Keep An Eye on 4 Points to Kick off Your New Year - Cyprus to Implement New Strategy in 2022

In the years following the dissolution of the Soviet Union in 1991, Cyprus gained great popularity as a portal for investment from the West into Russia and Eastern Europe, becoming for companies of that origin the most common tax haven. Many of the forex trading firms in Cyprus come from countries such as Israel and Russia. Particularly, the Cyprus legal system is founded on English law, and restrictions on foreign direct investment were removed, permitting 100% foreign ownership in many cases. In 2002, a new 12.5% corporate tax rate was put in place in the country, one of the lowest in the EU. Besides, as a member of the Eurozone, has no exchange restrictions.

CySEC (as of September 2021, there are 230 CySEC-regulated investment firms) became the one that regulates many of the world's biggest brands in retail forex since 2016, as they generally see it as an efficient way to get an EU operating license and industry know-how.

In October 2021, the Cyprus government has rolled out a new strategy to attract investment, which is expected to be implemented in January 2022. The strategy is comprised of the following:

I. Transforming the current Fast Track Business Activation Mechanism into the Business Facilitation Unit, as the Point of Single Contact for foreign companies.

II. Revised policies concerning the issuance of temporary residence and employment permits to third-country nationals who work in foreign companies operating in Cyprus.

III. The right to family reunification of eligible third-country nationals.

IV. Streamlining the process of employment permit application.

V. Introducing the Digital Nomad Visa.

VI. More employees / innovation companies becoming eligible to tax exemption.

VII. Increased tax deduction for R&D cost.

VIII. How foreigners apply for Cypriot citizenship.

For those forex companies of foreign interests which have set up office or branch in Cyprus, they are urged to keep an eye on the following four points.

The new Business Facilitation Unit (BFU) to replace the current Fast Track Business Activation Mechanism (FTBA).

The current Fast Track Business Activation Mechanism in Cyprus came into effect since September 3 2020, with an aim to further attract foreign investment, and in hope of providing efficient services to those foreign businesses which wish to enter the country. Foreign businesses that are eligible to FTBA are often required to meet the following:

- Companies should have a physical presence in Cyprus including establishment/operation of independent offices that are separate from any private residence.

- Existing companies should have a minimum turnover of €500.000 per year for 3 out of the last 5 years.

- New companies should provide a reliable 5-year business plan illustrating growth potential.

A concept was brought into the new strategy this time, and that is the proposed BFU will act as the Point of Single Contact (PSC) for all foreign companies. This is something worth noting. According to BusinessinCyprus.com, the PSC Cyprus is meant to become the single interlocutor, by fulfilling a coordinating role, between service providers and competent authorities. It is put in place to simplify procedures and improve efficiency.

It is foreseeable that for future foreign companies which wish to enter the Cypriot market, the eligibility criteria, compared to that of FTBA, will be easier after BFU is established.

More benefits for third-country expatriates working in Cyprus

Statistics show that there are nearly 180,000 foreign nationals in Cyprus, a community making up approximately 22% of the country's population. For many of those expats working in Cyprus, especially in forex business, a lot of them are here alone while their families are staying behind. They could only fly back in limited holidays, which is something that becomes increasingly challenging with the ongoing pandemic. As the new strategy rolled out, Fazzaco asks for forex brokers' attention on strategies concerning benefits for third-country expats. It is of great importance for your foreign staff to rest assured.

In addition to quicker issuance of residence and employment permits, eligible third-country expats may also bring their families to Cyprus for reunification, including visa application assistance. But there are restrictive terms too, such as your families may only come to Cyprus on non-work visa.

Employment of third-country nationals with a minimum gross monthly salary of € 2500. These employees must have a university degree or at least 2 years of experience, a minimum 2-year contract and they will also be allowed to move their family to Cyprus.

Tax-related policies (for both employees and companies)

"In this world, nothing is certain except death and taxes." Famous quote from Benjamin Franklin, the founding father of the United States. For a company, a tax exemption policy is undoubtedly a good news.

The new strategy brings about tax policies that concern both individuals and companies. For forex brokers, please attach importance to both.

Individually, the tax exemption becomes applicable in a wider scale, meaning more will be eligible to apply for tax exemption (new residents/employees with remuneration from employment of €55,000); meanwhile, the benefit gets extended from 10 to 17 years.

For companies, the new strategy extends the 50% tax exemption for investment in certified innovative companies to also include corporate investors. Besides, an increased discount on R&D costs will be granted to be considered as tax deductibles up to 20%.

Specific date when policies become effective

As of writing this article, all policies above are yet to be officially implemented. They are planned to become effective from January 1 2022. However, some terms still require legislative procedures. Please follow up the specific effective dates of the said policies.

At last, Fazzaco has done a preliminary research on the new strategy of Cyprus this time, and we believe that it, too, aims to attract those Cypriot citizens who live overseas to come back, as well as eligible workforce from adjacent politically unstable countries to go to Cyprus, and help it make progress in the coming year since the Covid-19 pandemic has been taking tolls on the country's economy for a long time.