The Exchange Control Restriction Law dates back to colonial times when Cyprus was under British rule and is connected with the Scheduled Areas created by the British to promote transactions in sterling. Under this law the expatriation of funds by Cypriots or foreigners, as well as all money transactions with foreigners, are subject to the approval of the Central Bank of Cyprus in its capacity as Exchange Controller.
Foreigners who sell immovable property in Cyprus may expatriate immediately an amount equal to the sum brought into Cyprus for the purchase of such property, upon proof that such amount emanated from external funds. Any profit may be expatriated at a rate of CY£10.000.- in each subsequent year, plus accrued interest.
In order to encourage foreign investment in Cyprus, the Government has recently liberalised its policy to a great degree, allowing participation of foreigners in a great number of sectors of the economy. The new policy will allow foreigners to acquire a 100% participation in Cypriot companies in all sectors, and will relax the requirements imposed on Cypriots wishing to participate in investments abroad.
Under the new policy the only criteria foreign investors will have to fulfil are to prove that their new ventures will not pollute the environment, damage the economy or constitute a security risk.
An application will have to be submitted to the Central Bank by a foreigner wishing to invest in Cyprus. However, the criteria and time taken to process the application will be reduced to the minimum.
The main advantage of the new policy is that where the application for foreign participation does not exceed 49%, the application will be considered by the Central Bank and it will not be necessary to obtain the opinion of the relevant Government department. In the case of an application participation exceeding 49% the Central Bank will have to obtain the opinion of the relevant Government department, but the examination procedure will be relaxed.
The new policy provides for only a limited number of saturated activities, which are land development, culture, education and public utilities. The banking, insurance, financial, printing and publishing sectors will be subject to a special regime: the Central Bank will examine applications for foreign participation in these sectors and will decide on the percentage of participation and its terms and conditions.
More particulars on the new policy may be found in the relevant circular of the Central Bank of Cyprus, attached hereto as Annex 2.
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