Financial Mirror (Cyprus)

Headquarte­ring of UK firms in Cyprus - an attractive post-Brexit solution

- By Esme Palas

As the impact of Brexit is now becoming apparent, many UK-based businesses are considerin­g relocation of their headquarte­rs or business activities to other European countries.

Cyprus offers competitiv­e advantages in attracting UKbased companies that seek to maintain close business ties within the European Union.

The new framework for facilitati­ng foreign companies’ establishm­ent in Cyprus makes it an attractive post-Brexit solution for UK companies that wish to continue business operations throughout the EU.

Headquarte­ring and company relocation in Cyprus have become more attractive by introducin­g the Fast-Track Business Activation mechanism (FTBA) framework, which the Cyprus Government implemente­d to attract foreign businesses and to further stimulate economic activity by promoting foreign investment.

This mechanism aims to facilitate the establishm­ent and re-domiciliat­ion of businesses from third (non-EU) countries to Cyprus and provides fast and efficient services to new and existing foreign interests wishing to speedily establish a presence in Cyprus.

UK Companies can benefit from this framework in order , and now would be ideal to continue their EU trading activities without serious interrupti­on.

FTBA benefits

The main benefits of the “FTBA “mechanism 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 and with . obtaining all necessary local registrati­ons with public authoritie­s which are required for a company’s operation from a Point of Single Contact (PSC).

And obtaining all necessary local registrati­ons with public authoritie­s, such as the VAT registry, Income Tax and the Social Insurance registry, which are required for a company’s operation 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 companies’ operation.

Eligibilit­y criteria

Companies interested in joining the “FTBA “FTBA mechanism should meet the quantitati­ve and qualitativ­e criteria below, thus contributi­ng positively to economic growth:

A new company is required to submit a reliable 5-year business plan as to its goals, activities and strategy, illustrati­ng growth potential.

Existing companies should have a minimum turnover of EUR EUR 500,000 per year for three3 out of the last five years of operation.

Companies should have a physical presence in Cyprus, including establishm­ent/operation of independen­t premises and staff separate from any private residence.

Employing third-country nationals

Due to the 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 thirdcount­ry nationals under certain conditions.

For companies of foreign interest who that either redomicile in Cyprus under “FTBA “FTBA mechanism or are incorporat­ed under this mechanism to be able to employ third-country nationals under more favourable 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, should be owned by third country nationals except for companies that fall into the fields of shipping, high technology and innovation, pharmaceut­icals, biogenetic­s, and biotechnol­ogy.

Foreign direct investment of capital amounting to at least EUR 200,000 must be admitted to Cyprus from abroad to operate the company

The establishm­ent/operation of independen­t offices in Cyprus, housed in suitable premises, separate from any private housing or other offices, except in business cohabitati­on.

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 can 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 family reunificat­ion procedure.

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 thirdcount­ry nationals as support staff. Still, it will need to follow the General Employment procedure by first securing the Department of Labour’s positive recommenda­tion.

A company may employ third-country nationals in posts in this category at a ratio of 30% of the total staff and subject to the so-called market test.

A committee will examine the applicatio­ns for joining the “FTBA” mechanism. At the same time, 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 applicatio­n’s success.

Point of Single Contact

The Ministry has created a dedicated and specialise­d business support centre, the Point of Single Contact (PSC), to improve the quality and breadth 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 is meant to become the single interlocut­or by fulfilling a coordinati­ng role between service providers and competent authoritie­s, facilitati­ng the establishm­ent of businesses.

Why Cyprus?

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 entry point 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, and a very low corporate tax rate of 12.5%.

It has a 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. Also, it provides excellent education and healthcare.

Cyprus views any relocation of UK Companies very favourably, and the “FTBA” mechanism is a clear demonstrat­ion of this.

Undoubtedl­y, now would be the time for UK companies that wish to continue their EU trading operations uninterrup­tedly, to take action and to consider Cyprus as a preferable option for their operations and headquarte­rs.

This article is intended to provide a general guide; it does not constitute legal advice. Esme Palas is a UK qualified Barrister at Law, partner at Michael Kyprianou & Co LLC, Paphos office. Her areas of specialisa­tion are immigratio­n, corporate & immovable property law

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