Obtaining Cypriot citizenship by investment

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Chloe Andrews
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1 Citizenship by investment Cyprus

Obtaining Cypriot citizenship by investment Cyprus offers one of the most attractive citizenship schemes with full rights as a European Citizen Cyprus is at the crossroads of Europe, the Middle East

2 Obtaining Cypriot citizenship by investment Cyprus offers one of the most attractive citizenship schemes with full rights as a European Citizen Cyprus is at the crossroads of Europe, the Middle East and Africa, making it ideally suited for inward investment. In addition to its geographical location, the island has a favourable tax regime and a legal system based on English common law. A former British colony, Cyprus is an English-speaking independent and sovereign state, and is also a member of the EU. Cyprus is the fastest country in Europe to make decisions on applications for naturalisation as a Cypriot citizen (three months), and its membership in the EU automatically grants anyone naturalised within Cyprus an EU Passport, and the right to move, live or work anywhere within the EU. Additionally, the jurisdiction has international airport connections to all major European cities and other major destinations including Dubai, Doha and Russia. The Cyprus Government welcomes business to the island, and has established a number of initiatives to facilitate investment in Cyprus, including the Scheme for naturalisation (citizenship) of investors (Scheme). The Scheme was established pursuant to subsection (2) of section 111A of the Civil Registry Laws of and dates back to It features a number of favourable provisions and is periodically amended. This Guide outlines eligibility criteria and options for family members of applicants to the Scheme, and our infographic on the final page of this Guide represents the prerequisites. A. Eligible applicants under the investment programme A non-cypriot citizen is considered an eligible applicant if, at the time of application, he/she fulfils the following prerequisites: is over the age of eighteen is or becomes a resident of Cyprus has a clean criminal record is not subject to EU sanctions is either a high ranking senior manager or a person who meets the investment criteria as set out in this Guide 1. Over the age of eighteen The eligible applicant must, at the time of the application, be over eighteen years of age. The actual moment at which the age is tested is at the time of application and not the time when the decision is made. 1

3 2. Resident of Cyprus Unless the applicant is already a resident of Cyprus by virtue of a separate provision/law, the applicant may become a resident through the acquisition of real estate which is to be used as the permanent residence of the applicant and the cost of which must not be less than 500,000 (excluding VAT if applicable). The permanent residence may not be disposed of at any time, in other words it should be held indefinitely. The only possibility of disposing of the permanent residence would be with the prior approval of the Government and only on the condition that: a residential property of equal value has been purchased and shall be used for permanent residence the sale would not in any way amend the criteria on which the applicant successfully obtained his citizenship In practice, immediately after the filing of the application for the acquisition of citizenship, the applicant may apply for a residence permit pursuant to the relevant provisions of the Aliens and Immigration Law Cap 109. A temporary residence permit shall be granted upon the presentation of the relevant evidence which proves filing of the application for citizenship under the Scheme. Such permit is revoked if the applicant fails to acquire citizenship. 3. Clean criminal record The applicant must prove that he has a clean criminal record by producing, at the time of application, a certificate from his country of origin and of his country of residence (if different to the country of origin) confirming his/her clean criminal record. 4. Not on sanctions list An applicant whose name has appeared on a sanctions list, and, as a result of that, had his/her property within the European Union frozen, shall not be considered an eligible applicant. 5. High ranking senior managers or those who meet investment criteria 5.1 High ranking senior managers A permanent resident who is a high ranking senior manager in a company which has, in the past three years from the date of application, made investments which meet the investment criteria, would be able to apply for citizenship under the provisions of the Scheme. A high ranking senior manager is regarded as a person who holds a board position or a managerial position in a company and has been earning remuneration leading to taxable income, being not less than 100,000 (one hundred thousand Euros) in a period of three years (in aggregate and not per year). 2

