Incentives for Third Country Nationals to Invest in Cyprus - Significant Improvements

Contributed by Fiducenter (Cyprus) Ltd [www.fiducenter.com.cy]

Introduction

It has been reported several times in the past that as part of its effort to attract foreign high net worth individuals, the government of Cyprus is providing some incentives to third country nationals to invest in Cyprus.

The schemes, since their implementation, have created increased interest, especially from Asian investors, who see Cyprus as the gateway (being the far eastern border of the EU) to the great freedoms provided by the EU to its Member States and their citizens, especially the freedom to conduct business in the union.

The government of Cyprus, in an effort to boost investment in the country following the recent unfortunate developments in its banking sector, which had an adverse impact on the local economy, has recently decided some very beneficial changes related to these incentives. These changes are presented below.

1.    Permanent Residence Permit

It is reminded that this special class of permit relieves its holders from time consuming procedures associated with other types of permits, such as consular inspections, renewal of permits, re-entrance permits, etc. We reported on 30 August 2012 and 28 January 2013, that the procedure as well as the qualifying criteria had been streamlined, in order to make the scheme more attractive. As mentioned above, further improvements were recently decided by the government, as follows:

A. Private Company

The purchase of a house will also be accepted even if it is made under the name of a company and not under the applicant’s name, provided that the Company is registered in the applicant’s name and/or the applicant’s name and his/her spouse and s/he/they are the sole shareholders.

B. First-time sales

The said purchase applies to houses being sold by the development company to a buyer for the first time. As of 7 May 2013, and for the purpose of implementing this policy, applications concerning the resale of houses will not be accepted. The sale documents for resale houses that have been submitted to the Land Registry before 7 May 2013 (the resale documents’ submission date will be confirmed by the Department of Lands and Surveys), will only be accepted for the purpose of implementation of this policy.

C. Abandonment of requirement for multiple properties from the same development

Houses/apartments can now be independent from each other, but must be sold by the same company. Previously it was possible acquire up to two units in the same development, provided that the units were adjacent (in a horizontal or vertical sense) when they relate to houses or apartments, so that it would be possible to be consolidated into one unit.

D. Children

An immigration permit may also be granted to the applicant’s children, even if they are over 18 year old and are not financially dependent on the applicant, provided that each one of the said children has a minimum share in the purchase value of the acquired property amounting to EUR 300,000 (e.g. if the applicant has a 30-year old child and wishes to acquire an immigration permit, then s/he must purchase a house worth EUR 600,000; if s/he has 2 adult children that are financially independent, then s/he must purchase a home worth EUR 900,000, etc.).

It is implied that in such a case, each child must submit with the application, all the necessary documents (e.g. insured annual income of EUR 30,000, deposit of EUR 30,000 in a Cypriot financial institution, which will remain blocked for 3 years).

The requirement for the applicant to visit Cyprus at least once every two years, also applies for the members of his/her family that are included in his/her immigration permit.

E. Procedure

The applications will be submitted directly to the Civil Registry and Migration Department (CRMD) in person or through a representative. Upon submission of the application a duty charge of EUR 500 must be paid. The application will be fast tracked by the CRMD and will be submitted to the Minister of Interior, through the General Director of the Ministry of Interior. For the purpose of this particular type of immigration permit, an interview with the applicant will take place only in certain cases, when deemed necessary by the General Director of the Ministry of Interior. It is estimated that by implementing the procedure described in the present Notice, the application examination period from the day of its submission shall not exceed 2 months. Provided that the criteria of the present Notice are met, and if there are no issues regarding the applicant’s criminal record that could have an impact on public order or safety, then the application shall be examined under a positive light by the Minister of Interior, and an immigration permit shall be issued.

2.       Cypriot Passport/Citizenship

This is a policy implemented by the government for providing citizenship in special cases, after approval is obtained from the Council of Ministers. Although each case is considered on its own merit, some criteria have been formed as to the minimum requirements, which need to be met for considering such application.

With a decision of the Council of Ministers on 24 May 2013, the investment options have been expanded and the relevant thresholds have been reduced. The alternatives (one of the below must be satisfied) stand now per part A below.

