Doing business in Cyprus
Cyprus has long established itself as a thriving business hub, with a vast array of investment opportunities in key growth sectors of the economy. The island’s ideal strategic location, advanced infrastructure and high quality of life do not only represent key reasons to relocate and live on the island, but are also at the heart of an investor’s choice to invest in Cyprus.
The island is an ideal investment gateway to the European Union, as well as a portal for investment outside the EU, particularly into the Middle East, India and China. As a member of the wider EU and Eurozone community, Cyprus ensures safety and stability for investors, while also offering them market access to more than 500 million EU citizens.
The local infrastructure is ideally suited for business people who need to get things done. Thanks to its modern road network, extensive port facilities and two new international airports, travel and transport in and beyond Cyprus is fast, efficient and cost-effective.
Human talent constitutes Cyprus’ most compelling advantage, complemented by a broad range of high quality professional services. As a dynamic business centre, Cyprus offers an abundance of highly educated and skilled individuals, multilingual in their majority, ready to serve the needs of any business.
Cyprus, indeed, has all the right ingredients to maintain a strong and resilient economy, due to its small size, productive labor force, business friendly and flexible government.
Our country’s competitive advantages are significantly enriched by a robust and transparent legal and regulatory framework and an attractive tax regime, which offers a wide range of incentives and advantages both for legal and natural persons.
Cyprus’ legal system, based on English Common Law principles, is widely recognised as a business-friendly and effective system that ensures transparency and reliability in business practices. Offering foreign businesses a familiar and reliable framework within which to operate, Cyprus’ legal system is also fully compliant with the EU, the Financial Action Task Force on Money Laundering (FATF), OECD, FATCA, the Financial Stability Forum laws and regulations and EU AML directives.
Moreover, Cyprus offers an attractive and transparent tax regime, fully compliant with EU, OECD and international laws and regulations. Providing access to an extensive network of more than 60 Double Tax Treaties, and maintaining a corporate tax rate of 12.5%, one of the lowest in the EU, Cyprus offers international investors and domestic businesses confidence to invest, grow and prosper.
Attractive tax system
Cyprus has a simple and transparent tax system with one of the lowest corporate tax rates in the EU and multiple exemptions for both corporates and individuals.
The main characteristics of the Cyprus tax system are outlined below:
- Low corporate income tax rate of 12.5%
- EU & OECD Compliant
- Access to EU directives (e.g. Parent-Subsidiary)
- Extensive double tax treaty network with over 60 countries
- Dividend participation exemption (subject to conditions)
- Exemption from tax on gains from the disposal of securities (e.g. shares, bonds)
- Notional interest deduction on equity applies to all taxpayers and all business activities
- No withholding taxes on interest and dividends
- No taxation of capital gains (except for disposal of real estate in Cyprus or shares of company holding real estate in Cyprus)
- No succession taxes
- No Controlled Foreign Company (CFC) rules
- Tax neutrality on foreign exchange differences unless they arise from trading in currencies or currency derivatives
- Foreign tax relief on income subject to both Cypriot and overseas tax
- Exemption on profits of foreign permanent establishments (subject toc conditions)
- Company reorganisation rules based on the EU Mergers Directive allow for tax-neutral group restructuring
- Attractive Intellectual Property regime in line with “modified nexus approach” (OECD Action 5)
- No exit tax rules
- 50% exemption on employment income exceeding €100,000 per annum for non-residents taking up employment in Cyprus
- No tax on dividends, interest and rental income of non-domiciled individuals
Naturalisation of Investors in Cyprus by exception
The Council of Ministers introduced on 13/09/16 a scheme pursuant to which third country nationals may acquire citizenship through naturalisation by exception by satisfying certain investment/economic criteria, which was recently amended by the Council of Ministers on 13/02/19.
As per the criteria of this investment scheme, the requisite investments should have been made by the applicant three (3) years preceding the date of the application and the applicant is required to retain the said investment for a period of at least three years from the date of naturalization and as amended for applications that are submitted from 15/05/19 and onwards the applicants must retain their investments for a period of at least five (5) years.
A non – Cypriot citizen may apply for the acquisition of the Cypriot citizenship through naturalisation by exception if he/she meets the following economic criteria and terms and conditions:
1. Investment in real estate and land developing
A direct investment in Cyprus of at least €2,0 million (excl. VAT) for the acquisition or development of real estate projects, including residential or commercial developments, developments in the tourism sector, or other infrastructure projects. The acquisition of land is not considered as a qualifying investment under this section.
If the applicant has invested in housing units/units on the basis of this section, then the purchase of another permanent residence in Cyprus will not be required, if at least one of the housing units is worth at least €500.000 (excl. VAT), provided that the applicant retains the possession of the residence for life. It should be noted that applications filed after 15/05/19 and relate to investments in housing units the total investment in housing units including the permanent residence should at least be €2.5 million.
