Cyprus: hiring foreign staff has become more expensive
Last year, many expats in Cyprus breathed a sigh of relief when amendments to abolish direct investments for obtaining the international company status were adopted.
Business development in the island has always been brisk, as Cyprus used to offer a unique tax environment for international companies:
- low corporate tax rate,
- withholding of the tax on dividend and interest payments at source,
- no tax on capital gains and profit on sales of shares and securities,
- exemption from the tax on foreign dividends and interest, etc.
Besides, public and private companies and funds registered in Cyprus can be used as efficient investment vehicles.
Nevertheless, at the end of the year, the Council of Ministers announced strengthening of the requirements to obtain an annual residence permit (Visitor Visa*) in Cyprus with no right to work, and then introduced amendments to the Policy for the Registration of Companies in the Register of International Business Companies. The resolution came into force on 12 December 2022.
*Follow the link for the article on the new Visitor Visa requirements.
Now, foreign invested companies should prove their initial equity investments of at least EUR 200,000.
Why does a company need the International Business Company (IBC) status?
Companies from the Register of International Business Companies (IBC) are entitled to use the simplified procedure for employing managers and highly paid staff from any third countries with a monthly salary of EUR 2,500.
In case the company’s beneficiary is a Russian citizen, then amendments regarding direct investments will be a problem because of the sanctions. The thing is that the money (EUR 200,000) should be transferred from the ultimate beneficiary to the company’s account with a Cyprus bank from abroad. The certificate (SWIFT) proving the fact of the initial investment in the Republic of Cyprus should be submitted to the ministry. This money can be further used in various ways: for gradual spending on the company’s needs (staff salaries, office rent, etc.) or for investing in purchase of an office or equipment for the company.
As a reminder, companies that are entitled to employ third-country nationals:
- Public companies listed on any recognized stock exchange.
- Internationally functioning companies (formerly – offshore) operating before the regime alteration. Their records are kept by the Central Bank.
- Cyprus shipping companies.
- Cyprus high-tech or innovation companies.
- Cyprus pharmaceutical companies or Cyprus companies dealing with biogenetics and biotechnologies.
- Companies with the majority of the total share capital owned by persons who obtained Cypriot citizenship through naturalization based on economic criteria. They should prove that the conditions under which they were naturalized continue to be met.
- High-tech companies.
However, despite the new circumstances, Cyprus continues attracting foreign investors and specialists. Issues of relocation, employment of foreign staff, tax obligations of foreign nationals and many more.
In 2017, the foundation appeared in the UAE: in Abu Dhabi in the Abu Dhabi Global Market free zone, then in 2018, in Dubai in Dubai International Financial Centre, and in 2019, in Ras Al Khaimah in RAK International Corporate Centre.
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