New incentives for Companies setting up and operating in the Republic of Cyprus
On 15 October 2021, the Ministry of Finance announced new incentives in the form of an action plan for the purpose of encouraging more companies to operate or further expand their activities in the Republic of Cyprus. The suggested reforms are already being examined and actions will be taken as of January 2022, once the relevant authorities release further updates regarding their implementation.
The newly developed action plan and the incentives therein are focusing more on the areas of research, development and innovation, shipping, pharmaceuticals, biogenetics, technology as well as foreign interest companies with the already existing Business Fast Track Activation developing into a Business Facilitation Unit, making better use of technological advancements The key proposed reforms which, are set out below, are related to migration and naturalisation, tax, social insurances as well as a number of additional suggested actions including technological enhancement and advanced workforce training.
A. Migration related key reforms
1. Employment of workforce from third countries by companies of foreign interest that operate in Cyprus or intend to operate in Cyprus. Amongst others, the following have been suggested:
(i) Focus lies more with shipping, innovation and pharmaceutical companies in Cyprus
(ii) Granting of work permits within a month since the filing of the application
(iii) Work permits to have a duration of three years
(iv) Third country nationals will be employed on a contractual basis for at least two years should have a university degree or equivalent, at least two years of relevant experience and will be receiving €2500 monthly gross salary.
2. Right of family-reunification for third country nationals who are part of the Business Facilitation Unit.
(i) The spouses of those who have obtained residence permit are eligible to free and direct access to the labour market with a minimum monthly gross salary of €2500. This is still subject to the conditions laid out in the relevant law (CAP.105) with regards to the procedure to obtain long-term residency status (i.e. a passport valid for at least a 2-year period)
3. Simplification and a speeding-up of the process to obtain work permit
(i) The aim is to amend the Foreigners and Immigration regulations so as to make the process faster and easier through the layout of simpler criteria. The Ministry of Foreign Affairs is already examining the matter.
B. Obtaining Digital Nomad Visa
1. The process of obtaining a Digital Nomad Visa is subject to conditions and essentially, the beneficiary obtains a residency permit in the Republic of Cyprus for a year, with the prospect of renewing it for an additional two years. The beneficiaries can be accompanied by the members of their families who however, are not allowed to work or undertake any form of economic activity in the Republic of Cyprus. It is worth noting that should they reside in the Republic of Cyprus for 183 or more days (consecutive or otherwise), then they shall be deemed as tax residents of Cyprus, given that they are not tax residents in any other country.
C. Tax incentives
1. Extension of tax exemption/deduction for investing in innovative companies. The bill of this implementation is undergoing examination, and should it be approved then it shall be discussed at the House of Representatives.
2. Currently, for individuals earning income from employment exceeding €100.000 per annum, a 50% tax exemption is available for 10 years. This exemption will now be applicable to individuals earning income from employment exceeding €55.000 per annum and for the exemption to be available for 17 years instead of 10 years.
1. Right to apply for naturalisation after five years of employment and residency in the Republic or after 4 years in the event that the certificate of very good knowledge of Greek is obtained. It is worth noting that currently the law provided for 7 years and should the above proposal proceed, then the relevant law will be amended by the first trimester of 2022, in accordance with the action plan.
E. Social Insurances
1. Right for third county nationals to ‘take advantage’ of social insurances when they return to Cyprus, given that these have not been already taken advantage of (i.e., received through a pension fund).
F. Additional Actions
1. Technology enhancement for example through the usage of ‘’cloud’’ services.
2. Informative and promotional campaign with the aim to attract highly skilled Cypriots who live and work abroad.
3. Modernisation of CAP.113 and of the whole justice system.
4. Advanced workforce training as well as renovation of the education system, both at a secondary and tertiary level, to live up to the standards of the labour market
How can MPC help?
Given the above wide ranging and comprehensive reforms to attract businesses to Cyprus, fin tech, shipping, and research and development companies in particular can benefit form these incentives when considering a European HQ or base for their operations MPC Legal can provide advise and assist clients with regards to strategies for relocating businesses to Cyprus and/ or relocating their work force bearing in mind legal, practical,and tax consequences. For further details, please contact us.