Criteria for Certification

The classification of an SME as ‘innovative’ is being evaluated, as follows:

To be certified an enterprise must meet the requirements of the innovative SME definition:

A small and medium-sized enterprise (SME) qualifies as an ‘innovative SME’ if:

Its operations are carried out in the Republic of Cyprus and
It has a business plan for its risk finance investment and fulfils at least one of the following conditions:

  1. It does not operate in any market; or
  2. It has not been operating in any market for more than 7 years (this restriction does not, under certain conditions, apply for follow-on investments) following their first commercial sale; or
  3. It requires an initial risk finance investment which, based on a business plan prepared in view of entering a new product or geographical market, is higher than 50% of their average annual turnover in the preceding 5 years.
The company submits a Certificate from an External Auditor, certifying that the research and development costs represent at least 10% of its total operating costs. This Certificate must be in accordance with the audited financial statements of the company, which proves the costs for research and development in at least one (1) of the three (3) previous tax years. The categories of expenditure on research and development in the financial statements must be clearly defined. A draft Certificate of External Audit is attached as Annex 2.

The company submits a Business Plan in English, describing the ability to develop new or clearly improved products, services or processes with high technological or industrial risk, which are characterized as innovative in their field / market. Guidelines for the preparation of the business plan are attached as Annex 3.

Businesses that prove that they meet at least one of the following criteria over the last three years, and submit proof for it, will receive a certificate without the need of evaluation:

  • The company has secured funding from the SME Instrument (Phase I and / or Phase II), the EIC Pathfinder or the EIC Accelerator programmes of the Horizon 2020 EU Framework Programme, or from the EIC Pathfinder or the EIC Accelerator programmes of the Horizon Europe 2021-27 EU Framework Programme.
  • The company has received a Seal of Excellence Seal from the Programs listed above.
  • The company has secured funding from the Research and Innovation Foundation’s (RIF) PRE-SEED, SEED or INNOVATE Innovation Programs and other corresponding Innovation Programs that will be announced under RIF’s National Research and Innovation Framework Programs.
  • The company has secured a Startup Visa.

Other provisions:

  • A business will automatically cease to be considered an innovative SME if at any time, the total amount of risk finance exceeds EUR15 million (Commission Regulation (EU) No.651/2014 of 17 June 2014).
  • The innovative SME should not be listed on the Cyprus or any other Stock Exchange.

Innovative companies can be exercised not only by legal but also by natural persons (as private enterprises), or partnerships.

Reference to the state aid rules may provide for the exclusion of the business as an innovative SME.

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