Pursuant to subsection (2) of section 111A of the Civil Registry Laws of 2002-2013, the government of the Republic of Cyprus enforced a number of favourable incentives to encourage foreign direct investment into the country, as well as to attract high-net worth individuals to settle and conduct their business in Cyprus.
One such initiative is the Cyprus Investment Programme, rendering Cyprus a "jurisdiction of choice" for many high-net worth individuals and their families who decide to invest, settle and set up their business on the island via "approved" investments for yield, capital appreciation and/or growth.
Cyprus is a popular tourist, business and retirement destination within the EU. It is home to a highly skilled workforce, a reliable legislative framework and an attractive tax system.Needless to mention, it also possesses an ideal climate, safe environment and a high standard of living.
Cyprus offers one of the most attractive tax regimes in Europe. Companies – as well as individuals – benefit from a plethora of tax incentives including, but not limited to, an extensive network of Double Tax Treaties, a corporate tax rate of 12.5%, no inheritance tax, limited capital gains tax and no withholding tax on dividends paid to non-tax resident individuals.
Tax in Cyprus is not levied based on citizenship. Cyprus has adopted a residency-based system of taxation that effectively means that physical presence in Cyprus for more than 183 days in a tax year will constitute tax residency for individuals. As a result, if an individual is physically present in Cyprus for less than 183 days in a tax year, he will not be considered a Cyprus tax resident in that tax year.
Any non-Cypriot citizen may apply for the Investment Programme as long as certain criteria are met. The applicant can choose to make an investment of at least EUR 2 million towards the purchase or the construction of real estate. Alternatively, the applicant may invest at least EUR 2 million for the purchase, the creation or the participation in businesses or companies based and operating in Cyprus. Such businesses should be able to show substance in Cyprus and employ at least five Cypriot citizens. Otherwise, the applicant may purchase units amounting to at least EUR 2 million from alternative investment funds established in the Republic, licensed by the Cyprus Securities and Exchange Commission and whose investments meet the criteria of this Programme. Finally, the applicant may opt to invest in a combination of the above, provided that the total investment amounts to at least EUR 2 million. The amounts noted above do not include VAT.
The financial criteria include two mandatory government contributions of EUR 75,000 each towards the Research and Innovation Foundation and the Cyprus Land Development Corporation. The first obligation may be lifted if the applicant invests at least EUR 75,000 in a certified innovative or social enterprise or if an investment is made in Cypriot companies operating in the primary and secondary sectors of the economy amounting to EUR 400,000 or in the fields of R&D, education, health and renewable energy.
Naturalisation will grant a successful applicant and his family the freedoms of the European Union along with its social and legal system, visa-free or visa-on-arrival travel to 174 destinations including Canada, Hong Kong, Singapore and the UK, dual citizenship, as well as it not being necessary to continuously reside in the Republic before or after the approval of the application.
According to the terms and conditions of the program, a non-Cypriot citizen can apply for the acquisition of a Cypriot citizenship through naturalization by exception, if one of the financial criteria mentioned above is met, either personally or through a company in which he participates as a shareholder. Otherwise, naturalization can be obtained through investments made by his spouse or jointly with the spouse or as a high-ranking senior manager provided that he receives remuneration that generates tax revenues for the Republic of at least EUR 100,000 over a three year period.
Eligibility is also dependent on whether the necessary investments are made during the 3 years preceding the date of the application. It's worth noting that the investor is obliged to retain the investment for at least 5 years from the date of the naturalization.
Should the investor wish to replace the investment during the specified 5-year period, he may do so only upon the receipt of an approval obtained beforehand by the Ministry of Finance. Additionally, the applicant must possess a permanent residence in the Republic whose purchase price is at least EUR 500,000 plus VAT. If the investor chooses to proceed with the real estate option mentioned above, he can include his privately owned residence in his total EUR 2MM investment. Lastly and for clarify, the applicant must be over the age of 18 and be able to present a clear criminal record.
The benefits of the Cyprus Citizenship are extended to the investor's parents provided they are owners of a permanent residence of at least EUR 500.000 and wish to apply for citizenship. Entitled to apply are also the investor's minor children as well as the adult financially dependent children (full-time students) up to the age of 28.
Originally published 02 July, 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.