The Council of Ministers of the Republic of Cyprus, by Decision of 15.10.2021, approved the "Strategy for Attracting Businesses for Activities or/and Expansion of their Activities in Cyprus", which entered into force on 02.01.2022. The New Strategy abolishes the existing Policy for the employment of staff from third countries employed by companies / companies of foreign interests and replaces it with the New Strategy, aiming to enhance Cyprus' position as an international high-growth business centre.

The new fast-track "Companies of Foreign Interests" mechanism allows for Cyprus registered companies to employ third country (non-EU) nationals to work and live in Cyprus, if certain basic requirements are met.

The application for such registration will be submitted to the Business Facilitation Unit ("BFU") of the Ministry of Energy, Commerce and Industry. There are no governmental fees for such application.

Once the company is registered with the Register of Companies of Foreign Interests of the BFU, a written confirmation will be given. Using the written confirmation, companies who have been registered with the Register of Companies of Foreign Interests, can contact the Civil Registry and Migration Department ("CRMD") for the temporary residence permit and employment permit of their third-country personnel.

Eligible business to be considered as Companies of Foreign Interests

In order to register a Cyprus company as a Company of Foreign Interests, eligible businesses must meet one of the following criteria:

  1. The majority of the company's shares are owned by third-country nationals.
  2. In case that, the percentage, of the company's shares, owned by a third-country national is equal or less than 50% of the total share capital, the company is eligible if that foreign participation has a value of at least €200.000.

In both cases above (1&2), the Ultimate Beneficial Owner (UBO) must deposit an amount of €200,000 in an account held by the company in a credit institution licensed by the Central Bank (payment institutions are not included). Alternatively, the company can submit evidence of an investment amounting to €200,000, for the purposes of operating its business in Cyprus (e.g. office purchase, office equipment purchase, etc.).

If more UBOs exist, then this amount can be deposited or invested by a single UBO or collectively.

  1. Public companies registered on any recognised stock exchange.
  2. Companies of international activities (formerly off-shore), which operated before the change of regime, whose data are held by the Central Bank.
  3. Cypriot shipping companies.
  4. Cypriot high-tech/innovation companies*.
  5. Cypriot pharmaceutical companies or Cypriot companies active in the fields of biogenetics and biotechnology.
  6. Companies of whom the majority of the total share capital is owned by persons who have acquired Cypriot citizenship by naturalization based on economic criteria, provided that they prove that the conditions under which they were naturalized continue to be met.
  7. Cypriot Private Institutes of Tertiary (Higher) Education licensed by the Ministry of Education, Sport and Youth.

* An enterprise qualifies as 'High Technology Company' if:

  1. it is already established and has a presence in the market, and
  2. it has a high level or experimental R&D intensity, and
  3. it developed product/s that fall into one of the following categories: products related to aviation and space industry, computers, electronic and telecommunication products, pharmaceuticals, biomedical, research and development equipment, electrical machinery, chemicals, non-electrical machinery.

Office in Cyprus

In addition to the above criteria, an eligible business in order to qualify as a company of foreign interests must also be able to demonstrate that the company operates in independent offices in Cyprus. The establishment/ operation of independent offices in Cyprus, in suitable premises, must be separate from any private housing or other office, except in the case of business co-habitation.

Time frame of registration with the Register of BFU

All the necessary registrations for the establishment of the company with the Register of Companies of Foreign Interests of the BFU will be completed within seven (7) working days from the date of submission of all the necessary documents to the BFU of the Ministry of Energy, Commerce and Industry.

Employment and residency of third country nationals

In order for a third-country national (non-EU citizen) to be employed in a Company of Foreign Interests in Cyprus, it is required to be a holder of a temporary residence permit and employment permit for this purpose, in accordance with the current Cyprus immigration Legislation.

