Updates on the new policy for Permanent Residence by Investment application
The Cyprus Government, in an attempt to attract foreign investment to the island and enhance further economic growth, introduced Regulation 6(2) of the Aliens and Immigration Regulations which provides non-EU nationals, who invested in Cyprus, the right to permanently reside on the Island.
To address some weaknesses and flaws in the system, these criteria have been amended and will take effect on May 2, 2023.
The main provisions of the new policy are as follows:
1. The applicant must make an investment of at least €300,000 in one of the following categories:
A. House/apartment: Purchase of a house/apartment sold for the first time (not a resale) by a land development company of a minimum value of €300,000 (plus VAT).
B. Real estate (excluding houses/apartments): Purchase of another form of real estate such as offices, shops, hotels or similar developments, or a combination of these, with a total value of €300,000. These properties may also be resale properties.
C. Share capital of a Cypriot company with activities and personnel in Cyprus: Investment worth €300,000 in the share capital of a new company or an existing company which is registered, based and operates in Cyprus with a proven physical presence and employs at least five (5) people.
D. Shares of a Cyprus Investment Organisation for Collective Investments (type AIF, AIFLNP, RAIF): Investment worth €300,000 in shares of a Cyprus Investment Organisation for Collective Investments whose investments need to be carried out in Cyprus.
2. It must be proven that the money to be used for the investment came from abroad from the applicant’s personal bank account or that of his spouse, supported by proper documentation proving the settlement of the purchase with the vendor.
3. In addition, the applicant should prove that they have at their disposal a secure annual income deriving from abroad of at least €50,000. The annual income is increased by €15,000 for a dependant spouse and €10,000 for each dependent child.
4. The applicant and their spouse must submit a clean criminal record from their country of origin and country of residence.
5. They must certify that they do not intend to work in the Republic, with the exception of their employment as directors in a company in which they have chosen to invest within the framework of this policy.
6. If the investment does not concern a company’s share capital, applicants may be shareholders in companies registered in Cyprus and receive dividends. They may also hold the position of non-executive director in such companies without remuneration.
7. Where applicants choose to invest under the investment criteria B, C, or D, they must present information regarding their place of residence in the Republic.
8. When investing in residential or other properties, the applicant needs to provide proof that the contract of sale was filed with the Land Registry and official receipts for the payment of at least €300,000 (excluding VAT), regardless of the date of delivery of the property. Evidence must be provided that the funds invested have come from abroad and are not a product of internal borrowing. The total investment should be paid into the seller’s account at a Cypriot financial institution.
Provisions for dependents
1. The Immigration Permit is issued to the applicant and the applicant’s dependents (spouse and minor children up to the age of 18).
2. Unmarried children between the ages of 18 and 25, who are students in higher education abroad on the date of submission of the application, and who are financially dependent on the applicant, may submit their own, separate application for an Immigration Permit. In such a case, the father or mother and/or both parents together must prove that they have an additional annual income of €10,000 for each such dependent child.
3. Such permit, once issued, will continue to be valid even after they reach the age of 25, even if they marry and cease to be students and/or financially dependent on their parents.
4. An Immigration Permit may also be granted to adult children of the applicant who are not financially dependent provided a higher-value investment is made. The market value of the €300,000 investment should be multiplied according to the number of adult children, who will rely on the same investment for the purposes of obtaining an Immigration Permit. Each adult child will need to prove they have at their disposal a secure annual income of at least €50,000, which will be increased by €15,000 for a dependent spouse and €10,000 for each dependent child.
Applicants are required to prove on an annual basis the following:
- They continue to hold the initial investment (or at least equal and still eligible replacement),
- They continue to receive adequate annual income for themselves and their dependents,
- They are covered by valid private health insurance if no longer registered with the national health scheme,
- They are of clean criminal record both from their country of origin and country of residence.
In case the applicants fail to provide the above, then their and their dependents’ residence permits will be cancelled.
The right of the applicants and their adult dependent children to reside in Cyprus is indefinite, even though the permit itself will have a validity of 10 years from issuance after which date it will need to be replaced. The right and residency permit issued for minor children of the applicant will end once they reach the age of 18. They can reapply if they fulfil the relevant criteria mentioned above.
