Cyprus Research & Development Incentives for High-Tech Companies

Background

Cyprus offers a very favourable corporate environment with an attractive and transparent corporate taxation regime.

The Government recognised that the time had come to respond to the growing need of new technology and to support foreign investors, with additional incentives, for structuring their Hi-Tech business in Cyprus.

The Revised Approach Towards R&D Expenditure

Cyprus introduced new Research & Development (R&D) incentives during 2022, which have generated an exponential growth in the Hi-Tech business industry.

  • Whereas Hi-Tech businesses were previously allowed to deduct 100% of their R&D expenses, they are now allowed to deduct 120% of their R&D expenses against future profit.

The impact has already been noticed, with an increase in granting work permits to staff with highly specialized skills. This is boosting the local economy and helping to make Cyprus a new business hub that is attractive to foreign investors for structuring their business.

Cyprus has become an even more cosmopolitan island, actively putting in place measures to enable growth in the Hi-Tech business sector.

Summary of Corporate Tax Rates in Cyprus

The following sources of income are exempt from corporate income tax in Cyprus:

  • Dividend income;
  • Interest income, excluding income arising in the ordinary course of business, which is subject to corporation tax;
  • Foreign exchange gains (FX), with the exception of FX gains arising from trading in foreign currencies and related derivatives;
  • Gains arising from the disposal of securities.

Additional Information

For further information about the R&D incentives for Cyprus based Hi-Tech businesses, please contact the Dixcart office in Cyprus: advice.cyprus@dixcart.com.

How Individuals and International Companies can Benefit from Tax Incentives in Cyprus

How Individuals and International Companies can Benefit from Tax Incentives in Cyprus

As an EU member state, Cyprus offers a pleasant climate, excellent infrastructure, and a convenient geographical location. There are two main airports which provide frequent flights to most European cities as well as several international destinations. Cyprus has positioned itself well as a country of choice for both individuals and corporations, through various tax incentives and benefits.

  • The numerous tax incentives offered has seen a steady flow of EU and non-EU nationals establishing their business operations in Cyprus. In addition, individuals find Cyprus a tax efficient location to structure their personal tax positions by taking advantage of flexible tax resident rules and the non-domicile tax regime.

Cyprus is a common law jurisdiction, and its justice system is based on the ‘adversarial model’. Cypriot law has been modelled on English common law.

Cyprus also has access to all EU directives as well as an extensive network of double tax treaties.

Cyprus Offers a Range of Interesting Tax Incentives for Individuals

Many high-net-worth individuals relocate to Cyprus due to its advantageous non-domicile tax regime, whereby individuals who were not previously tax resident can apply for non-domicile status.

Cypriot non-domiciles benefit from a zero rate of tax on; interest, dividends, and capital gains (apart from capital gains derived from the sale of immovable property in Cyprus), as well as capital sums received from pension, provident and insurance funds.

These zero tax benefits are enjoyed even if the income has a Cyprus source or is remitted to Cyprus. There are several other tax advantages, including a low rate of tax on foreign pensions, and there are no wealth or inheritance taxes in Cyprus.

 

Options for Relocating: Permanent Residence and Temporary Residence Permits

Individuals wishing to move to Cyprus can apply for a Permanent Residence Permit which is useful as a means to ease travel to EU countries and organise business activities in Europe.

Applicants must make an investment of at least €300,000 in one of the investment categories required under the programme, and prove they have an annual income of at least €50,000 (which can be from pensions, overseas employment, interest on fixed deposits, or rental income from abroad).

If the holder of a Permanent Residence Permit resides in Cyprus, this may make them eligible for Cyprus citizenship by naturalisation.

Alternatively, a temporary residence permit can be obtained by establishing a foreign investment company (FIC). Through this kind of international company, work permits can be obtained for relevant employees, and residence permits for them and family members. Another key advantage is, again, that after residing for seven years in Cyprus, within any ten-calendar year period, third country nationals can apply for Cyprus citizenship.

