Cyprus unveils new Action Plan to boost business activities

The Cyprus government presented, on 15 October, its new action plan for attracting businesses to Cyprus with an emphasis, among others, on high technology, shipping, innovation, and research and development, in a bid to turn the island into a sustainable business and trade centre in the wider region and Europe.

President Nicos Anastasiades said the plan includes 12 targeted actions in five pillars that take into account the best practices employed by other European countries. It was also fully in line with the European acquis and the Long-term Growth Strategy 2035, the new productive model for the future and the guidelines of the European Commission and the Recovery and Resilience Fund.

The measures include a new ‘business facilitation unit’; various enhancements to and relaxations of the policies for visa, work permit and citizenship applications; and further tax incentives for companies and employees.

As of 1 January 2022, the existing fast-track business activation mechanism is to be transformed into a business facilitation unit that will function as the focal point of contact for multinational companies either operating in Cyprus or that wish to operate in Cyprus, as well as for Cyprus companies in specific areas of economic activity, including shipping, high-tech, biotech and pharmaceutical.

The unit will provide services to set up a company, registration with the social insurance registry and the employers’ registry, and registration for VAT and income tax purposes. The unit will also give guidance on the permits needed to set up shop in Cyprus and expedite employment and residence permits.

The scheme allows for the employment of third-country nationals who have the required academic skills or at least two years of relevant experience and are paid a minimum gross monthly salary of €2,500. The duration of residence and employment permits will be three years and permits will be issued within one month of the application date.

Third-country nationals that have secured a residence and work permit will have the right to bring their family to Cyprus and there will be immediate and free access to the Cyprus job market for spouses and partners.

Companies will also be able to employ third-country nationals as support staff provided that the number employed does not exceed 30% of all support staff. The maximum number of third-country nationals is 70% of the total number of employees in a five-year period from the date of the inclusion of the company in the business facilitation unit.

The Ministry of Interior will amend the relevant regulations of the Aliens and Migration Law, to simplify the process and determine the criteria based on which work permits will be granted.

A new type of residence permit is to be introduced for people who wish to live in Cyprus but work in companies operating abroad. This will benefit third-country nationals who are self-employed or employees who work remotely using information and communication technologies, with employers or clients outside Cyprus. The initial allocation is for a maximum of 100 visas.

To qualify for a visa, the individual must have a minimum income from overseas (evidenced by payslips, bank statements, etc.) of at least €3,500 per month – increased by a further 20% for a spouse and by 15% for any minor child – hold medical insurance and have a clean criminal record certificate from their country of residence.

Individuals granted a digital nomad visa will have the right to stay in Cyprus for up to one year, with the right to renew for another two years. They may be accompanied by their family members, to whom a residence permit may be granted, upon request, that expires at the same time as that of the visa holder.

The spouse or partner and minor children of the digital nomad visa holder may not work or engage in any kind of economic activity in Cyprus. If they stay in Cyprus for a period that exceeds 183 days during the same tax year, they will be considered tax residents of Cyprus, provided they are not tax residents elsewhere.

A number of tax incentives are also proposed that will require legislative regulations. The aim is for the relevant legislation to be submitted to parliament by the end of December and to be approved during the first quarter of 2022. These include proposals to:

• Expand the existing personal income tax exemption of 50% to cover new Cyprus tax resident employees with annual salary income of at least €55,000, while existing beneficiaries of the scheme with annual salary income between €55,000 and €100,000 will be able to extend the exemption from 10 to 17 years.
• Extend the tax exemption of 50% for investment in certified innovative companies to corporate investors; the scheme that was in force until 30 June 2021 applied only to individuals.
• Introduce an enhanced tax deduction of 20% on research and development (R&D) expenses, i.e., 120% of the actual expenditure incurred may be deducted from taxable income.

Legislation will also be required to introduce two proposed changes to applications for citizenship:

• A reduction in the eligibility period for applying for citizenship from seven (7) years of residence and work in Cyprus to five (5) years; and
• A further reduction of four (4) years for holders of certifications proving that they have a very good knowledge of the Greek language.

Again, the aim is for the relevant legislation to be submitted to parliament by the end of December and to be approved during the first quarter of 2022.