New Silicone Valley in Cyprus: tax incentives for Start-Ups and Research Center in Pentakomo
September 30, 2016
Europe has been introducing the policy of innovations development and integration into manufacturing processes for a certain period of time already. Now Cyprus has taken the measures which are a logical follow up of such a policy. The government of the country has approved a tax incentives package aimed at innovative and start-up companies.
After the financial crises had gone, the investors from China, Russia, United States and Middle East turned their attention to the offshore zone states. Most of them started their business activity on the islands. In such a way Cyprus has become one of the ten countries taking the leading position in business development and improvement. Main factors influencing this process are red tape procedures minimizing along with maximized automation and simplification of the new legal entities registration system. It should be noted, that this offshore jurisdiction allows the registration of corporate entities of any kind. Not only trading companies or the ones of tourism sector are commercially viable here.
The scientific research section has been intensively developed in the state for the last several years. At the end of 2015, the Cypriot government has issued more than 25 million euro into the projects dealing with research and design.
In spite of the fact that the investment entrepreneurship market has been rapidly developing on the island, it’s rather young. It allows business people avoid caring about the competition and fighting for the place in the sun. In the last 5 years, the applied scientific sector has grown, even notwithstanding the consequences of the global economic crisis. As a result the Republic has taken the 3rd place among the leaders of the European countries dealing with scientific and technical innovations integration into the ongoing business.
Almost all EU member states are now developing scientific research sector and most of the activity is conducted within “Europe-2020” framework. It’s a strategy aimed at the integration of new technologies into the manufacturing and applied scientific investigations support. The key target of it is investing 3% of GDP in Research and Design.
Traditionally, the United States of America and Japan were the leaders in this sphere. These two countries create new business directions and ramp up their economic strength. Reluctant to stay aside, Cyprus has approved a number of tax incentives for the startups. The package allows up to 50% tax exemption on investment in innovative and start-up companies on the island. However, the maximum annual amount to be exempted is limited by the sum of €150,000.
Financial incentives and governmental support are the most effective methods of attracting investments in this or that economic sector. That’s why the alike programs have been working in the majority of European countries for a certain period of time already. The investors are even not obliged to set up a start-up company in person. The funding can be realized through the financial support of the legal entities and individuals-entrepreneurs, dealing with this sphere, financial contributions into ready-made companies or through the investment funds.
Not all the companies can be referred as innovative. The entities which spent at least 10 % of their operating expenses on research and development in at least one of the last three years are only considered as such. Investors can take part in the project purchasing the shares, granting loans or guarantees.
Any start-up company will be reviewed as a commercial project, that’s why it’s not enough to make a scientific discovery, but a business plan is necessary. The Cypriote government doesn’t only aim at the country’s scientific capacity development, but wants to integrate new technologies into the commercial sector. The final project implementation period will come into effect upon the corresponding Parliament decision.
Hi-Tech park formation within the frame of the country’s innovation sphere development
One of the most important events in the frame of the project implementation will become the launch of the first Hi-Tech Park in the country. It will be situated in Pendakomo not far from Lemesos. Scientific entertainment infrastructure development and the creation of the two new centers are presupposed in the park. One of the centers is of the applied research and another one is of design. The service spaces of various R&D companies will be situated here. Direct foreign investments help Cypriots bring the project to life.
The participants of the project may not only expect certain commercial profit but also a stimulus from Cypriote government. It is tax minimization for innovation companies share purchase and for patent and copyright acquisition procedures. Besides, the tax rate for the purchase of fixed assets and equipment, necessary for scientific research works, will be decreased.
Cyprus citizenship by investment into start-ups
The innovation projects can not only become a source of income encouraged by the state, but are also a potential opportunity of gaining European citizenship. One of the options of getting the economic citizenship in Cyprus is through the investments into innovation start-ups. In case an investor becomes a shareholder in the profitable business with a potential, he can get citizenship for himself and his family members.
To receive the passport of the Republic, you should provide an investment in the minimum amount of €2.5 million as a part of Major Collective funds with at least 5 other investors. You should also preserve your underwriting share for 3 years.
The participation in economical citizenship program requires owing a private residence on the island. The minimum purchase cost of it should be €500.000. A private apartment in Cyprus can not only become a perfect summer residence for your family but also a source of income through rent. Several years is now enough to cover residential outlay in Cyprus. The island is a developed center of tourism and the interest to it grows nowadays. The aggravated situation in Turkey and Egypt favors it.
The program of citizenship by investment allows getting a ready-made document in just several months, while a standard procedure is long and complicated. The latter usually takes 7 years if all the terms and conditions are met by the applicant.
The Cypriote passport allows permanent residence on the island and provides an opportunity for the individual to live in any European state. The person can also receive social benefits and incentives, medical care and education in the schools and universities of EU as well as enjoy visa-free entry into 133 countries of the world.