,500 per
  month which can be proven as follows: (i) employment or works
  contract or proof of employment, in the case of dependent work or
  (ii) funds in a bank account. If sufficient funds come from paid
  services of dependent work, services or works, the above minimum
  level refers to net income after payment of required taxes in the
  country of employment (iii) the above amount shall be increased by
  (20%) for the spouse or civil partner and by fifteen percent (15%)
  for each child.




• medical insurance;




• certificate of clear criminal record.




• E. TAX INCENTIVES

Extension and expansion of tax exemption for investment in
innovative companies

The 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 have been extended
until 31/12/2023.

Tax deduction for research and development expenditure

The existing regime of 50% exemption for investments in an
approved innovative company by an individual or through an
investment fund or through an alternative trading platform which
was terminated on 30/6/2021 has been extended by 31/12/2023.

Incremental tax allowance on research and development
expenditure

Eligible research and development expenditure will be deducted
from taxable income at 120% of the actual expenditure.

Expanding of the existing tax benefit applicable to
non-domicile employees

Exemption of 50% from personal income tax for 10 years from the
year of employment to new non-domicile employees with
employment income of €55,000 and above. This exemption will
also be granted to existing employees with employment income
between €55,000 and €100,000. The exemption is not
applicable in respect of an athlete’s income.

Exemption of 50% from personal income tax to existing
non-domicile employees (that are in Cyprus), with income of
€100,000 and above for an extended period of 17 years.

Note: Domicile status

Domicile status is defined in the Special Contribution for
Defence Law, (L.117(I)/2002) (SDC). According to
the said definition an individual is considered domiciled in Cyprus
in accordance with the provisions of the Wills and Succession Law
(Cap. 195) which distinguishes between domicile of origin (i.e.,
the domicile received by an individual at birth) and domicile of
choice (i.e., the domicile acquired by an individual by
establishing a home with the intention of a permanent
residence).

A person who has a domicile of origin in Cyprus will be treated
as domiciled in Cyprus with the exception of:

• an individual who has obtained and maintained a domicile of
  choice outside Cyprus under the provisions of the Wills and
  Succession Law (Cap. 195), provided that this individual was not a
  Cyprus tax resident for a period of at least 20 consecutive years,
  or




• an individual who was not a Cyprus tax resident for a period of
  at least 20 consecutive years immediately prior to 2015.

Additionally, irrespective of his/her domicile of origin, an
individual who has been a tax resident of Cyprus for at least 17
years out of the last 20 years shall be considered as deemed
domiciled in Cyprus.

F. OTHER INCENTIVES

In addition to the above the Strategy for Attracting
Businesses for Activities or/and Expansion of their Activities
includes the following incentives:

Naturalisation

Right to submit an application for naturalization after 5 years
of residence and work in Cyprus or after 4 years if the applicant
fulfils the criteria for holding a recognised certificate of
success in very good knowledge of Greek language.

Securing the right to social security

Securing the transfer of social insurance contributions, by
intensifying the efforts for concluding Bilateral Agreements with
third countries that will be determined by the Ministry of Labour
and Social Insurance, so that when a third country national who has
paid social security contributions in Cyprus, returns to his/her
country for permanent residence, he/she will be allowed to transfer
the contributions paid, on the condition that with these
contributions he/she did not acquire any right to a pension for old
age, disability, etc.

Work permits under category E

Simplification and speeding up of the procedures for granting
work permits under category E.

Infrastructure

Upgrading the infrastructure for information and communication
technologies and broadband connectivity.

The above-mentioned factors together with the quality
Mediterranean lifestyle demonstrates that Cyprus is a viable
substance-oriented jurisdiction for business headquartering and
relocation.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.