Moving to Cyprus to take up Employment

It is common for high-net-worth individuals to relocate to Cyprus for employment purposes. If the Permanent Residence Permit is not the right route for you and/or your family, Cyprus offers several alternate ways to live and work in Cyprus:

  • Business Facilitation Unit: visas for highly skilled third country nationals – the Ministry of Finance announced in 2022, that they are introducing the Business Facilitation Unit to assist highly skilled third country employees with a minimum gross salary of €2,500 per month, to gain work permits in Cyprus. These permits will last up to three years.
  • Digital Nomad visa: non-EU nationals who are self-employed, salaried, or on a freelance basis can apply for the right to live and work from Cyprus remotely, for up to one year. The visa can be renewed for another two years.

Why Relocate to Cyprus for Work?

Personal taxation benefits:

  • A tax exemption of 50% of employment income, is available to an individual employed in Cyprus who was resident outside of Cyprus before he/she commenced employment in Cyprus. The exemption applies for a period of seventeen years starting from the first year of employment in Cyprus, provided that employment income exceeds €55,000 per year.
  • Cyprus has more than 65 tax treaties that provide for zero or reduced withholding tax rates on; dividends, interest, royalties, and pensions received from abroad. In addition, lump sums received as a retirement gratuity, are exempt from tax.
  • A Cypriot tax resident receiving pension income from abroad, can choose to be taxed at a flat rate of 5%, on amounts exceeding €3,420 per year.

Starting a Business in Cyprus as a Means of Relocation

The reputation of Cyprus as an international financial centre has grown significantly over recent years. Cyprus is an attractive jurisdiction for trading and holding companies and offers a number of tax incentives.

In order to encourage new businesses to the island, Cyprus offers two temporary visa routes as a means for individuals to live and work in Cyprus:

  • Establishing a Cyprus Foreign Investment Company (FIC): individuals can establish an international company which can employ non-EU nationals in Cyprus. Such a company can obtain work permits for relevant employees and residence permits for them and their family members. A key advantage is that after seven years, third country nationals can apply for Cyprus Citizenship.
  • Establishment of a small and medium sized Innovative Enterprise (Start-up visa): this scheme allows entrepreneurs (individuals or a team), from countries outside the EU and outside the EEA, to enter, reside and work in Cyprus in order to; establish, operate, and develop a start-up business. This visa is available for one year, with the option to renew for another year.

Corporate Tax Benefits

  • Cypriot companies enjoy a 12.5% rate of tax on trading, and a zero rate of capital gains tax. In addition, Cyprus tax resident companies and Cyprus permanent establishments (PEs) of non-Cyprus tax resident companies, are entitled to a Notional Interest Deduction (NID), on the injection of new equity used to generate taxable income.
  • NID is deducted from taxable income. It cannot exceed 80% of the taxable income, as calculated prior to the NID, arising from the new equity. A company could achieve an effective tax rate as low as 2.50% (income tax rate 12.50% x 20%). Please contact the Dixcart office in Cyprus for further information: advice.cyprus@dixcart.com

Additional Information

For further information about the attractive tax regime for individuals in Cyprus, please contact Katrien de Poorter at the Dixcart office in Cyprus: advice.cyprus@dixcart.com

sceneric view of a beach in cyprus

Extensive Tax Optimising Opportunities for Cypriot Companies

Cyprus offers substantial advantages for corporations established and managed there.

  • In addition, establishing a company in Cyprus provides a number of residence and work permit options for non-EU individuals to move to Cyprus.

Cyprus is a very attractive proposition for non-EU individuals seeking to establish a personal and/or corporate base within the EU.

Attractive Tax Benefits

We are seeing an explosion of interest in the tax benefits available to Cyprus tax resident companies and individuals.

Sophisticated international financial centres such as Switzerland are amongst the countries with clients recognising the opportunities presented by Cypriot companies.

