A Fast-Track Business Activation policy has been recently implemented by the Cyprus Government aiming to support companies wishing to set-up or further expand their operations in Cyprus.
Under this new policy, eligible companies can enjoy an accelerated procedure for the incorporation, as well as the registration with relevant public bodies required for the company's operations. In light of the recent revision of the policy for the employment of non-EU nationals, companies under the Fast-Track Business Activation shall be enabled to hire an increased number of staff in key positions, while at the same time the employees' family members can be granted Cyprus residence permits.
This mechanism is available to companies which have been already incorporated or wish to be established in Cyprus, as well as to branches and subsidiaries of foreign companies. These companies are required to have physical presence in Cyprus, including premises and staff. The company's premises should be independent and separate from private residences.
A new company is required to submit a reliable business plan as to the company's goals, activities and strategy illustrating growth potential. On the other hand, existing companies should have a minimum turnover of EUR 500.000 for three out of the last five years of operation, and audited accounts should be submitted to the competent authorities.
Eligible companies should invest or have invested, at any time prior to their application, a minimum amount of EUR 200.000 for the purposes of the company's operations in Cyprus. The investment amount could be used for the acquisition of the company's assets or equipment, but not for the shareholders' private matters e.g., not to acquire a private residence.
Under this policy a straightforward procedure will be implemented with regards to the provision of the following services:
- Registration of the company and name approval;
- Registration with the Social Insurance Registry and the Employers' Registry; and
- Registration with the VAT Registry and the Income Tax Department
In addition to the above, a fast-track procedure will facilitate the company to be registered with the Civil Registry Migration Department, so as to effectively enable the company to hire non-EU staff and grant them a work-permit. Up to 200 employees (or more under certain conditions) may be hired under this policy depending on the company's turnover, including Directors, Middle Management Executives and other Key Personnel, as well as Specialists of particular know-how for which there is a significant shortage of supply at national level related to the high-tech, pharmaceutical and marine business sectors.
It is important to note that under this policy there are no restrictions on the maximum duration of stay of the non-EU staff. Moreover, non-EU holders of residence and employment permits have direct access to family reunification with their family members (spouse and minor children), provided that the relevant conditions of the Aliens and Immigration Law are met.
The issuance of a temporary residence and employment permit under the abovementioned categories of staff is allowed when the entry of the citizen into Cyprus was made with a visa, and not by previously securing an entry permit, which further facilitates the process.
The work permit and the residence permit can be examined within four to six weeks from the date of submission of the relevant application.
In order to be eligible, non-EU shareholders should own the majority of the company's shares (over 51%). This requirement is lifted in the event that the company belongs to any of the following categories:
- Public companies registered in any recognised stock exchange;
- Former offshore companies that were operating in Cyprus by approval of the Cyprus Central Bank, before the change of their offshore status;
- Cypriot shipping companies;
- Cypriot companies of high technology/innovation, that will be certified by the Deputy Ministry of Research, Innovation and Digital Policy based on the applicable framework; and/or
- Cypriot pharmaceutical companies or companies operating in the fields of biogenetics and biotechnology.
As such, companies of Cypriot or other EU citizens can benefit from this scheme, as well as companies owned by citizens who have acquired the Cypriot citizenship through the Cyprus investment Program, so long as the above-mentioned criteria are met.
The applications to join the Fast-Track Business Activation will be examined by a Committee, while a due diligence will be conducted on the companies and the shareholders. Following the submission of a successful application, the Ministry of Energy, Commerce and Industry shall grant the company the relevant Certificate.
Besides the fast-track procedure for the incorporation and registration of the company as explained above, and the permit to employ a significant number of non-EU nationals in key positions, essential tax advantages can benefit the company. These companies can enjoy the low corporate tax rate (12.5%), while expenses incurred for the production of income are tax deductible.
On a personal level, the employees and their family members who relocate to Cyprus can enjoy the perk of low personal income tax. Recently, the Income Tax Law (118(I)/2002) has been amended so as to extend the exemption of the amount of EUR 8.550 or 20% - whichever is the lower - of the remuneration from employment carried out in Cyprus by an individual who was resident outside of Cyprus in the tax year before the year of commencement of employment in Cyprus. Such an exemption shall be provided for a five-year period following the year of commencing employment. An advantageous Non-Dom status can be beneficial to new tax-residents providing for significant tax deductions on their income and tax exemptions on dividends and interest for 17 years.
Originally Published by Michael Kyprianou, January 2021
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.