By Uglobal Staff
Cyprus has retooled its citizenship-by-investment scheme, reducing the cost to investors in a bid to continue the success of a program that has reportedly drawn more than 4 billion euros in new investment to Cyprus since 2013.
Coupled with changes in 2015 that allowed immigration investors to qualify as non-domiciled for tax purposes, the overhaul should ensure that the program remains attractive to investors seeking an EU passport, says Georgina Papapolydorou, an immigration lawyer with Christodoulos G. Vassiliades & Co. “Definitely, definitely,” she says. “It’s a very popular program.”
Finance Minister Harris Georgiades this year confirmed that Cyprus had issued more than 2,000 passports since reforming its citizenship-by-immigration system in 2013. On a per-capita basis, Cyprus confers citizenship on more people than any other EU nations except Sweden and Luxembourg, according to Eurostat data.
Last year’s overhaul saw the minimum total investment required for citizenship reduced to 2 million euros, from 2.5 million euros. Investments can now be made in real estate, businesses, financial instruments, or any combination thereof, although no more than 500,000 euros can be invested in government bonds. The overhaul also eliminated a past option that had allowed investors to qualify simply by making bank deposits.
Real estate remains by far the most popular investment vehicle, Papapolydorou says. “Most of the investors choose to invest in properties,” she says. “It’s more convenient for them, and it’s easier and less time consuming.”
Applicants whose investments aren’t chiefly in residential real estate are also required to purchase a residential property costing at least 500,000 euros, and maintain it for the duration of their citizenship, Papapolydorou points out.
Real-estate investors must also maintain a 500,000-euro residence in Cyprus, but can count the cost of that property towards their 2-million-euro initial investment. “It can be said that they save half a million euros,” Papapolydorou says.
Under the revised program, investors must now obtain Cypriot residency before applying for citizenship; in practice, however, that’s a simple process. “It’s done automatically on the same day,” Papapolydorou explains.
Applicants receive residency cards within five days of filing their papers, and receive passports six months later, she explains. “It’s very easy to apply for this scheme, and very convenient as well,” she says.
Spouses and dependents can be included in the citizenship application, and investors’ parents can also qualify for Cyprus citizenship if they purchase an additional 500,000-euro residence. Investors and their parents can also club together to buy a single 1-million-euro residence to cover the property requirement for both parties.
Besides its flagship citizenship program, Cyprus also offers permanent residency at a reduced price. That program is open to applicants with an annual income of 30,000 euros or more, and requires the purchase of a property valued at 300,000 euros or more, of which at least 200,000 euros must be paid up-front.
That’s an attractive option, says Esme Palas, an associate with Michael Kyprianou & Co.
“Many more applications are made for permanent residency as opposed to citizenship due to the large investment required for citizenship,” she says.
Despite the higher price-tag, though, the Cypriot citizenship program is unique in offering a quick, hassle-free way to obtain full citizenship of an EU member-state, rather than just residency, says Savvas Poyiadjis, managing director of Nicosia-based advisory firm Fidescorp.
Citizenship confers the ability to travel, work, and live across the entire EU region, along with other benefits.“ Apart from that, Cyprus passport holders are able to travel visa-free (or visa on arrival) in 158 countries worldwide,” Poyiadjis notes.
The tax benefits of Cypriot citizenship are also a big selling-point, with non-domiciled rules now exempting qualified residents and citizens from taxation on their dividends, interest, and rental incomes. Cyprus also has the lowest corporate tax rate in Europe, making it especially attractive for business owners, Poyiadjis notes.
“Cyprus is currently one of the best places for conducting international business,” he says. “With careful tax and business planning, entrepreneurs could relocate their businesses and benefit substantially.”
Cyprus’ residency and citizenship programs are helping the country’s economy, and especially its real-estate industry, to bounce back from the financial crisis of 2012-13. The number of properties sold to foreign buyers fell by 50% between 2010 and 2013, but has since largely recovered, according to government data.
More than a quarter of Cypriot property sales now involve foreign buyers, fueling a 43 percent increase in registered real-estate contracts in 2016 based on the previous year, according to a KPMG report. “The interest of foreign investors in Cyprus’ real estate market keeps growing,” the report notes.
The majority of foreign property buyers are from China, Russia, India and the UAE, according to PwC, with residential properties accounting for the bulk of such sales. “We have clients applying for citizenship from all over the globe, including but not limited to China, Hong Kong, Malaysia, Vietnam, Thailand and Russia,” Palas says.
The impact of foreign buyers is especially clear in the booming market for high-end real estate: sales of residential properties worth 1.5 million euros or more quadrupled from 32 in 2013 to 117 last year, according to PwC.
Still, the success of the Cypriot program does bring some drawbacks: the country’s advisory community remains largely unregulated, and Poyiadjis warns that the program has attracted some unscrupulous players.
“Although the Cyprus migration programs offer great advantages to applicants, investors should be very careful about who they cooperate with,” he says.
That’s especially true when it comes to purchasing real estate, he says: unwary investors could find themselves in possession of a property, but unable to obtain the formal title deeds needed to complete their citizenship applications.
“It is very important to ensure that the property purchased either has a title deed or no obstacles are in place in issuing one,” he says. “Proper advice should be sought in order to safeguard one’s ownership.”
Investors should also plan on finding a trustworthy legal advisor to ensure their citizenship paperwork is properly processed, Palas says.
“It is of the utmost importance for those seeking to relocate through these programs to seek independent legal advice,” she says. “The choice of a reputable law firm is of paramount importance in the success or failure of a candidate’s application.”