Cyprus as the ideal headquartering location: Key drivers & the Fast-Track Business Activation
In an era of global business, with distributed work forces, shifting employee preferences and hiring trends, businesses around the world are embracing this hybrid work models and Cyprus has further fostered a dynamic commercial environment within which businesses can operate.
Over the past couple of years, we have seen increasing numbers of international fintech and other international businesses such as Wargaming and French insurance giant Murex relocating to Cyprus citing motivating factors such as the favourable tax reasons, the ease of doing business, and its strategic location as a gate way to Middle East-Africa – Asia.
This article explores the new mechanism the Cyprus government has introduced the Fast-Track Business Activation mechanism to facilitate the establishment and re-domiciliation of businesses from third (non-EU) countries to Cyprus as well as the existing advantages of the national legal and tax framework when choosing Cyprus as a headquartering destination.
One of the most attractive Tax regimes in Europe
Undoubtedly, Cyprus has one of the most favourable tax regimes, with the corporate tax rate being just 12.5%. Businesses relocating their headquarters to the island can benefit from the Double Tax Treaty network with more than 60 countries as well as being exempted from capital gains tax, withholding tax on outgoing dividends, immovable property tax and inheritance tax.
Legislative framework & Regulatory structure
As a member of the European Union, Cyprus complies with European Directives and Regulations and adapts to all licensing and regulatory-related European framework. As a result, the protection for investment and intellectual property is tight whilst the regulatory structure is constantly updated to keep up with investors’ needs.
As one of the fastest growing EU economies, Cyprus’ stable business environment and constant emergence of opportunities as well as the granting of access to the EU market and to European and global workforce, offers to businesses high-quality professional services whilst allowing them to benefit from some of the lowest office rental rates in Europe.
Fast-Track Business Activation mechanism
The Fast-Track Business Activation mechanism was approved on the 3rd of September 2020 aiming to further attract foreign business to Cyprus as well as to provide fast and efficient services to foreign businesses wishing to locate to Cyprus and start operating immediately.
Companies interested in joining the Fast-Track Business Activation mechanism should meet the criteria laid out below:
Companies should have a physical presence in Cyprus including establishment/operation of independent offices that are separate from any private residence.
Existing companies should have a minimum turnover of €500.000 per year for 3 out of the last 5 years.
New companies should provide a reliable 5-year business plan illustrating growth potential.
Fast Track Business Activation is led by the Ministry of Energy, Commerce and Industry and includes the provision of a plethora of services ranging from the establishment of a company, registration with the VAT Registry, thorough guidance for establishing and operating a company in Cyprus to facilitating the issuing of residence and employment permits in Cyprus for third country nationals, the requirements of which, can be found in detail below.
Facilitating the issuing of residence and employment permits in Cyprus for third country nationals.
On the 7th of October 2020, a revised Policy for the Issue of Residence and Employment Permits for companies of foreign interests registered in the Republic of Cyprus, was approved. The policy defines the criteria on the basis of which, facilitation services will be provided for residence and employment permits of third country nationals which applies to both existing and new companies under the following conditions:
Third country shareholders should own the majority of the company's shares with the exception of companies that fall into the fields of shipping, high technology and innovation, pharmaceuticals, biogenetics and biotechnology.
A foreign direct investment of capital amounting to at least €200.000, must be admitted to Cyprus from abroad for the purposes of operating the company.
The establishment/operation of independent offices in Cyprus, housed in suitable premises, separate from any private housing or other office, except in the case of business co-habitation.
Companies that meet the above criteria are eligible to employ third country nationals as Directors, middle management executives, key personnel or specialists with no restriction on the maximum duration of their stay in the Republic. Third country nationals employed in the above positions are able to exercise their right to family reunification.
A company of foreign interests may also employ third country nationals as support staff but will need to follow the General Employment procedure by first securing the positive recommendation of the Department of Labour. A company may employ third country nationals in posts in this category at a rate of 30% of the total staff and subject to the so-called market test.
The applications for joining the FTBA mechanism will be examined by a Committee while a due diligence check will be conducted on the companies and the shareholders wishing to join the Fast-Track mechanism. The Ministry of Energy, Commerce and Industry will grant the company the relevant certificate following the success of the application.
The implementation of the Fast-Track mechanism specifically the revised procedures on employment of third country nationals will significantly ease the transition of the business and workforce of companies looking to migrate to Cyprus.
How can we help you?
As a full-service law firm, we can assist businesses with all aspects of the relocation/ migration process as we have extensive experience in tax planning, corporate and financial law matters as well as in handling Immigration issues. For further inquiries, please contact us.