- Panayiotis Thrasyvoulou, Partner, People Advisory Services
- Riginos Polydefkis, Director, Head of Immigration Services, People Advisory Services
- Costas Anastasiou, Manager, Immigration Services, People Advisory Services
Temporary application of Zero VAT rate (0%) to selected food & socially significant products
On Tuesday 02 May 2023, the Cyprus Council of Ministers approved the application of zero VAT rate on selected food and socially important products. Those products will be subject to 0% VAT, some being reduced from 5% while others lowered from 19% VAT after the Order implementation. The measure is temporary and will apply from the decree’ publication date (implementation expected from Friday 5 May) in the Official Gazette of the Republic up to 31 October 2023.
Products subject to Zero VAT rate via the new Decree
- Bread: All types of bread fresh or frozen with or without leaven (e.g white, black, wholegrain, multigrain, country/rustic, rye, cornbread, baguette, ciapatta, sliced bread, breadrolls, buns, pittas). Pastries, baked or dried products and any bread with additional ingredients such as raisins, nuts, aromatics are excluded from ‘bread definition’ for the purposes of 0% VAT
- Milk: fresh milk (e.g. cow, goat, sheep), sweetened, condensed, long-life, flavored milk (e.g. chocolate, banana), plant milk (e.g. almond, soy, rice)
- Baby food: in powder, dry or even liquid form intended for consumption by children. Snacks (e.g. crisps, nuts candies, chocolates, ice creams) are not subject to 0% VAT
- Baby and Adult diapers
- Products for feminine hygiene protection (tampons, sanitary napkins and incontinence pads)
Next Steps for Businesses
Affected Businesses need to:
- carry out a stock counting (by the of the business day before the change in the VAT rate) of their products to be placed under the 0% VAT.
- consider that they have the right to choose which VAT rate (old – 5/19% /new - 0%) to apply on the goods impacted by the rate change. Such right is applicable where the basic tax point (goods delivery) occurred before the VAT rate change and the actual tax point (invoice/payment) occurred afterwards (or vice versa).
Our EY VAT Team is at your disposal should you think your organisation requires assistance with the practical implications of the Order.
- George Liasis Partner, Indirect Tax Services
- Georgios Pitsillis Director, Indirect Tax Services
- Maria Raspa Senior Manager, Indirect Tax Services
- Elpida Papachristodoulou Senior Manager, Indirect Tax Services
- Iacovos Kefalas Senior Manager, Indirect Tax Services
- Simos Simou Senior Manager, Indirect Tax & Controversy
New Tax Identification Number format
The Tax Department of Cyprus announced that the format of the Tax Identification Number ('TIN') issued for new registrations in the Registry of the Cyprus Tax Department has changed from 27 March 2023 onwards. The new format of the TIN consists of:
- Nine (9) characters, with the first eight (8) being numerical and the last being a Latin letter (in English), as the alphabetic control character.
- All new TINs start with the number six (6) e.g. 60000000A.
The new TIN format is a random number with a control character at the end and does not include elements (e.g. Identity Card (ID) number or Company Registration Number (HE)) related to the new taxpayer.
- Petros Liassides, Partner, Direct Tax Services
- Eleni Kostari, Senior, Global Compliance & Reporting
Tax treaty between Cyprus and the Netherlands enters into force
On 30 June 2023, the Cyprus - Netherlands Income Tax Treaty (2021) (the “Treaty”) will enter into force. The Treaty generally applies from 1 January 2024.
The Treaty provides for full relief of withholding taxes on dividend payments to corporate investors, provided they hold directly at least 5% of the capital of the company paying the dividends throughout a 365-day period. This exemption also applies for certain recognized pension funds which are generally exempt under the corporate tax laws of the contracting jurisdictions. The Treaty provides for a maximum 15% withholding tax rate in all other cases.
Moreover, the Treaty provides for 0% withholding tax rate for interest and royalties.
Given the above, the Treaty presents a beneficial legal framework for cross-border investments.
For additional details please refer to our previous alert: The Netherlands and Cyprus sign double tax treaty | EY - Global
- Petros Krasaris | Partner | International Tax and Transaction Services
- Elina Papaconstantinou | Manager | Intl Tax and Tran Svcs(ITTS)