Cyprus is one of the most prominent European fintech hub, home to several fintech businesses such EMI, forex, cryptocurrency funds thriving payments sector. The country has the winning combination of a strong financial sector, successful tech ecosystem and vibrant startup scene. The great sunny weather and high adoption of new tech makes it the ideal base for fintech businesses. There are various factors for the establishment of fintech companies in Cyprus.
Some of them are the wide access to markets, strong economic growth, a pro-business environment, tech-savvy talent, low operating costs, and number of incentives, including a competitive IP regime and special immigration framework.
There are many successful fintech companies that have already either relocated or expanded in Cyprus, using the country as gateway to and from EU. Cyprus, is considered as a prime location for the fintech industry, providing a home for some of the world’s biggest forex brokers and online-trading platforms.
Covid-19 does not negatively affect the sustainability and growth of Fintech businesses. Startups and established fintech companies remain strong and most of them adopted remote working and they are ready to expand their business in the post pandemic era.
New Immigration Framework for FinTech companies
Recently, the Council of Ministers adopted a new set of incentives relating to the immigration rules in place for fintech companies wishing to establish presence in Cyprus.
Each company has the right to employ up to 15 third country nationals as directors and middle management executives and is further entitled to employ any number of qualified third country nationals, who possess wanted ICT skills.
Companies interest in joining the Fast Track Business Activation Mechanism should meet the criteria below, thus contributing positively to the country’s economic growth.
The main criteria are:
a. Companies should have a physical presence in Cyprus including establishment/operation of independent offices that are separate from any private residence.
b. Existing companies should have a minimum turnover of EUR500.000 per year for 3 out of the last 5 years.
c. New companies should provide a reliable 5-year business plan illustrating growth potential.
The Fast Track Business Activation Mechanism facilitates the following process:
1. The incorporation of a company within 7 days from the date that the company enters the Mechanism.
2. The registration with the social insurance registry and the employers’ registry, registration with the VAT registry and in the income tax.
3. Employment of a greater number of third country nationals in specific professions and with specialized skills, for which a shortage of supply has been identified at national level, with the majority being related to digital skills.
4. Issuance of residence and employment permits in Cyprus for third country nationals.
a) Third country shareholders should own the majority of the company’s shares.
b) The ultimate beneficial owner must invest at least € 200.000 in Cyprus, for the purposes of operating the company.
– This requirement only applies to companies which will employ staff from third countries for the first time.
– In case the percentage of foreign participation in the share capital of the Company is equal to or below 50% of the total share capital, in order for the Company to be considered eligible, this percentage must represent an amount equal to or greater than the amount of € 200.000.
– The establishment/ operation of independent offices in Cyprus, in suitable premises, separate from any private housing or other office, except in the case of business co-habitation.
The key benefits for companies with regards to third country nationals are the following:
– no restrictions on the maximum duration of stay;
– no requirement for a sealed employment contract from the Department of Labour;
– right to family reunification with the employee’s spouse and minor children;
– a visa entry may be converted to a temporary residence and an employment permit may be issued after arrival in Cyprus.
Attractive IP Regime
Cyprus is an attractive jurisdiction for the establishment of an IP holding and development company, offering an efficient tax rate as well as the legal protection afforded by EU Member States and by the signatories of all major IP treaties and protocols.
It is important to be noted that 80% of the profits qualifying for the regime are exempt from tax. With a corporate tax rate of 12,5% this can be result as an effective tax rate of as low 2,5%. Under the Cyprus IP regime, 80% of the qualifying profits generated from the qualifying assets is deemed to be a tax deductible expense for qualifying taxpayers. In calculating the qualifying profits, the new regime adopts the Nexus Approach.
Attractive tax regime
Cyprus has numerous tax advantages directed to companies involved in international dealings, some of which are as follows:
– Low corporate tax rates (12,5%);
– IP tax regime (80% of profits are exempt from tax);
– No dividends tax to non-domiciled shareholders;
– No withholding tax on royalty payments aboard;
– There is foreign Tax Relief available;
– There are personal tax exemptions for new residents and non-domiciled individuals;
– No inheritance tax;
– Dividend and interest income exempt for 17 years from the time a person relocates to Cyprus;
– Double Tax Treaties with more than 65 countries;
– There is no tax on gains from disposal of titles;
– There is no tax on foreign exchange gains;
– There is availability for notional interest deduction for equity investment into Cypriot companies.
There are various factors which constitute Cyprus as an attractive destination for the establishment of headquarters of International companies:
– EU Member State within the eurozone;
– Legal system based on English common law;
– High quality of services in business sector;
– Low cost for running business;
– Stable political, economic and social environment;
– Excellent flight connections to the major international business cities;
– Low rate of criminal acts as per the Eurostat’s statistics.