Companies of Foreign Interests

What are Companies of Foreign Interests?

Companies of Foreign Interests are companies duly incorporated in the Republic of Cyprus, with the majority of shares held by non-EU nationals. Cyprus Companies of Foreign Interests may also be 100% owned by non-EU nationals.

The New Strategy

The Cyprus Council of Ministers, with its Decision dated 15.10.2021, approved the New Strategy for atracting companies to operate and/or expand their activities in Cyprus. The new Strategy is in force since 2.1.2022. The Strategy abolishes and replaces the previous policy on the employment of personnel from third countries (non-EU) employed by companies of foreign interests. According to the provisions of the New Strategy:

• Maximum quotas for foreign staff are cancelled. Companies can freely employ any number of highly paid non-EU nationals without going through a labour market check.
• Specialists are not limited to specific professions or skills. However, all companies commit to invest 30% of their total staff in Cypriots/EU citizens over a period of five years. In five years, that is atier 2.1.2027, the ratio for new hires will be checked. If a company does not adhere to the 70:30 ratio, the case will be evaluated on its own merits and put before the management for an administrative decision.
• The examination time of applications for residence and employment is set at one month.

Why Cyprus?

Cyprus is the third-largest island in the Mediterranean Sea and is strategically placed at the easternmost tip of Europe, at the crossroads of major sea and air routes connecting Europe, Africa, and Asia. The Economic development in Cyprus may mostly be atributed to the hospitality, construction, transport, banking, and IT industries and ratings from
international agencies place Cyprus in the Top 10 as best country in the world for atracting and retaining foreign direct investments. Cyprus has additionally been investing in education and training initiatives to develop a skilled workforce.
The country has a solid education system with a focus on promoting science, technology, engineering, and mathematics and offers a variety of educational resources such as:

• Public and Private Universities,
• Higher Education Institutes,
• English-speaking private secondary schools and a number of schools offerring tuition in French, Arabic and Russian languages.

Cyprus’ most significant competitive advantage may well be its low cost of doing business coupled with its talented population. Cyprus’s advantageous tax policy, tax incentives and strategic position are a significant atraction to
corporations in establishing regional headquarters or offices on the island and,

• As from 1 January 2022 Article 8(23A), 50% of the remuneration of employees, whose first employment in Cyprus began from 1 January 2022 onwards, is exempt from income tax for a period of 17 years (starting from the month of employment), if their remuneration per year exceeds €55,000.
• Non-domicile status which again applies to first time employees in Cyprus based on the above structure ensures that all dividend and interest income for such individuals form all over the world once they become Cyprus tax residents is exempted from Income or Capital Gains Tax. However, since they will be living in Cyprus and enjoying
  the benefits of the island such as medical care, General Health System contributions on dividend income are applicable but capped at EUR 180.000 Annual Income @ 2.65% = EUR 4.770 per year.

Please read our article on Non-Domicile Status to learn more on this.

• Low Corporate Tax rate set at 12.5%.
• Intellectual Property (IP) regime providing tax incentives for companies holding IP rights, reducing their effective tax rate as low as 2.5% on IP-related profits.
• Double Tax treaties with over 60 countries.
• Notional Interest Deduction which allows for an interest deduction on equity capital further reducing the effective tax rate as low as 2.5% for qualifying companies.

Furthermore, Cyprus has made a name for itself as a major hub for the financial sector in the European Union. Foreign corporations and investors stand to gain from the nations’ well-regulated financial sector, which will allow them to easily springboard to the European Union. Additionally and equally significant is the prospect of any Cypriot enterprise to apply for and receive financing from a number of European Union (EU) initiatives and programs designed to stimulate the economy and encourage new business formation, research, and innovation.

Cyprus’s real estate and building industries as well as investment in green projects and renewable energy are significant economic drivers for the island. Rising demand for both commercial and residential real estate, as well as the development of the tourist industry, have spurred growth in these areas.

An additional area equally significant is the accelerated rise of remote work and digital nomadism making Cyprus a desirable location for digital nomads. Because of its mild temperature, high quality of life, and convenient access to modern infrastructure, it has become a popular choice for digital nomads looking for a change of pace. Cyprus indeed offers a high quality of life, with a pleasant Mediterranean climate, beautiful landscapes, and a rich cultural heritage.
These factors guarantee an improved work-life balance.

Cyprus is a great place to establish a company!

Eligibility Criteria

1. The majority of the company’s shares must be owned by non-EU nationals
2. If the majority of the company’s shares are not owned by non-EU nationals (i.e. equal to or less than 50%) then the company is eligible if the foreign participation represents an amount of at least €200.000

In both cases above (1&2), the ultimate beneficial owner (UBO) must deposit or invest an amount of at least €200,000, for the purposes of his/her business activity in Cyprus. If more UBOs exist, then this amount can be deposited or invested by a single UBO or collectively.

3. Public companies registered on any recognised stock exchange
4. Companies of international activities (formerly off-shore), which operated before the change of regime, whose data are held by the Central Bank
5. Cypriot shipping companies
6. Cypriot high-tech/innovation companies*
7. Cypriot pharmaceutical companies or Cypriot companies active in the fields of biogenetics and biotechnology
8. Companies of which 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.

For cases 3-8, the investment criteria is also applicable and the company’s initial investment in the Republic of at least €200,000 must be proven by presenting the appropriate certificates (e.g. bank statement at the time of deposit of the amount or proof of investment (purchase of office space and/or office equipment).

The Company should operate in independent offices in Cyprus and pursuant to the relevant regulations.

* An enterprise qualifies as ‘High-Tech/Innovation Company’ if:

• it is already established and has a presence in the market,
• it has a high level or experimental R&D intensity, and
• 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.

Staff Categories

Directors
This category includes the Directors or Partners registered in the Registrar of Companies and Official Receiver, the General Managers of branches and of mother companies of alien companies, the Departmental Managers and the
Project Managers.

Middle Management Executives and other Key Personnel
This category includes the upper / middle management personnel and the other administrative, secretarial, or technical staff.

Specialists
This category includes professions and/or with skills relevant to the Company’s operating activities.

Support Staff
This category includes any support staff lower or higher level needed to operate the business.

*The minimum gross monthly salary for highly skilled employment is set at € 2500, (this includes Directors, Key personnel, Specialists and Support Staff). Below this limit, employment is considered to be at support level and a contract must be dully stamped by the Department of Labor provided that the company has received a permit to employ non-EU nationals at this level from the labour Department.

*The maximum number of non-EU national employees is set at 70% of all employees over a period of 5 years starting from the day of joining the Business Facilitation Unit and atier the lapse of 5 years, if the company will not be able to employ 30% of Cypriot or EU workers, the mater will be re-examined.

*The non-EU citizen must have a university degree/diploma, or, proof of at least 2 years of relevant experience in a corresponding employment position.

Family Members
In order to preserve family unity, non-EU nationals with residence and employment permits are able to exercise their right to Family Reunification for their family members (spouse and minor children), provided that the relevant conditions of the Aliens and Immigration Law are met.

Spouses of employees who obtained a residence and employment permit in Cyprus and who receive a minimum gross monthly salary of €2,500 can have immediate and free access to the labour market.

Please read more about Non-Domicile Status.

The information provided by CRS is for general informational purposes only and should not be construed as professional or formal legal advice. You should not act or refrain from acting based on any information provided above without obtaining legal or other professional advice.