2. Purchase or participation in Cypriot businesses or companies
An investment of at least €2,0 million (excl. VAT) in the purchase or participation in business or companies, that are based and operating in Cyprus. These businesses or companies should have a tangible presence and substantial activity in Cyprus, as well as employ at least 5 employees that are Cypriot or EU citizens who have been legally residing in Cyprus for a continuous period of at least 5 years preceding the submission of the application.
3. Investment in Alternative Investment Funds (AIFs) or financial assets of Cypriot companies or organizations
An investment of at least €2,0 million (excl. VAT) in units from AIF, bonds, debentures or other securities established in Cyprus in companies or organisations with substantial economic activity in Cyprus which are licensed and regulated by the Cyprus Securities and Exchange Commission (CySec). The purchase by an AIF of units of other AIFs does not satisfy the requirements of the Scheme.
4. Combination of investments
The above investments can be combined, with a total investment amount of at least €2.0 million (excl. VAT). Such combination may also comprise the acquisition of government bonds of the Republic of Cyprus, up to €500.000.
One of the amendments introduced by the Council of Ministers on 13/02/19 is the requirement for the investors that file applications from 15/05/19 and onwards to make a contribution to the Research and Development Foundation of Cyprus of at least €75.000 and a contribution to the Cyprus Land Development Corporation of at least €75.000.
5. Terms and Conditions
The applicant must have a clear criminal record and not be included in the sanctions list.
Own a permanent privately-owned residence in Cyprus of a market value of at least €500.000 (excl. VAT).
If members of the same family apply separately as investors, they can collectively acquire a residence provided that its total value covers the amount of €500.000 (excl. VAT) per applicant. The Scheme does not impose a requirement to reside in Cyprus after obtaining the Cyprus passport.
The applicant must hold a residence permit in Cyprus before obtaining the Cyprus citizenship.
Schengen Visa (applicable from 15/05/19 onwards). The applicant must be a holder of a valid Schengen visa unless such visa is not required to enter into a Member State or when the applicant is a national of an EU state.
Spouse/ partner: The investor’s spouse or partner may acquire the Cypriot Citizenship. Their application may be filed simultaneously
- Minor children: Dependent children up to the age of 18 may apply, after the investor acquires the Cypriot Citizenship and provided that the other parent consents
to the grant of the citizenship
- Adult financially dependent children: the right to apply for citizenship is also granted to the financially dependent adult children of the investor belonging to one of the following two categories:
- students up to the age of 28
- children with severe physical/ mental disability that prohibits employment
- Parents: The investor’s parents may also apply for citizenship after the investor has acquired his/ her citizenship, provided that they are owners of a private residence of at least €500.000 (+VAT). The investor and his/ her parents may collectively acquire one residential property of a total value of at least €1m (+VAT)
Category F – Fast Track Procedure under Regulation 6 (2)
Category F scheme applies to non-EU nationals, who possess and have a secured annual income, high enough to give them a decent living in Cyprus, without having to engage in any business, trade or profession and are not entitled to work. This income must come from legal sources from legal sources from abroad, for example, it could derive from pensions, permanent deposits, business activities, ownership of companies, shares etc.
The following conditions must be satisfied for the issuance of the permit:
- the applicant should prove that he has at his disposal a secure annual income of at least €30.000. This annual income is increased by €5.000 for every dependent person. This income must derive from abroad and may include salaries from employment, pensions, dividends from shares, fixed deposits, rents etc.
- the applicant should deposit a minimum capital of €30.000 that must be transferred to Cyprus from abroad, into an account, which will be pledged for a period of at least three years.
- the applicant should submit, with the application, title deeds or a contract of sale in his name and/or his spouse, which has been officially deposited with the Department of Lands and Surveys, of a real estate of at least €300.000 (excl. V.A.T.) and official receipts for the payment of at least €200.000 (excluding V.A.T.).The full payment of the value for the real estate shall be settled in an account in a financial institution in Cyprus. It should be noted that the purchase of the property must be in relation to a property sold for the first time by a development company.
- the applicant must submit a confirmation of a clear criminal record from his/her country of residence and generally should not be considered as a threat in any way to the public order or public security in Cyprus.
- the applicant will need to confirm that he/she does not intend to be employed in Cyprus in any direct or indirect manner. It should be noted that the applicant and/or his spouse may be a shareholder(s) in a Company registered in Cyprus and the income from the dividends of such a company in Cyprus are not deemed an impediment for the purpose of obtaining an immigration permit.
- the applicant and his family included in the Immigration Permit, must visit Cyprus at least once every two years.
- the duration for the issuance a residence permit under Regulation 6 (2) shall not exceed a period of 2 months from the date of the submission of the application, as it is considered as a fast track procedure.