Cyprus citizenship by investment scheme provides passport to Europe

In late 2011, the Council of Ministers of the Republic of Cyprus laid down criteria and conditions for the naturalisation of foreign investors and entrepreneurs by exemption. Since then, Cyprus has entered into the competitive field of residence and citizenship planning. Citizenship by investment, the term widely coined for accelerated investment schemes that lead to alternative citizenship and a second passport with limited residency requirements, aims predominantly to entice foreign investors, entrepreneurs and high net worth individuals (HNWIs).

The reasons for obtaining an alternative citizenship and seeking residence solutions are many and the demands of today’s globalised world constantly keep adding to that number.

Whether it be to ensure a better quality of life and education, access to medical facilities, a back-up plan for times of political unrest, fiscal cliffs and estate planning, or to facilitate investment and banking privacy, dual citizenship, passport and visa-free travel are nowadays ever more important for international clients and their families.

Legal history

Cyprus was, until 1960, a British colony, and as with all Commonwealth countries the fundamental areas of Cyprus law were, and to a certain extent still remain, carbon copies of their respective English counterparts.

As from 2004, Cyprus is part of the European family as an EU member state. Its market economy is dominated by the services sector, which accounts for 76% of GDP.

While financial services and tourism are the most important sectors, the recent discovery of vast deposits of natural gas and oil underwater in its exclusive economic zone is expected to upgrade Cyprus to a major player in the energy field in the next five years. Despite the financial turmoil that has severely challenged mainland EU, Cyprus has preserved its corporate growth, maintaining its long-standing average rate of 15,000 new company incorporations per annum, all subject to a flat corporate tax rate of 10%, the lowest in the EU.

In exchange for Cyprus (EU) citizenship and a passport, Cyprus seeks to incentivise prospective investors and HNWIs to invest in and grow its economy. The eligibility requirements for the Cyprus citizenship by investment scheme are equally applicant and investment-orientated.

As to the former, the applicant needs to be at least 30 and have a clean criminal record. Confirmation will be sought that the applicant’s name is not included on the list of persons whose property is ordered to be frozen within the boundaries of the EU. Finally, the applicant is required to have a permanent privately owned residence in the Republic of Cyprus, the value of which must exceed the amount of €500,000 (US$662,000) at current prices.

Six options

As far as the investment side of the scheme is concerned, applicants may elect any one of the following six broad mediums, depending on his or her commercial/financial fluency:

(i) Bank deposits

The applicant must have personal deposits in Cyprus banks, or deposits of privately owned companies, or of a trust (in which he or she is a shareholder), in Cyprus amounting to a minimum of €15 million for at least a five-year period. In this case, the application is expected to be endorsed by a Cypriot bank, confirming the existence of the applicant’s fixed-term five-year deposit.

(ii) Direct investments

The applicant must have direct investments in Cyprus amounting to a minimum of €10 million. Direct investments may include purchase of immovable properties, businesses, companies, shares and financial assets, etc.

(iii) Entrepreneurial activities

The applicant must have established/registered in Cyprus a company, or companies, controlled by him or her with a total minimum turnover of €10 million per annum on average (in accordance with the company/companies audited accounts) over the last three years preceding the year of the application, and at least one-third of the applicant’s employees must be citizens of Cyprus.

(iv) Introduction of innovative technologies

The applicant must prove that he or she has introduced on a large scale new and innovative technologies in vital/major sectors of the Cyprus economy, or that he or she has established an important research centre for the conduct of research locally on a large scale;

(v) Direct income and/or remuneration for services

The applicant must have established a company or companies, the management of which is in Cyprus and in the last three years preceding the year of the application has paid into the Cyprus economy at least €500,000 on average per annum, either in the form of income tax/VAT payments and/or in the form of remuneration for the purchase of business services (legal, accounting, auditing, banking etc.).

(vi) Combination

A combination of direct investments, entrepreneurial activities and deposits in Cypriot banks amounting to €15 million.

Citizenship approval

The complete application is reviewed by the Council of Ministers, which may take up to four months. If the application is approved, the applicant is naturalised and this leads to the immediate and lawful ownership of a Cyprus (EU) passport.

Once Cyprus citizenship has been acquired, it is for life. Not only the applicant, but his or her dependants, may enjoy full Cypriot (EU) citizenship for life, which can be passed on to a future generation by descent.

It should be noted that applicants are not required to surrender any other citizenship and/or passport they may have, as dual citizenship and/or passport are permitted under Cyprus law. And there is no requirement to sit any language aptitude or ocal knowledge tests.

Prior to taking any decisions, potential applicants of the Cyprus citizenship by investment scheme are strongly encouraged to seek legal and tax advice from their country of origin, as well as from the Republic of Cyprus. Long-term residence and work permit schemes are also available in Cyprus.

Nick Tsilimidos is an associate at L Papaphilippou & Co in Cyprus