Sun, Sea and Citizenship
1 August, 2014
Citizenship by investment is becoming a popular option among the world’s wealthy individuals who seek to take advantage of certain citizenship related benefits. Cityscape takes a look at what such a scheme has to offer in the case of Cyprus.
Cyprus has long been a popular market for overseas investors with regards to the purchase of second homes. Between 2004 and 2008 in particular, the Cypriot property market witnessed an increase in demand. With the global financial crisis however, real estate prices plummeted, creating strong opportunities for buyers.
Highest in demand are seafront properties in areas such as Limassol, Paphos, and Ayia Napa, which are popular due to their beach lifestyle aspects and infrastructure.
Secondly, integrated master-planned communities are gaining attraction, offering properties that cater to all types of owners including locals, new residents, second home owners as well as vacationers.
But apart from its beautiful landscapes, perks as popular tourist destination and close proximity to the Middle East, North Africa and the rest of Europe, Cyprus also presents an attractive opportunity for real estate investment due to its ‘Citizenship by Investment’ programme.
Issa Elhaj, Senior Citizenship & Residency Consultant at citizenship and residency planning service Elevay, says many investors are drawn to the island on the basis of the possibility of obtaining Cypriot citizenship that comes with all the travel benefits that holding an EU passport provides.
“The strategic geographical proximity to the Middle East, North Africa and Europe makes Cyprus an attractive option [to Middle Eastern investors] and the relatively modest cost of the real estate component of the citizenship by investment programme makes this a very desirable choice for many investors in the region. Cyprus citizenship also offers the many travel related benefits of being an EU member country,” Elhaj commented.
With several citizenship/residency programmes related to the purchase of real estate emerging in a number of countries around the world, we take a closer look at the Cypriote programme called “Citizenship by Investment.”
Legal update: “Citizenship by Investment”
In 2011 Cyprus first introduced a “Citizenship by Investment” programme, which has undergone several updates since, with the latest update having been recently made. Following is a legal insight into the current regulations related to the Citizenship by Investment programme, prepared by Stylianos Christoforou, Barrister at the Judicare Group* in Cyprus.
The so called “Citizenship by Investment Scheme” currently available by the Republic of Cyprus may easily lead an individual to the acquisition of a Cypriot (EU) citizenship and a Cypriot (EU) passport with very limited residency requirements.
The Citizenship by Investment scheme offered by the Republic of Cyprus grants, by way of exception, citizenship to eligible applicants that make a certain significant investment into the local economy. The benefits of Citizenship by Investment are numerous yet the most important ones are that the successful applicant will:
- be granted the legal right to EU citizenship, both for him/herself and all dependents
- be free to move within Europe like every other European citizen
- have access to education, medical facilities and a range of options for a better quality of life within the EU
- have a choice in case of political unrest
- have an efficient base for the tax structuring of his business
The scheme provides that any applicant must meet one of the six criteria below and the terms and conditions as imposed by the Cabinet of Ministers:
- Gross Investment and Donation to Fund the State
The applicant should make the following investments and donations to Governmental funds: At least €2 million to be invested in shares and/or bonds of the Cyprus Investment Company that will be formed (the applicant must deposit the amount said at the Cyprus Treasury Department until the shares and /or bonds of the aforesaid company are issued) and an amount of at least €500 thousand shall be donated to the Research and Technology Fund.
- Direct Investment
The applicant must have direct investments in Cyprus of at least €5 million. Examples of direct investments include but are not limited to: Purchase of real estate, acquisition of businesses/companies that are based and have activities in Cyprus; purchase of shares of companies registered in Cyprus; purchase of financial instruments (e.g. bonds and debentures registered and issued in the Republic of Cyprus); and participation in a company/consortium that is in charge of the execution of a Government project.
It must be noted that with regards to the first four aforementioned conditions, the applicant must have in his/her possession the related investments for a period of at least three years. In case of a portfolio of shares or bonds, it should be ensured that the value of the portfolio during the three year period will not be less than the specified amount.
- Bank Deposit
The applicant should have deposits in Cyprus banks amounting to €5 million, for a period of at least 3 years. The deposits can be either personal or deposits of his/her private entity or of a trust whereby the applicant is the beneficiary.
It must be noted that certain banks with whom we co-operate may, upon application, provide a loan to the applicant using the said deposit as collateral.
- Combination of options 1, 2 and 3
The applicant may choose to have a combination of mixed investments and donations to a Governmental fund (criterion 1, direct investments (criterion 2), or deposits to Cypriot banks (criterion 3); the combination must again amount to €5 million.
- Business Activities
The applicant should be a shareholder or the ultimate beneficiary of a Cyprus company that has its head office and business operations in Cyprus. Further, the Cyprus company should have paid in the Republic of Cyprus at least €500.000 per year during the three years preceding the filing date of the application. The amount of €500.000 can include payments made to public Cyprus funds (e.g. Income Tax, VAT, Social Insurances) and the acquisition of professional services in Cyprus (e.g. legal, accounting, audit);
Alternatively, in the instance that the Cyprus company employs at least five or ten Cypriot citizens, then the minimum amount that must be paid in Cyprus (as described above) is reduced to €350.000 or €200.000 per year respectively during the three years preceding the filing date of the application.
In the scenario where the applicant has paid into the Cyprus economy direct revenue or fees (as described above) lower than the ones mentioned above, a combination can be made with criteria 1, 2 or 3. The sum of the payments made to the public Cyprus funds and the professional fees for the last three years shall be deducted from the required investment to satisfy criteria 1, 2 or 3.
- Impaired Depositors
The applicant has suffered impaired deposits in the Bank of Cyprus and/or Laiki Bank which totals to at least €3 million.
If the applicant has suffered an impairment in the above mentioned banks which is under €3 million, he/she can still apply for Cypriot citizenship provided that he/she invests the remaining amount (i.e. to sum up to €3 million) in mixed investments and donations to a Governmental fund (criterion 1) or in direct investments (criterion 2).
In addition to the applicant satisfying any one of the above six criteria, the applicant must also have a clean criminal record; and own a permanent residence in Cyprus of a market value at least €500,000(plus VAT).
*Judicare Group is an international network of law firms assisting and advising clients on all issues related to international property investment, and specialises in problematic property transactions and in the recovery of invested funds placed at risk in such scenarios.