A. Investment Options

1. Mixed investments and donation to a state fund

The applicant should have invested and donated the following:

(a) An amount of at least €2 million for purchase of shares and/or bonds of the state investment company to be established and

It is understood that the applicant may deposit the said amount to the General Accounting Office of the State until the shares and/or bonds of the said company are issued

(b) An amount of at least €0.5 million as a donation to the Research and Technology Fund.

2. Direct investments

The applicant must have made a direct investment of at least €5.0 million in Cyprus. Direct investments may alternatively regard the following:

(a) Purchase of buildings (residence buildings, offices, stores, hotels etc or developments of a similar nature, with the exception of unused land).

(b) Acquisition of firms or companies with registered seat and operations in the Republic of Cyprus.

(c) Purchase of shares of companies registered in the Republic of Cyprus.

(d) Purchase of financial assets (e.g. debentures/securities convertible in to shares/bonds registered and issued in the Republic of Cyprus, including those which are to be issued by the Solidarity Fund according to the Law on the establishment of a National Solidarity Fund of 2013).

(e) Participation in a company/consortium of companies which have undertaken the execution of public works.

It is understood that for conditions (a) - (d) the applicant shall keep the said financial assets in their possession for a minimum period of three years. In case of a portfolio of shares or bonds, it should be assured that the value of the portfolio for the said period shall not be reduced to an amount below the defined one.

It is further understood that the Minister of the Interior shall have the right during the period ending 30 June 2014, to reduce the abovementioned amount regarding Direct Investments to €2.0 million for non-Cypriot citizens who are proven to be taking part in the specific group plan for the purchase of real estate, which will include in its entirety the purchase of real estate on the territory of the Republic of Cyprus, which is controlled by the Government of Cyprus, with a value of no less than €10 million.

3. Bank deposits

The applicant shall have personal deposits in Cypriot banks or deposits of his/her private companies or trusts (for which they are the final beneficiary) in the Republic of Cyprus of at least €5.0 million at a three-year fixed term.

4. Combination of Mixed Investments and Donation to a State Fund (A1), Direct Investments (A2) and Deposits in Cypriot Banks (A3)

The applicant must have a combination of the above which amounts to €5.0 million.

5. Business Activities

The applicant must be a shareholder or final beneficiary of a company (or companies), the management of which must be in the Republic of Cyprus and which must have paid to the State Funds (corporate tax, V.A.T. or other fees and charges etc.) and as remuneration for the purchase of business services (lawyers, accountants, auditors) an amount of at least €500,000 per annum for the last 3 years prior to submission of the application.

Alternatively, in case that the applicant is a shareholder or final beneficiary of a company (or companies) operating in Cyprus, having its head offices in Cyprus and employing at least five (5) Cypriot citizens, then the minimum amount to be paid for the above-mentioned (direct revenues-corporate tax, V.A.T. or other fees and charges etc. and remunerations for the purchase of business services - lawyers, accountants, auditors) is reduced to €350,000 per annum for the last three years prior to submission of the application.

In case that the applicant is a shareholder or final beneficiary of a company (or companies) operating in Cyprus, having its head offices in Cyprus and employing at least ten (10) citizens of Cyprus, then the minimum amount to be paid for the above-mentioned (direct revenues-corporate tax, V.A.T. or other fees and charges etc. and remunerations for the purchase of business services - lawyers, accountants, auditors) is reduced to €200,000 per annum for the last three years prior to submission of the application.

For every such company (or companies) two (2) shareholders at the most may submit applications for naturalization, preferably those who own the majority of the share capital.

In case that the applicant has paid to the Cypriot economy direct revenue or remuneration (as described above) lower than the above-mentioned amounts, a combination with criteria A1 (Mixed investments and donation to a state fund), or A2 (Direct Investments) or A3 (Bank deposits) is possible. The total of payments in State Funds and remunerations for services in the last three years shall be deduced from the required investment amount for the satisfaction of criteria?1 or ?2 or ?3.