Corporate Tax Benefits Available in Cyprus

  • Cyprus companies enjoy a 12.5% rate of tax on trading
  • Cyprus companies enjoy a zero rate of capital gains tax (with one exception)
  • Notional Interest Deduction can substantially reduce corporate tax further
  • There is an attractive tax deduction for Research and Development expenses

Starting a Business in Cyprus as a Means of Relocation for Non-EU Nationals

Cyprus is an attractive jurisdiction for trading and holding companies and offers a number of tax incentives, as detailed above.

To encourage new business to the island, Cyprus offers two temporary visa routes as a means for individuals to live and work in Cyprus:

  1. Establishing a Cyprus Foreign Investment Company (FIC)

Individuals can establish an international company which can employ non-EU nationals in Cyprus. Such a company can obtain work permits for relevant employees, and residence permits for them and their family members. A key advantage is that after seven years, third country nationals can apply for Cyprus Citizenship.

  1. Establishment of a Small/Medium Size Innovative Enterprise (Start-up Visa) 

This scheme allows entrepreneurs, individuals and/or teams of people, from countries outside the EU and outside the EEA, to enter, reside and work in Cyprus. They must establish, operate, and develop a start-up business, in Cyprus. This visa is available for one year, with the option to renew for another year.

Additional Information

Dixcart is experienced in providing advice regarding the tax benefits available to companies established in Cyprus and assisting with their establishment and management. We can also assist with the relocation of corporate owners and/or employees.

Please speak to Katrien de Poorter, at our office in Cyprus: advice.cyprus@dixcart.com

Substantial Tax Efficiencies for Individuals in Cyprus

Cyprus is a very attractive proposition for non-EU individuals seeking to establish a personal or corporate base within the EU.

Attractive Tax Benefits

We are seeing an explosion of interest in the tax benefits available to Cyprus tax resident individuals*.

There are many wealthy individuals with contacts in international centres, such as Switzerland for whom Cyprus is an interesting proposition. 

Individuals can become Cyprus tax resident spending as little as 60 days a year in this sunny, Mediterranean island.

Key Individual Tax Advantages

  • There is an exemption from tax on capital sums from pensions and a low rate of tax on foreign pension income
  • For first time employment there is a 50% exemption from tax for those earning more than €55,000 per annum
  • Income from interest and dividends is not taxed in Cyprus
  • There is an exemption from Capital Gains Tax (with one exception), and no inheritance or wealth taxes are liable in Cyprus

Cyprus 60 Day Tax Resident Rule

It is possible to become tax resident in Cyprus – spending only 60 days a year there, subject to further conditions. Please contact Dixcart for additional information.

Additional Information

Dixcart is experienced in providing advice regarding the tax benefits available in Cyprus and assisting with the relocation and/or the tax residence process.

Please speak to Katrien de Poorter, at our office in Cyprus: advice.cyprus@dixcart.com

* for those not previously tax resident in Cyprus

sceneric view of a beach in cyprus

Cyprus’ new strategies for attracting business – What has changed during 2022?

In October 2021, the Cyprus Government announced that they were implementing an Action Plan to attract investment into Cyprus.

This Article reviews the extensive tax incentives and new programmes implemented during 2022, which have made Cyprus an even more attractive place to relocate to.

Business Facilitation Unit

The Ministry of Finance promotes the Business Facilitation Unit that processes the acquisition of work permits for highly skilled third country employees, with a minimum gross salary of €2,500 per month. It is a requirement to have a university degree or equivalent qualifications or certifications.

The maximum number of work permits for third country nationals per company is set at 70% of all employees over a period of 5 years. The permits are issued within 1 month and last up to 3 years, and employees’ spouses  can also access the labour market in Cyprus.

Digital Nomad Visa

Eligibility

Via the Digital Nomad Visa Program non-EU nationals, active as self-employed, salaried or on a freelance basis can apply for the right to live and work in Cyprus. The applicants must work remotely using information technology and communicate remotely with clients and employers outside Cyprus.