4 5.2 Investment criteria The types of investments that would qualify for the application are analysed further below, however, prior to doing so it should be noted that: the applicant may apply directly as a physical person or through a company (or number of companies) in which he has a proportion of shares that would satisfy the investment conditions. Additionally any investments made by the spouse of the applicant or jointly with the spouse of the applicant shall be considered towards the satisfaction of the financial criteria the investments must have been made by the applicant at a time during a period of three years preceding the date of the application a successful applicant may dispose of the said investments but only after a period of three years from the date of his/her naturalisation. This is a substantial difference to the real estate purchased and used as the permanent residence of the applicant, which can never be disposed of and which must be held indefinitely (save for the case of substitution with property of at least equal value and with the consent of the council of ministers) generally, where the residence bought to be used as a permanent residence is of a value greater than 500,000, the excess amount of the value of the permanent residence shall count towards the total investment Investment in real estate, land development and infrastructure projects A minimum investment of 2 million in the purchase and/or construction of buildings including, but not limited to, residential or commercial developments and/or developments in the tourism sector and/or other infrastructure projects. The purchase of land and the submission of a business plan for the development of the land shall qualify under this criteria. On the other hand, the mere purchase of land without a business plan or alternatively licenses for development having been issued shall not qualify. Equally, the investment in land in a real estate zone which restricts development will not qualify. It is important to stress that an applicant who has elected to invest only in residential real estate will benefit from the fact that his permanent residence will count towards the investment. For example, an applicant who bought a residence to be used as his permanent residence for 500,000 and wishes to invest solely in residential real estate will have to do so by investing an additional 1.5 million. Residential real estate does not include any development of offices or other 3

5 buildings, the use of which is other than residential, but it should be clarified that such residential developments may be rented out or sold (following the three year period post naturalisation). An applicant who purchases a permanent residence for an amount of 2 million will not need to invest further. Yet, the restriction of liquidating/disposing the property after the three year period as analysed above will apply given that the residential property in this case has been classified as the permanent residence Investment in financial assets of Cypriot companies or Cypriot organisations A minimum of 2 million investment in the purchase or subscription or participation in companies or organisations incorporated/formed in Cyprus which: for the preceding five years from the date of application employed at least five Cypriot or EU nationals (Employees) in all cases the Employees must have been legal and continuous permanent residents of Cyprus during a period of not less than five years prior to the date of application (not the date of investment) Significantly, the funds used for the purchase/participation/subscription are evidently used to satisfy the specific plans of the said companies/organisations on their objectives, which must be exclusively related to Cyprus Investment in alternative investment funds or financial assets of Cypriot companies or Cypriot organisations that are licensed by the Cyprus Securities and Exchange Commission (CySec) Cyprus funds legislation allows the establishment of alternative investment funds (AIFs) which are licenced and supervised by CySec and which have different strategies and investment targets. A number of these AIFs invest exclusively in Cyprus, particularly in the areas of investments described under the programme and which we have already analysed or are in areas approved by the Ministry of Finance (Cy-AIF). The purchase of units with a minimum amount of at least 2 million in Cy-AIFs would be a valid option of investment under the programme. Just like any other investment, the redemption, disposal or liquidation of units must be kept for a period of at least three years and confirmation should be provided by the auditor/custodian (if applicable) of the Cy-AIF. Independently of this, the applicant may elect to invest a minimum of 2 million in instruments (bonds, convertible bonds, stock, preference shares, other securities) issued by Cypriot companies or organisations, with the approval of CySec. The issuers must have proven physical presence and substantial economic activity in the Republic of Cyprus, the purpose of 4

which shall be exclusive investment in Cyprus. The investment in a Cy-AIF which invests in other AIFs or CY-AIFs would not qualify as an investment for the purposes of the programme. 5.2.