6. Individuals whose deposits at the Bank of Cyprus or Laiki Bank have been impaired due to the measures implemented in both banks after March 15, 2013

The applicant's deposits at one or both of the above-mentioned Banks have been impaired for a minimum amount of €3.0 million.

In case that the applicant's deposits at one or both of the above-mentioned Banks have been impaired for an amount below €3.0 million, he/she can apply after making an additional Direct Investment (A2) or Mixed Investments and Donation to the State Fund (A1) for the outstanding required amount of the said criterion.

B. Terms and Conditions

It is reminded that in order to qualify for the scheme the applicants must satisfy some basic conditions, as follows:

(a) Must have clean criminal record. Furthermore, his/her name shall not be included in the list of persons whose assets are required to be frozen within the boundaries of the European Union.

(b) Must have a permanent privately-owned residence in the Republic of Cyprus, of a minimum market value of €500,000, plus VAT.

(c) In case that any condition is found by periodic controls not to be satisfied, naturalization may be revoked.

The requirement for a minimum age of 30 years has been abolished.

It should be stressed that even if the figures stated above are not fully achieved, as long as the potential investor has the correct profile and commits himself to a considerable and respectful investment in the island, he might be eligible for the passport, as the Council of Ministers has the absolute discretion in approving or rejecting an application.

C. Submission of documents

For the consideration of applications, submission of several documents is required, such as inter alia, the deed of purchase and certificates of settlement for the residence mentioned in Part B above. In addition the following are required, in accordance with the case.

1.  Mixed investments and donation to a state fund

(a) Receipts for donations to the Research and Technology Fund.

(b) Receipts from the General Accounting Office of the Republic of Cyprus for the purchase of shares and/or bonds of the state investment company to be established.

2.  Direct Investments

(a) For real estate purchase: Deed of purchase, property title/certification of submission of the contract to the Department of Lands and Surveys, receipts of payment of the agreed purchase price.

(b) For business/company purchase: Deed of purchase, receipts of payment of the agreed purchase price, certification from the Registrar of Companies regarding the shareholders.

(c) For share purchase: Share certificates.

(d) For financial asset purchase: Title(s) and other documents.

3. Bank deposits

(a) Certifications from Cypriot banks regarding the deposits of the applicant or the companies in which he/she is the final beneficiary or the trusts in which he/she is the final beneficiary of the three-year fixed term.

(b) In case of deposits of companies in which the applicant is the final beneficiary, a Certificate of Incorporation of the company from the Registrar of Companies or/and any other relevant evidence.

4. Business Activities

(a) Certificate of Incorporation of the Company (or the companies) from the Registrar of Companies.

(b) Certificate of Shareholders from the Registrar of Companies or certificates proving that the applicant is the final beneficiary of the company (or the companies).

(c) Confirmation for the amounts paid for business services. The certification shall be issued by the business service providers.

(d) Audited accounts of the company (or companies) for the last three years prior to submission of the application.

(e) Certification from the Department of Social Insurance for the insurable earnings of the employees of the applicant's company (or companies).

5. Impairments of deposits in Bank of Cyprus and Laiki Bank

(a) Certificate stating the amount and time of the deposit impairment.

(b) In case of deposits of companies in which the applicant is the final beneficiary, a Certificate of Incorporation of the Company from the Registrar of Companies or/and any other relevant evidence.

3.    Other incentives

The VAT provisions related to the application of the reduced rate of 5% (as compared with the standard VAT rate of 18%) on the construction or acquisition of residential property in Cyprus which is to be used as the primary and permanent residence were extended last year so as to include acquisitions by individuals, from all over the world, who do not ordinarily reside in Cyprus but acquire property to be used as their residence while they are in Cyprus. 

Furthermore, The Land Registry (Duties and Fees) Law provides for full exemption from transfer fees for all transfers of real estate property for which VAT was payable on the transaction and 50% exemption from transfer fees for all other transfers. This exemption is valid for all contracts signed after 2 December 2011 and it will be in effect, as things currently stand, until 31 December 2014.

For the most recent and complete details of the incentives please refer to our Practical Note 7, Incentives for third country nationals to invest in Cyprus.