As the implications and the impact of Brexit are now becoming apparent many UK-based businesses are considering relocation of their headquarters or business activities from the UK to other European countries. Cyprus offers competitive advantages in terms of attracting UK-based companies that seek to maintain close business ties within the European Union.
The new framework for facilitating the establishment of foreign companies in Cyprus makes it an attractive post-Brexit solution for UK companies that wish to continue business operations throughout the EU moving forward.
Headquartering and company relocation in Cyprus has become more attractive through the introduction of the framework known as the Fast-Track Business Activation mechanism (‘’FTBA’’), which was very recently implemented by the Cyprus Government in an attempt to further attract foreign businesses and to stimulate economic activity by promoting foreign investment to the island. This mechanism aims to facilitate the establishment and re-domiciliation of businesses from third (non-EU) countries to Cyprus as well as to provide fast and efficient services to new and existing entities of foreign interests wishing to speedily and efficiently establish presence in Cyprus. UK Companies can most certainly benefit from this framework and now would be the ideal time to continue their EU trading activities without serious interruption.
Benefits of the Fast-Track Business Activation mechanism.
The main benefits of the ‘’FTBA’’ mechanism which is operated by the Ministry of Energy, Commerce and Industry are that it offers assistance and accelerated procedures for the incorporation or re-domiciliation of companies in Cyprus, as well as with obtaining all necessary local registrations with public authorities, such as the VAT registry, Income Tax and the Social Insurance registry which are required for the Companies’ operations from a Point of Single Contact (PSC). There is also facilitation for the expedited issuance of the necessary residence and employment permits in Cyprus for third country nationals and their family members, required for the operation of companies in Cyprus.
Eligibility criteria for the Fast-Track Business Activation Mechanism
Companies interested in joining the ‘’FTBA’’ mechanism should meet the quantitative and qualitative criteria below, thus contributing positively to the country’s economic growth: A new company is required to submit a reliable 5-year business plan as to the company’s goals, activities and strategy illustrating growth potential.
Existing companies should have a minimum turnover of €500.000 per year for 3 out of the last 5 years of operation.
Companies should have a physical presence in Cyprus, including establishment/operation of independent premises and staff that are separate from any private residence.
Eligibility criteria for employing third country nationals under more favourable provisions
Most importantly, due to the recent revision of the policy for the issuance of residence and employment permits of third country nationals employed in companies of foreign interests registered in the Republic of Cyprus, facilitation services will be provided for residence and employment permits of third country nationals under certain conditions.
In order for companies of foreign interest who either re-domicile in Cyprus under FTBA mechanism or are incorporated under this mechanism to employ third country nationals in Cyprus under more favorable provisions and to be registered as a company of foreign interests with the Migration Department the following should apply:
Third country shareholders should own the majority of the company’s shares with the exception of companies that fall into the fields of shipping, high technology and innovation, pharmaceuticals, biogenetics and biotechnology.
A foreign direct investment of capital amounting to at least €200.000, must be admitted to Cyprus from abroad for the purposes of operating the company.
The establishment/operation of independent offices in Cyprus, housed in suitable premises, separate from any private housing or other office, except in the case of business co-habitation.
Companies that meet the above criteria are eligible to employ third country nationals as Directors, middle management executives, key personnel or specialists with no restriction on the maximum duration of their stay in the Republic. Third country nationals employed in the above positions are able to exercise their right to family reunification.
In such a case, third country nationals who are family members, (spouse and minor children), can enter and reside in Cyprus after the sponsor has followed the procedure for family reunification.
Furthermore, the issuance of a temporary residence and employment permit for the above positions (Directors, key personnel and specialists) is allowed when the entry of the third country national into the Republic was made with a visa and not by previously securing an entry permit from the Civil Registry and Migration Department.
A company of foreign interests may also employ third country nationals as support staff but will need to follow the General Employment procedure by first securing the positive recommendation of the Department of Labour. A company may employ third country nationals in posts in this category at a rate of 30% of the total staff and subject to the so-called market test.
The applications for joining the FTBA mechanism will be examined by a Committee while a due diligence check will be conducted on the companies and the shareholders wishing to join the Fast-Track mechanism. The Ministry of Energy, Commerce and Industry will grant the company the relevant certificate following the success of the application.
Creation of the Point of Single Contact (PSC), Cyprus
The Ministry has also created a dedicated and specialized business support centre, the Point of Single Contact (PSC) which aims at improving the quality and breath of services provided in Cyprus to existing and new companies. In addition to operating the ‘’FTBA’’ mechanism, the PSC facilitates the establishment of businesses in the services sector and the cross-border provision of services within the internal market. The PSC established by the Ministry of Energy, Commerce and Industry is meant to become the single interlocutor by fulfilling a coordinating role between service providers and competent authorities which will facilitate the establishment of businesses.
Cyprus is an attractive post Brexit Solution for UK Companies and due to its competitive advantages will provide fertile ground for attracting companies and investments. It is an international business centre and an ideal point of entry to the EU with a strategic location.
As an EU member, it allows businesses to enter and do business from and within the EU and beyond. Cyprus has a transparent and attractive tax regime with competitive tax rates and a wide range of double taxation treaties with other countries, as well as a very low corporate tax rate of 12,5%. It has credible and highly reputable, advanced and stable business, banking and financial services and an efficient and transparent legal, financial and regulatory framework. It also has relatively low set-up and operation costs for companies. Apart from business advantages, it offers a high quality of life and an affordable Mediterranean lifestyle making it an ideal headquartering location. In addition, it offers excellent educational and healthcare system.
Cyprus views any relocation of UK Companies to its country very favourably and the ‘’FTBA” mechanism is a clear demonstration of this. Undoubtedly, now would be the time for UK companies that wish to uninterruptedly continue their EU trading operations, to take action and to consider Cyprus as a preferable option for their operations and headquarters.
The content of this article is intended to provide a general guide to the subject matter and does not constitute legal advice. For further information or advice, please contact Esme Palas, Partner at Michael Kyprianou & Co LLC, Barrister at Law, specializing in Corporate, Real Estate and Immigration, via email at: Esme.Palas@kyprianou.com or by phone at: +357 26930800.