Cyprus’ new action plan for attracting foreign investments and talent

Cyprus, having a services-oriented economy with a local population with years of experience in servicing international clients, is transposing itself into one of the top relocation and headquartering centres in Europe. Its ideal location, great climate, natural beauty and history, combined with the skills and knowhow of the local workforce, its common law legal system and various tax incentives, make Cyprus a top choice for companies wishing to set up offices and attract highly skilled personnel required to manage business activities.

The Cyprus government has developed a new strategy, which includes a series of actions and reforms in several areas, aiming to enhance Cyprus’ position as an international and sustainable high-growth business centre. More specifically, the new strategy aiming to attract foreign investments and talent includes the following:

1.Transformation of the existing fast track business activation mechanism into a Business Facilitation Unit (BFU):

 The existing fast track business activation mechanism has now become the BFU. The BFU is intended to function as a central contact point for the setting up of businesses in Cyprus by eligible companies, as explained in section 2 below.

The BFU’s main responsibilities relate to the provision of information and assistance with the incorporation of entities in Cyprus (such as assistance with the registration of companies, business name approvals, registration with the social insurance register and registration with the tax/VAT register), as well as the provision of guidance on the required licences for operating a business in Cyprus. Additionally, it aims to facilitate and accelerate the issuance and renewal of residence and employment permits to third country nationals working for companies registered with the BFU.

2.Review, broadening and simplification of the policy for the employment of third country nationals

The existing policy for the employment of third country nationals by Cypriot companies of foreign interests, which enabled Cypriot companies of foreign interests meeting certain criteria to employ third country nationals without going through the standard local labour test,  has been revised and broadened.

Companies eligible register with the BFU and  employ third country nationals without the need to go through the standard local labour test now include the following categories:

a) foreign companies/undertakings operating in the Republic of Cyprus or foreign companies/undertakings intending to operate in the Republic of Cyprus, that establish presence in Cyprus;

b) Cypriot shipping companies;

c) Cypriot high-tech/innovative companies; and

d) Cypriot pharmaceutical companies or companies active in the sectors of biogenetics and biotechnology.

In addition, the former criteria that had to be met by Cypriot companies of foreign interests and the maximum cap that used to be applicable for the employment of third country nationals have been abolished. Eligible companies can now freely employ any number of third country nationals who are considered to be highly skilled, without limitation as to their profession/skills and without having to go through the standard local labour test. It is further noted that issuance of employment/residency permits has become much faster, now taking approximately only one month.

The relevant requirements are now as follows:

a) Eligible companies must ensure that 30% of their total staff is EU/Cypriot within 5 years from the inclusion of the company in the BFU.

b) The third-country employees to be employed by an eligible company must receive a minimum gross salary of €2.500 and must possess either a university diploma/equivalent qualification or prove that they have at least two years of experience in a corresponding employment position. In addition, the employment contract with the eligible company must have a duration of at least two years.

3.Right to employment for family members of third country nationals who are part of the third-country employment policy

Spouses whose family member has obtained a residence and work permit in the Republic of Cyprus, and who receive a minimum gross monthly salary of €2,500 (other than support staff) will be eligible for immediate and free access to the labour market.

4.Simplification and speeding up of the process of granting Category E work permit (long term resident status)

The Ministry of Interior has acknowledged that the process of obtaining a long term resident status is very time consuming and is thus working on an amendment to the relevant legislation in order to simplify the procedure and determine the criteria on the basis of which the long term residence status permits will be granted.

5.Social insurance

Cyprus has intensified the efforts to conclude bilateral agreements with third countries, so that when a third-country national who has paid social security contributions in Cyprus returns for permanent residence in his/her country, he/she is able to transfer the contributions paid in Cyprus to his/her country under certain conditions.

6.Introduction of the digital nomad visa

A digital nomad visa has been introduced, which is essentially a residence visa enabling nationals from non-EU/EEA countries, to reside temporarily in Cyprus and work remotely from Cyprus for an employer registered abroad. The duration of the visa is for one year and can be renewed for a further two years. There was initially a ceiling of 100 visas to be issued, but the Council of Ministers has recently approved the increase of this number to 500 visas. The digital nomad scheme is very new and has commenced its operation on the 1st of March 2022.

The main conditions for obtaining the digital nomad visa are:

a) providing evidence that the applicant has sufficient funds, i.e. a stable income to cover living expenses during the stay in Cyprus, without requiring recourse to the national social welfare system. The amount of sufficient funds is set at €3.500 (net) per month and can be proven by the employment contract or other proof of employment of the applicant and bank account statements. The above amount is increased by 20% for the spouse/partner and 15% for each child;

b) having medical insurance in place; and

c) providing a clean criminal record from the country of residence.

If the financial supporter and his/her family reside in Cyprus for one or more periods totaling more than 183 days within the same tax year, they are considered tax residents of Cyprus, provided that they are not tax residents of any other country.

7.Consideration of broadening of tax incentives

The tax authorities are considering the expansion/extension of a number of tax incentives that relate to either personal income of non-domicile employees or investments into innovative business/research and development expenditures.

8.Faster naturalisation

The authorities are working on an amendment of the relevant legislation that is expected to be submitted in Parliament in the near future. One of the purposes of the amendment is for the law to provide for the right to a specific category of non-Cypriot employees to submit an application for naturalisation after five years of residence and work in the Republic of Cyprus, instead of seven that is required today. This time frame could be further reduced to four years if certain other criteria are met. In addition, the proposed law aims to provide a more flexible way of calculating the employees’ period of stay in the Republic of Cyprus, by taking into account the nature of their work and any necessary absence abroad for business purposes.

Our firm has extensive experience with all aspects of setting up a business in Cyprus and with assisting with the relocation and headquartering of companies, as well as with providing all-round support and advisory services on real estate, immigration and employment matters.