It is one of the costliest citizenship-by-investment programmes, yet there are many reasons to invest in the economy of the island.
With recently reduced tax burdens, Cyprus is an interesting option for those who would like to acquire European citizenship.
The investment programme of Cyprus is a ‘direct citizenship’ programme, one of the few programmes in the world where citizenship can be obtained in as little as three months, against a significant but relatively simple to make investment.
The government of Cyprus has recently revised its taxation framework and it now offers tax free profits for non-domiciled investors.
The Cyprus Tax Update has introduced the status of a ‘non-domicile’ individual, targeting high-level business executives and High Net Worth Individuals (HNWI).
This revision exempts such persons from the Special Defence Contribution Tax, which is currently 30 per cent on interest income and 17 per cent on dividend income, explains Henley and Partners, a citizenship and residency planning consultancy.
In addition, there has been a reduction of transfer fees on real estate transactions by 50 per cent until the end of 2016, and investors are exempted from capital gains tax on any real estate transaction, provided that the acquisition is between the date of entry into force of the law and December 31, 2016.
It also includes the consolidation and modernization of immovable property tax and transfer fees and notional interest deduction on fresh capital injected into Cyprus companies.
The citizenship-by-investment programme is known to be among the costliest in the world, with a minimum investment requirement of €5 million (Dh20,3 million).
However, the investment can be shared, pointed out Dominik Zunkovic, Manager at the Dubai branch of Henley and Partners.
“The investment can be shared among five individuals, each making an investment of €2.5 million.
“Their investment does not need to be submitted as a single investment, nor do they have to invest in the same project. All they need to do is apply together.”
There are several investment options the applicant can opt for, such as the real estate option, requiring the applicant to invest at least €5 million in real estate or other developments.
Other options are to inject a similar amount in financial assets of Cypriot entities, a company residing and operating in Cyprus or to hold a deposit of up to €5 million in a local bank for at least three years.
Holding a permanent residence on the island with a market value of at least €500,000 plus VAT is one of the conditions that must be a met by applicants, in addition to holding a clean criminal record and meeting the processing fees, which depend on the investment option.
An advantage of having a Cypriot citizenship is that it accounts for EU citizenship, which means freedom of movement, work and study in the EU zone.
The Cyprus passport allows visa free travel to 151 countries, including Canada, Hong Kong and Singapore.
In addition, citizenship is granted to the applicant and family under the same investment amount.
According to Dominik the programme attracts a lot of interest especially in the Mena region.
“The Cyprus Citizenship-by-Investment Program has seen a substantial growth in demand by 100 per cent from the Mena region in the past six to eight months.
“The programme has gained considerable interest since it was launched, and even more so since concessions regarding the shared investment were made last year.
“In the Mena region, wealthy investors do not mind holding property on the island for some time, considering it a vacation home.
“”After three years, they can sell the property, while they gained citizenship for life.”
“We submit documents to the Cypriot government on a monthly basis, so if we have five candidates we can advise them to gather their applications as a single application, in order to be eligible for this option,” he added.
A number of additional measures are currently under discussion, including neutral tax treatment for foreign currency exchange differences (forex) which do not relate to trading in forex, an extension of the arm’s length principle to include arm’s length downwards adjustments and an extension of the period of the employment income exemption for expatriates earning over EUR 100.000 from five to 10 years.