The main requirements are the following:

  • they will be paid a minimum gross monthly salary of € 2,500.
  • they will hold a university degree or diploma or equivalent qualification or confirmation of relevant experience in a corresponding employment position of at least 2 years in duration.
  • submit an employment contract of not less than 2 years in duration.

Work permits are issued within 1 to 2 months from the date of the application submission and can be valid for a period of up to 3 years.

A director, middle management, key personnel or a person with high skills in a Company of Foreign Interests can reside in Cyprus without a time limit, provided that he / she holds a valid temporary residence and employment permit can be renewed. The restrictions that apply to the general employment of foreigners in the Cyprus apply to support staff.

Ratio of EU and third country national employees

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 the company has been registered with the Register of Companies of Foreign Interests of 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, if the criterion of 30% Cypriot employees is not met.

Support stuff

Support staff (with a gross monthly salary of less than € 2,500) is permitted provided that it does not exceed 30% of the total support staff and provided that there is an employment contract between the third-country national and the employer which is duly validated by the competent authority in accordance with current legislation. The salary level is determined on the basis of the existing applicable legislation.

Family reunification

The spouses of directors, middle management personnel, key personnel and highly skilled personnel have an immediate and free access to the labour market of Cyprus once their supporter (in our case, the employee in the Company of Foreign Interests) has obtained from CRMD the necessary temporary residence permit and employment permit. This option does not apply for spouses of support stuff.

Other Benefits

  • Attractive Corporate Tax Regime. 12.5% of the net profits is payable as tax by a Cyprus company (one of the lowest across European Union). Effective tax rate as low as 2.5% Corporate Tax on revenues from Intellectual Property Rights (IP Box Regime). 0% withholding tax on dividends or interest or royalties paid by a Cyprus resident company to non-resident shareholders (certain conditions apply to royalties on rights used within Cyprus). Double Tax Treaty network covering more than 60 countries.
  • Incorporation and Administration Costs. There are low incorporation, administration and maintenance costs for Cyprus companies compared to other European Union countries.
  • Redomiciliation. The Cyprus Companies Law allows the redomiciliation of foreign companies into Cyprus and of Cyprus companies out of Cyprus, without such companies losing their corporate identity while ensuring their business continuity. In this way, operating headquarters can be moved to Cyprus or off Cyprus, allowing investors, entrepreneurs and international companies to become Cyprus tax residents and enjoy the advantageous tax regime of Cyprus.
  • Non-Domiciled Tax Residency. Cyprus taxation scheme is based on the principle of residence and there are two main rules someone can choose to become a Cyprus tax resident: the 183 days rule and the 60 days rule. A person can be considered as non-domiciled Cyprus tax resident if that person has physical presence in Cyprus exceeding 183 days in a tax year (1st January to 31st December) or resides at least 60 days in a tax year in Cyprus (1st January to 31st December), and carries a business and/or work in Cyprus and maintains a permanent home in Cyprus while not spending more than 183 days in any other country during a tax year and/or be a tax resident of any other country. Benefits of being a non-domicile Cyprus tax resident is to enjoy for a maximum of 17 years a full exemption on their worldwide dividend and interest tax and any profit from sale of securities that include shares, bonds, debentures and others is specifically exempt from Cyprus taxation, provided that the underlying assets do not include immovable property located in Cyprus.
  • Lower income tax for persons taking up employment in Cyprus. First €19,500 of taxable income is tax exempt. Any taxable income in excess of this amount is taxed at progressive rates ranging from 20% to 35% (for taxable incomes over €60,000). 50% exemption for remuneration from employment exercised in Cyprus by persons who were tax resident outside Cyprus for at least 10 consecutive years before commencement of their employment in Cyprus. The exemption applies for a maximum period of 17 years commencing from the year of employment, if such income exceeds €55,000 per year. In case of Cyprus remuneration which is less than €55,000, a 20% exemption is granted, up to a maximum of €8,550 – whichever is lower – for a maximum period of 7 years commencing from the 1st January of the year following the year of employment.

Originally published September 4, 2023.

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.