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Changes needed to attract foreign companies

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By Theodoros Mantis

In recent years, the aim of the state has been to promote Cyprus as an attractive investment destination and as a credible business centre, through the attraction and establishment of foreign companies on the island.

For these companies, the most important element for their development is the personnel, since they need specialised staff to operate smoothly in Cyprus.

This personnel are either already employed by the companies with the appropriate experience or their area of ​​expertise cannot be found in the local job market.

In many cases, these specialists come from countries outside the European Union.

Unfortunately, hiring these people is still a time-consuming process, with many demands from the Civil Registry and Migration Department (Company of foreign interests section).

This bureaucracy is blocking the decision of many investors to re-domicile their seat to Cyprus or expand their operations in Cyprus, thus choosing other investment destinations.

The restrictions that apply to the number of third-country nationals who can hold the position of Senior Managers and Senior Executive in a company, with 5 and 10 persons respectively, raise significant negative issues as they cannot organise new investment plans.

An extension of the above limitations can be given but it is the result of time-consuming procedures.

It would be more beneficial if this figure was indicative and adjusted according to the confirmed future expansion of the turnover of foreign interest companies or even on a percentage basis to the existing number of Cypriot and EU employees with an extension right.

Furthermore, the mandatory criterion of €171,000, according to which companies must transfer to Cyprus by bank instrument or other document proving their intention or direct foreign investment in the island, provides no guarantee that the money will not be disbursed by the account after the registration of the company.

Perhaps more substantial would be a request for proof of purchase of a building in the country or a long-term lease agreement of a building (e.g. over two years), which can be regarded as sufficient investment evidence in the country.

Another issue that needs improvement is the under-staffing of the foreign interests companies section of the Civil Registry and Migration Department which causes delays in finalising the required procedures.

There is an urgent need to establish a horizontal communication mechanism of the relevant government authorities to have an immediate exchange of information between them regards to the forms which must be filed by the companies.

This will help companies get rid of the complex and often repetitive, time-consuming document collection processes of the various government departments involved.

In this context, it would be useful to set up a management committee with a supervisory role to facilitate foreign companies wishing to invest in Cyprus.

However, in addition to the general simplification of the procedures, a specific plan should be agreed, providing further facilities and incentives to foreign interest companies which can prove through their business plans that they intend and can make major high value-added investments for the Cypriot economy.

All the points mentioned above are food for thought as many foreign companies, considering the complexity of the existing procedures and the time taken to complete them, have second thoughts about their consolidation in Cyprus.

Therefore, all necessary measures should be taken to help attract international investors and promote Cyprus as an attractive business hub.

The writer is Head of People Advisory, Payroll and Corporate Immigration Services of Ellinas Finance PCL