Headquartering of UK firms in Cyprus - an attractive post-Brexit solution
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 esme.palas@kyprianou.com