The most popular investment option last year was the real estate contribution. Investors spent EUR 1.2 billion on residential real estate and infrastructure development projects on the island.
Foreign investors have invested EUR 76.4 million in Cypriot business and local shares. Other investment options, such as contributions to investment funds, accounted for EUR 58.5 million.
Statistics of the Citizenship Programme for 2013-2019
According to the results of the audit, between June 2013 and December 2019, 2855 investors received Cyprus passports for investments. Russians were in first place by the number of passports received for investment. This is followed by citizens of China, Ukraine, Lebanon and Saudi Arabia.
In 7 years, the programme has brought the country €9.7 billion. The programme contributed 1.7% to the country’s GDP growth in 2016-2019. However, the assessment does not take into account the indirect impact of the programme on the economy: sometimes investors invest in local businesses after obtaining passports.
Investments in real estate accounted for 60% of all investments under the programme. The amount of transactions over the past years was €6.4 billion. Investors have invested 39%, or €2.5 billion, in the purchase of property on the island.
Other areas of the Cypriot economy have received €3.3 billion in investments. For example, investments in local companies totalled EUR 1.2 billion. In third place were deposits in Cypriot banks, to which investors transferred 713.3 million euros. The programme allowed investments to be placed in deposits in 2013-2017.
In 2020, the Cyprus economy was affected by closed borders and the financial crisis. The government is therefore developing new conditions and proposals that will help attract foreign investors to the country.
What measures are being considered by the Government of Cyprus to attract investors?
The real estate market has been stimulated by Cypriot developers. The fact is that in 2020, demand for real estate fell due to closed borders and the financial crisis. Between January and July 2020, the number of real estate sales to third country investors decreased by 46% compared to the same period in 2019. We talked about this in “The New Cyprus Real Estate Data: Demand is at a minimum, the market is close to stabilising, it’s time to buy”.
Proposals from developers have been submitted to the Government of Cyprus. According to real estate market experts, these measures will help the industry to recover in the shortest
3 changes that will stimulate the interest of foreign investors:
- Exempt real estate from capital gains tax.
- To reconsider the definition of “old real estate” – to consider objects as such already in 3 years of operation, instead of 10 years as it is now.
- Increase the discount on bank transfer fees to 70%. Now the discount is 50%.
Experts expect the government to make these changes by the end of 2020. We told you more about this in Cyprus: “The measures that will make real estate investment more attractive”.
The Cyprus Ministry of Finance proposed to introduce tax benefits for wealthy foreigners. The Parliament is currently considering 2 draft laws with corresponding amendments.
If the Parliament approves the draft laws, foreigners can pay 50% of the income tax rate. The government also proposes to extend the tax benefit of 20% or €8,550 when paying income tax. We talked about the draft laws in the material ‘The Cyprus Parliament is considering 2 draft laws on tax benefits for wealthy foreigners’.
We believe that tax incentives may be of interest to entrepreneurs who plan to participate in the Cyprus Citizenship Programme for their investments. This is particularly important against the background of the changes in the programme that the Government adopted in August 2020.
In particular, the changes concerned the conditions for the relatives of the investor, the strengthening of security checks and the passport withdrawal procedure. The amount of the donation for participation in the programme and the rules for investing in the country’s business have also increased.
For more information on changes to the Cyprus citizenship programme, please see our publication “Cyprus Published Changes to the citizenship programme”.
In our opinion, if the Government of Cyprus adopts the developers’ proposals and tax benefit laws, the results of the citizenship programme for 2020 could be comparable to those of 2019.