6 which shall be exclusive investment in Cyprus. The investment in a Cy-AIF which invests in other AIFs or CY-AIFs would not qualify as an investment for the purposes of the programme Combination of investments An applicant may elect to invest in more than one type of qualifying investment(s), provided that the aggregated investment is not less than 2 million. Additionally, as part of this combined investment, the applicant may elect to purchase special government bonds of the Republic of Cyprus up to a maximum of 500,000. These bonds are issued by the Public Debt Management Office of the Ministry of Finance, which is also the Issuer and Seller. A secondary market purchase of such bonds would not qualify as an investment within the parameters of the scheme. Just like any other investment, any type of property combined under this investment should not be disposed/liquidated/redeemed unless three years have lapsed from the date of naturalisation of the applicant. Citizenship options for families B. Options for spouses, parents and children 1. Spouse The spouse of the applicant is entitled to apply simultaneously with the applicant for the acquisition of the citizenship. The relevant prerequisites discussed in this Guide shall apply, however the spouse will not need to independently satisfy the residency and investment criteria. In other words, the spouse of an applicant who meets the residency test and investment criteria will be considered as having successfully met the same. He/she will, however, need to be over eighteen years of age, have a clean criminal record and not have any of his/her assets in Europe frozen as a result of his/her name being on a sanctions list. It is important to note that for the purposes of the Scheme, a spouse may be a person who is not married to the applicant, but is eligible to be considered as a spouse under the Civil Union Law of 2015 (184(I)/2015). In brief, the law provides the opportunity for a civil partnership to be recognised under the law and have the same effect as if the partners were married. 2. Parents The parents of the applicant are entitled to apply for the acquisition of citizenship once the applicant has acquired the citizenship. In other words, unlike the right of a spouse to apply simultaneously with the applicant, the parents are entitled to do so only and if the applicant has been granted citizenship. The parents will not need to satisfy the investment criteria, since this will be considered as satisfied. They will, however, need to satisfy all of the other prerequisites discussed in this Guide, including the residency requirements, by proving that they own a residential property which cannot be disposed of and the purchase price of which is not less than 500,000 plus VAT. The Scheme provides that the applicant and his/her parents may have a common residential property, however, in that 5

7 case, the value shall be doubled to a minimum of 1 million. 3. Children 3.1 Children under the age of eighteen (minors) Children under the age of eighteen are eligible to apply for citizenship after the applicant has acquired citizenship, and provided that both parents consent to the application. 3.2 Children over the age of eighteen The adult children of the applicant are entitled to apply for the acquisition of citizenship once the applicant has acquired the citizenship, provided that: at the time of application they have not reached 28 years of age, they are studying for an academic degree as full time students, and are therefore considered as financially dependent adult children. The Scheme provides that a degree could include a bachelor s degree, a master s degree, a foundation or other preparatory course, the duration of which does not exceed two six months periods; but it will not include any courses which are followed in connection with a professional expertise, for example a course to become a certified or chartered accountant or a Barrister-at-Law. An adult child serving in the army will also be considered as financially dependent and therefore eligible to apply an adult child who suffers a serious body or mind disability, rendering him/her unable to work "The level of service is absolutely topnotch." Chambers and Partners Harneys can assist with applications for the acquisition of Cypriot citizenship under the investment scheme, legal services related to the acquisition of real estate in Cyprus, and the investment in Cyprus companies. For more information please visit /cyprus. Pavlos Aristodemou M a n a g i n g P a r t n e r C Y P R U S pavlos.aristodemou@harneys.com

Eligible applicants prerequisites for Cypriot

Police Record Permanent Residence EUR 500,000 Mixed

2,000,000 Commercial *Residential Harneys, April 2017

institutions and corporations with legal services

Islands, Cyprus and Anguilla law, from more than 12

For more information about Harneys please visit or

8 Eligible applicants prerequisites for Cypriot citizenship through investment Main Applicant Clean Police Record Permanent Residence EUR 500,000 Mixed Investment High Ranking Senior Manager Investment EUR 2,000,000 Commercial *Residential Harneys, April 2017 Cypriot Passport Harneys is a leading international offshore law firm. We provide the world's top law firms, financial institutions and corporations with legal services relating to Bermuda, British Virgin Islands, Cayman Islands, Cyprus and Anguilla law, from more than 12 offices around the globe. For more information about Harneys please visit or contact us at marketing@harneys.com. This legal guide is for general information only and not intended to be relied upon for legal advice in any specific or individual situation. 7

9 Locations Anguilla Bermuda British Virgin Islands Cayman Islands Cyprus Hong Kong London Mauritius Montevideo Sao Paulo Shanghai Singapore Tokyo Vancouver harneys.com harneysfid.com

SCHEME FOR NATURALISATION OF INVESTORS IN CYPRUS BY EXCEPTION on the basis of subsection (2) of section 111A of the Civil Registry Laws of

SCHEME FOR NATURALISATION OF INVESTORS IN CYPRUS BY EXCEPTION on the basis of subsection (2) of section 111A of the Civil Registry Laws of 2002-2015 One of the main objectives of the economic policy of