Foreign Interest Companies – an overview

By: BLegal - Panayiotou Shamma LLC

Cyprus is continuously welcoming foreign investments and this is reflected in the country’s “Strategy for Attracting Businesses for Activities or/and Expansion of their Activities in Cyprus” as approved by the Council of Ministers on 15 October 2021 and amended on 30 November 2022. 

The main objective is the enhancement of the island’s position as an international high-growth business centre by attracting international investments and talent.

Foreign Interest Companies are companies registered in Cyprus with the Registrar of Companies and Intellectual Property and meet any one of the criteria listed below. Such companies should operate through independent offices in Cyprus and must be included in the Register of Companies with Foreign Interests (the Register) by submitting a request with all supporting documents to the Business Facilitation Unit (BFU) of the Ministry of the Ministry of Energy, Commerce and Industry.

The BFU will facilitate such businesses by evaluating the particular circumstances of each applicant, e.g. review its corporate documents, business plan and personnel requirements and decide whether the eligibility criteria are met, in which case these companies will be registered in the Register and the Civil Registry and Migration Department will be notified.

As such, these companies are able to employ third country nationals through a simplified and faster process for the work permits. The requirement to show that there are no skilled EU professionals to take up the relevant position, is also eliminated, for all categories of staff other than support staff, as explained below.

Eligibility Criteria:

Eligible businesses must meet one of the following criteria:

1. The majority of the company’s shares are owed by third-country nationals.
2. If it is the case that the percentage of the company’s shares owned by a third-country national is equal or less than 50%, the company is eligible if that foreign participation has a value of at least €200.000. In both of the above case (1 & 2), the ultimate beneficial owner (UBO) must deposit an amount of at least €200,000 in an account held by the company in a credit institution licensed by the Central Bank of Cyprus. Alternatively, the company can submit evidence of an investment amounting to €200,000, for the purposes of operating its business in Cyprus (e.g. purchase of office, equipment etc.).
   If there are more than one UBOs, then the amount of €200,000 can be deposited or invested either by a single UBO or collectively.
3. Public companies registered on any recognised stock exchange
4. Former “Off-shore” companies, which operated before the change of regime and whose data are already held by the Central Bank of Cyprus.
5. Cypriot shipping companies.
6. Cypriot high-tech/innovation companies.
   
   An enterprise qualifies as ‘High Technology Company’ if:

1. it is already established and has a presence in the market, and
2. it has a high level or experimental R&D intensity, and
3. it developed product/s that fall into one of the following categories: products related to aviation and space industry, computers, information and telecommunication technology (ICT), pharmaceuticals, biomedical, research and development equipment, electrical machinery, chemicals, non-electrical machinery.

7.Cypriot pharmaceutical companies or Cypriot companies active in the fields of biogenetics and biotechnology.

8.Companies of whom the majority of the total share capital is owned by persons who have acquired Cypriot citizenship by naturalization based on economic criteria, provided that they prove that the conditions under which they were naturalized continue to be met.

9. Cypriot Private Institutes of Tertiary (Higher) Education licensed by the Ministry of Education, Sport and Youth.

For cases 3-9 above, the investment criterion is also applicable and the company’s initial investment in the Republic of at least €200,000, must be proven by presenting the appropriate certificates (e.g. bank statement at the time of deposit of the amount or proof of investment (purchase of office space and/or office equipment)).

Staff categories:

1.Directors: (This category includes the Directors or Partners registered in the Registrar of Companies and Intellectual Property, the General Managers of branches and of holding companies of foreign companies, the Departmental Managers and the Project Managers). The minimum acceptable gross monthly salary for Directors is €4.000, which may be adjusted from time to time, depending on fluctuations in the wage index. The maximum number of third-country nationals that can be employed under this category, is 5 - unless the Civil Registry and Migration Department is satisfied that the employment of a greater number is justified, depending on each company’s circumstances.

2.Middle Management Executives and other Key Personnel: (This category includes the upper / middle management personnel and the other administrative, secretarial, or technical staff). The minimum acceptable gross monthly salary for Middle Management Executives and other Key Personnel is €2.500, which may be adjusted from time to time, depending on fluctuations in the wage index. The maximum number of third-country nationals that can be employed under this category, is 10 - unless the Civil Registry and Migration Department is satisfied that the employment of a greater number is justified, depending on each company’s circumstances.

3.Specialists: (Companies are entitled to employ third country nationals in professions and / or with skills relevant to the Company’s operating activities). The minimum acceptable gross monthly salary for Specialists is €2.500, which may be adjusted from time to time, depending on fluctuations in the wage index. The maximum number of third-country nationals that can be employed under this category, is based on the company’s turnover.

4.Support Staff: (There is no maximum number for the employment of third-country nationals under this category, provided that the necessary approvals from Department of Labour have been obtained and provided there are no qualified Cypriots or European citizens available, to perform such duties.

Tax benefits:

Other than the advantages listed above, there are a number of tax benefits available to Foreign Interest Companies, their employees and shareholders. These include:

• One of the lowest corporation tax rates in Europe at 12.5% on the company’s profits;
• Double taxation treaties in force may allow Companies tax registered in Cyprus to benefit from the avoidance of double taxation.
• Expenditure for scientific research and research and development expenses will be deducted from taxable income.
• There are a number of exceptions associated with the Cyprus Tax regime, such as the exemption of dividend income from corporation tax as well as dividend distributions to shareholders that are not subject to withholding tax. Further, individuals who invest in an approved innovative company get an exemption of 50% for their investment.
• Favourable tax regime for individuals, being employees of a Foreign Interest Company. These may embrace Non-domiciled employees (with an income of EUR 55,000 and above) get a tax benefit of 50% for 17 years.

Foreign Interest Companies are a positive addition to the Cyprus government’s objective for attracting foreign investment and talent through the development of such a favourable regulatory environment and a one-stop shop for investors.

If you have any questions, our team of experienced experts can assist with the right legal solutions for you. Feel free to reach us at info@blegalcy.com.