Substance Made Easy

True to both, Cyprus’ simple and certain tax and legislative framework and flexibility in adapting to global regulatory changes, the country has swiftly responded to the need for substance by facilitating the decision of any EU or Non-EU business to relocate to Cyprus through different incentives. These incentives are both complimentary and mutually exclusive, depending on the needs and requirements of each business.

I. Cyprus Non-Domiciled Tax Residency

Any foreign citizens, including EU Nationals, who seek to avail themselves of the benefits of the Cypriot legislative and tax systems by relocating to Cyprus for a minimum of 60 days per annum will obtain the tax status of a Non-Domicile individual and will therefore be able to enjoy significant tax benefits, as follows:

  •  0% Tax on dividends received;
  •  0% Tax on dividends paid by the individual in Cyprus;
  •  0% Tax on interest in fixed deposits/savings in Cyprus;
  •  The Individual will only be taxed in Cyprus on their worldwide income;
  •  Reduced tax on rental income;
  •  50% exemption on employment income exceeding EUR100,000 per annum for non-resident managers and employees taking up employment in Cyprus upon registration of a Cyprus Foreign Interest Company, which the Firm forms and registers for its clients.

The Firm assists its clients by locating / managing / staffing and supervising offices. For bespoke headquartering solutions please contact us.

II. Cyprus Permanent Residency

(i) Permanent Residency by Investment
The Department of Population and Migration has proceeded with a revision and subsequent improvement of the criteria for granting an immigration permit to applicants who are third country (Non-EU) nationals and who invest in Cyprus.

1. LEGAL FRAMEWORK

1.1 In accordance with the provisions of Regulation 6(2) of the Foreign and Immigration Regulations, the Minister of Interior decided to issue immigration permits to third-country nationals, in cases of investments that meet the requirements outlined below.

1.2 The applicant must meet one of the investment criteria set out in paragraph 2.1, as well as the qualitative criteria set out in paragraph 3 below. It is noted that the funds to be used for the investment have to come from abroad.

2. INVESTMENT CRITERIA

2.1 The applicant must make an investment of at least €300,000 in one of the following investment categories:

(A) Investment in a house/apartment: purchase of a house or apartment from a land development company, which should be for a first sale of at least €300,000 (+ VAT).

(B) Investment in real estate (excluding houses/apartments): purchase of another form of real estate such as offices, shops, hotels or similar developments or a combination of them with a total value of €300,000. Such an investment may involve a resale property.

(C) Investment in the equity capital of a Cyprus registered company with activities and staff in Cyprus: The investment must have a value of at least €300,000 in the equity capital of the company, which is both based and active in the Republic of Cyprus and has a proven physical presence in Cyprus and employs at least five (5) people.

(D) Investment in units of a Cyprus Collective Investment Enterprise (either AIF / AIFLNP / RAIF).

It is understood that any alienation of the holder of the immigration permit from the investment in which he/she has made without its immediate replacement with another of the same or greater value, which should meet the conditions set out above, will result in activation of the process of cancellation of the permit under the provisions of Regulation 6 of the Immigration Regulations.

2.2 The applicant must, in addition to the investment under paragraph 2.1 above, be able to prove that he/she has at his/her disposal an insured annual income of at least €30,000. The annual income increases by €5,000 for each dependent family member respectively and €8,000 for each dependent parent (of the applicant and/or his/her spouse). This income may emanate from salaries, pensions, dividends from shares, bank deposits, rents, etc. coming from abroad in cases where the applicant chooses to invest as per paragraph 2.1.(A) above. The calculation of the total income may include that of the spouse.

In instances where the applicant chooses to invest as per paragraphs 2.1.(B), 2.1.(C) or 2.1.(D) above the applicant’s total income or part of it may also be derived from sources or activities within the Republic of Cyprus.

3. QUALITY CRITERIA

3.1 The applicant and the spouse must submit a clean criminal record certificate from their country of residence or from the Republic in case they reside in Cyprus.

3.2 The applicant and the spouse shall certify that they do not intend to be employed in the Republic except as directors of a company in which they have chosen to invest under this policy.