Residence status

A Digital Nomad has the right to stay in Cyprus for a period of up to 1 year, with the right to renew for another 2 years. During the stay in Cyprus the spouse or partner and any minor family members, cannot provide dependent work or engage in any kind of employment activity in the country. If they reside in the Republic for a time period that exceeds 183 days within the same tax year, then they are considered as tax residents of Cyprus.

Each digital nomad must have a salary of at least €3,500 euros per month, medical coverage and a clean criminal record from their country of residence.

Extension of the tax exemption that applies to employees in the Republic

As specified in the strategy, tax exemptions that apply to foreign highly skilled employees in the Republic are extended up to a period of 17 years.

The existing tax exemption has also been extended to cover new resident employees with an annual salary from employment of €55,000 or more. They are entitled to a tax exemption of 50%.

Increased tax deduction (compared to the actual one) for research and development expenses

Research and development expenses are subject to an increased discount. Eligible research and development expenses can be deducted from taxable income equal to 120% of the actual spend.

Application for acquisition of Cypriot citizenship

There is now the option to apply for the Cypriot citizenship after a period of 5 years of residence and work in the Republic of Cyprus, instead of the 7 years that was applicable before.

Additional Information

For further information about the attractive tax regime for individuals in Cyprus, please contact Katrien de Poorter at the Dixcart office in Cyprus: advice.cyprus@dixcart.com.

Aerial,Drone,View,Of,Limassol,Marina.,Cyprus

Cyprus – Tax Benefits for Expatriates and High Net Worth Individuals Relocating There

Why Cyprus?

Cyprus is an appealing European jurisdiction, located in the eastern Mediterranean Sea and offering a warm climate and attractive beaches. Situated off the southern coast of Turkey, Cyprus is accessible from Europe, Asia and Africa. Nicosia is the centrally located capital of the Republic of Cyprus. The official language is Greek, with English also being widely spoken. Cyprus offers a palette of personal tax incentives for expatriates and high net worth individuals relocating to Cyprus.

Personal Taxation

An individual becomes a tax resident in Cyprus by spending more than 183 days in Cyprus in any one calendar year. With that being said, they will be taxed on income arising in Cyprus and also on foreign source income.

Any foreign taxes paid can be credited against the personal income tax liability in Cyprus. An additional incentive has been implemented whereas individuals can become tax residents in Cyprus by spending a minimum of 60 days in Cyprus provided that certain criteria is met.

Individuals who were not previous tax residents can also apply for the non-domicile status. Individuals who qualify under the Non-Domicile Regime are exempt from taxation income derived from; interest, dividends, capital gains (apart from capital gains derived from the sale of immovable property in Cyprus), capital sums received from pension, provident and insurance funds. In addition, there is no wealth and no inheritance tax in Cyprus.

Income Tax Exemption for Taking up Employment in Cyprus

  • An exemption of 50% of the remuneration from employment is available for an individual in Cyprus who was resident outside Cyprus before the commencement of his/her employment in Cyprus. The exemption applies for a period of 17 years starting from the first year of employment in Cyprus, provided that the income from such employment exceeds €55,000 per year.

Nil/reduced Withholding Tax on Income Received from Abroad

Cyprus has more than 65 tax treaties that provide for nil or reduced withholding tax rates on; dividends, interest, royalties and pensions received from abroad.

Tax Advantages for Pension Lump Sums and Income

Any lump sum received as a retirement gratuity is exempt from tax.

A Cypriot tax resident individual receiving pension income from abroad may choose to be taxed at a flat rate of 5%, on amounts exceeding €3,420 per year.

Additional Information

If you would like any additional information regarding the tax benefits available for expatriates and HNWI’s relocation to Cyprus, contact the Dixcart office in Cyprus: advice.cyprus@dixcart.com