Cyprus has approved new changes to its citizenship by investment by further tightening the rules to make the scheme trustworthy after the recently released EU report that expressed concerns about the investment citizenship scheme.

Under the new amendments, Cyprus removed government bonds option and from now on applicants must have had a schengen visa or residence permit to apply for citizenship by investment scheme.  Applicants refused of schengen visa and blacklisted by EU member state will not be able to apply for Cypriot citizenship under the investment scheme.

The prices of Citizenship by investment will also increase by EUR 150,000 as the Government will require donation to research and land agency.

Cyprus issued citizenships to 1,864 families since 2013 raising some EUR 6.6 billion euros with 24% of total transactions invested in construction and real estate sector and only contributed to 1.2% of GDP growth.

According to new report by Kathimerini, the significant changes to Cyprus investment scheme are

• Schengen visa: The applicant must be in possession of a valid Schengen visa in order to be able to apply for citizenship.
• Due diligence: Applicants to be vetted with tighter checks through appointed due diligence providers.
• Investment holding: Obligation to maintain the required investments for a period of at least 5 years from the date of naturalization, instead of the current 3 years.
• Bonds/Securities: Government bonds will no longer be an elegible investment for applicants.
• EU citizens: An applicant who has applied for citizenship in any other Member State of the European Union and who has been refused will not be entitled to obtain Cypriot citizenship.
• Residence requirements: The applicant must have a residence permit in the Republic of Cyprus for at least six months prior to naturalization as a Cypriot citizen.
• Transparent and Annual report:  Cyprus citizenship scheme will be more transparent. Annual Implementation Report will be published which will include the numbers, nationality and sector of investment.
• Donation to Research: A mandatory donation of €750,00 to the Foundation for Research and Innovation in order to promote the creation of an entrepreneurial innovation ecosystem. In addition, this obligation is lifted if the applicant has made an investment under the criterion “Buy or Set Up or Participation in Cypriot Businesses and Companies” amounting to at least 20% of the required investment cost of the stated criterion (ie €400.000 ) to a company that is active in the primary sector of the economy or in the secondary sector of the economy, or in one of the fields of research and technology, education, health, and renewable energy one.
• Donation to Land development: A mandatory donation of €75000 to the Cyprus Land Development Corporation, funds that are earmarked for implementing affordable housing policies.
• Investment products: Inclusion of right to invest in listed Alternative Investment Products, up to €200000.
• Shipping option: The inclusion of investments in the shipping sector in the eligible investments.
• Advertising ban: Reiterate ban on advertising of the program both on-line and in public spaces with particular emphasis on the visibility of the Cypriot passport and the symbols of the Republic and the EU.

Real Estate

Cyprus made no changes to investments of EUR 2 million in residential properties, requires a purchase of home worth EUR 500,000.

The standard rate for VAT in Cyprus is 19% in the construction sector. Any person that is buying  first permanent residence in Cyprus can apply for a reduced VAT rate of 5%).

Investment funds or shares does not attract VAT.

It is important to calculate the value-added tax (VAT) ( nil, 5% or 19%), transfer fees, stamp duty, legal fees, disbursements and immovable property taxes that will be applicable for real estate purchases as early as possible in order to budget accordingly.

Foreigners buying property in Cyprus first time are required to follow guidelines to avoid problems and pitfalls.