3.3 In cases where the investment does not relate to the share capital of a company, the applicant and/or the spouse may be shareholders in companies registered in Cyprus and the income from dividends in such companies may not be considered as an impediment for the purposes of obtaining the immigration permit. They may also hold the position of director in such companies without pay.

3.4 In cases where the applicant chooses to invest as per paragraphs 2.1.(B), 2.1.(C) or 2.1.(D), he/she should present data on his/her place of residence in the Republic by way of producing, for example, a title deed of property, a sale purchase agreement or rental agreement).

4. OTHER INFORMATION

Persons who are granted an immigration permit must take up their permanent residency in the Republic within one (1) year from the date of approval of the submitted application, while they must, like their family members, not stay outside the Republic for a period exceeding two (2) years. Otherwise, the immigration permit shall cease to be valid under Regulation 6(3) and / or may be cancelled under Regulation 6(4).

The Firm assists its clients throughout the entire process of obtaining a residency permit, including, inter alia, locating real estate, conducting due diligence on the title, preparation of sale purchase and other agreements, company formation, corporate support and the managing the application process.

More information is available by following the link to our article on Cyprus Permanent Residency or alternatively contact us for more information:

(ii) Cyprus Fast-Track Business Activation Mechanism

To supplement the existing incentives in place, the Fast Track Business Activation Mechanism was approved by the Council of Ministers 3 September 2020 with the intention of attracting additional foreign investment to Cyprus and facilitating business presence, as well as providing swift and efficient services to foreign businesses wishing to headquarter in Cyprus. The fast-track business activation mechanism constitutes a revision of the criteria for the issuance of residence and employment permits in respect to foreign interest companies registered in the Republic of Cyprus.

Eligibility Criteria

Companies interested in joining the Fast Track Business Activation mechanism are required to meet the criteria below:

  • Companies should have a physical presence in Cyprus, including the establishment/operation of independent offices that are separate from any private residence.
  • Existing companies should have a minimum turnover of EUR000 per year for three (3) out of the last five (5) years.
  • New companies should provide a reliable 5-year business plan illustrating growth potential.

Services

The Fast-Track Business Activation Mechanism is operated by the Ministry of Energy, Commerce and Industry and includes the following services:

  • Provision of services for the establishment of a company;
  • Assisting companies to obtain all necessary registrations for the establishment of a business from a single point of contact, including the following:
  • Company registration and name approval;
  • Registration with the Social Insurance Registry and the Employers’ Registry;
  • Registeration with the VAT Registry and in the Income Tax.

Guidance for the Establishment and Operation of Companies in Cyprus

  • Provision of information for all the necessary permits required by the company in order to start operations.
  • Facilitation of the issuance of residence and employment permits in Cyprus.
  • Facilitating the issuing of residence and employment permits in Cyprus for third country nationals.

It is noted that  due diligence checks will be conducted for all companies wishing to join the Fast Track Business Activation Mechanism.

Substance

The Cyprus leglislative and tax framework simplifies and facilitates the decision to headquarter in Cyprus and create real substance on the island, necessitated by recent developments in local tax laws, as well as EU legal developments.

Specifically, local authorities are adopting the “substance over form” doctrine. Careful planning and sophisticated tax advice is required in order to determine the extent of enhancing the substance of a company.

Having however a real physical presence in Cyprus by leasing offices and having highly qualified personnel working from these premises indicates that there is actual business conducted in and from Cyprus.

Additional Incentives Facilitating Business Relocation to Cyprus:

  • A strategic geolocation at the crossroads of 3 continents, Cyprus has acted as the bridge for commerce, trade and international business between Europe, Africa and Asia for over 10,000 years;
  • A service minded, pro-business political and legal infrastructure, with an inviting tax regime;
  • Highly developed and flexible common law legal system;
  • An attractive and safe investment gateway to the EU and other high growth markets like the Middle East;
  • An established international business and financial centre offering a tax efficient EU company domicile and a tax certain compelling invitation for regional headquarters.

The Firm assists its clients in applying for all of the incentives detailed here, as well as providing assistance in locating the right real estate, performing due diligence on the properties and drafting and managing the acquisition.