China, one of the world’s biggest economies, and the small yet dynamic EU member state of Cyprus are seeking ways to further strengthen their cooperation and business links. Enjoying solid diplomatic ties for well over 40 years, Cyprus and China have a long history of close economic cooperation and cultural exchange in the fields of education, health, sports and business. The countries also share October 1st as an important date, being both China’s National Day and the Independence Day of the Republic of Cyprus. The number of Chinese citizens discovering Cyprus as a tourist destination as well as an interesting investment opportunity has seen asteady increase and recognising this trend, Cyprus is setting its sights on providing more incentives as well as betterinvestor support.
New Incentives to Spur Investment
China is showing serious interest in inward investment to Cyprus, not only in using it as an intermediary holding and trading company location to tap into regional and EU markets, but also in investing in high-end real estate. With a wide range of attractive property as well as prices that have come down substantially over the last two years, many see this as a window of opportunity. Its permanent residence programme linked to the purchase of property in Cyprus was the first to attract Chinese buyers, with interest gradually evolving and maturing to Chinese developers and fund investors exploring the potential to enter into joint ventures with Cypriot enterprises or launch their own large scale real estate development projects. Interest from overseas buyers is certainly welcome in Cyprus, where the local real estate market is currently going through tough times. In a bid to boost the sector, the government has introduced a series of important incentives to attract more investors to its shores.
New legislation has been enacted providing additional benefits to investors in the property market, such as a 50% reduction in transfer fees for all sales and a 100% exemption from capital gains tax for profits on properties purchased by 31st December 2016. Also the personal tax exemption for high earners has now been extended from five to ten years. Individuals taking up tax residency in Cyprus and earning over €100,000 per year employment income, enjoy 50% exemption from personal income tax. This legislative amendment is expected to encourage the relocation of decision makers and top management to enhance business substance of Cyprus operations.
Attractive Citizenship and Residency Programmes
Cyprus often tops the list of best countries to live, work or retire in and has already attracted significant numbers of high-net-worth individuals and wealthy families worldwide looking for a permanent or secondary home. The charm of this versatile Mediterranean island and its rich historical legacy spanning over 10,000 years has captured the imagination of many. The popularity of Cyprus stems from various factors, such as its temperate climate and abundance of fresh produce, stable political environment, EU membership, its efficient legal and tax system, sophisticated infrastructure and the high quality yet low cost of living. It’s no wonder that the island’s residency and citizenship schemes have seen an increase in applications over the last few years, with significant interest from China, Russia and the Middle East. The citizenship through investment programme is gaining traction from individuals looking to tap into investment opportunities in Cyprus and gain visa-free entry to over 160 countries. Offering the right to live, work and study in any EU member state, an EU passport continues to be one of the most coveted in the world. Cyprus already hosts a large expatriate community, who enjoy the relaxed Mediterranean lifestyle and with its excellent private healthcare and schools, many families have found an ideal home away from home.
Gaining permanent residency in Cyprus is relatively straightforward, with a processing time of two to three months and no requirement for Greek language proficiency. An applicant’s spouse and children are also eligible for a permit, with children under 18 years old and financially dependent children up to 25 years old also granted residency. Although many decide to relocate to Cyprus permanently, there is no legal requirement to stay in the country as long as you visit at least once every two years. An added advantage of having permanent residence is that it provides an exemption from immigration entry procedures in Cyprus. The criteria for permanent residency are a secure and steady annual income of at least €30,000 derived from abroad and the purchase of one or two new real estate properties with a total purchase cost of at least €300,000, excluding VAT.
As a neutral and stable EU country in an increasingly unstable region, Cyprus has become an attractive option for high-net-worth individuals seeking a second citizenship and a means to secure their assets. An applicant and his/her family can receive Cyprus passports in around three months in exchange for a €5 million investment in bonds, assets of Cypriot companies, real estate, infrastructure projects and creation of a Cyprus business for a term of three years. The key benefits of the programme are EU settlement and excellent visa-free travel possibilities, no obligation to renounce existing citizenship and no Greek language proficiency requirements. As with residency, there is no obligation to stay permanently in Cyprus, but individuals applying for citizenship must have a permanent privately-owned residence in Cyprus with a purchase price of a minimum of €500,000, excluding VAT.
A Wide Range of Investment Opportunities
Cyprus has a solid and long track record for attracting FDI and the country’s expanding range of investment opportunities in luxury real estate, technology, tourism, energy infrastructure, privatisations and potential large scale projects have certainly caught the attention of multinational investors – most notably from China, Russia, the Middle East and the US. The strategic geographical location of Cyprus and its strong relationships with regional neighbours as well as Russia and CIS countries, coupled with its cost-effectiveness, make it an ideal launch pad for global investments. In addition, its upgraded framework for investment funds has established Cyprus as an increasingly attractive EU jurisdiction for asset managers looking to capitalise on opportunities. The emerging investment fund sector could develop into a multi-billion-euro industry and Cyprus provides many key advantages, such as preferential access to virtually untapped markets and offering a European passport to the fund management industry providing excellent possibilities for cross-border and international fund distribution. Industry experts say investors worldwide are seeing good prospects of a healthy return on investment in Cyprus, and with its solid Mutual Fund and Alternative Investment Fund frameworks, Cyprus is establishing itself as a new regional market and developing into a niche EU fund centre.
The country’s liberalised Foreign Direct Investment Policy for both EU and non-EU investors, its favourable tax regime and 12.5% corporate tax rate, establish Cyprus as one of the most competitive jurisdictions in Europe. Supported by an extensive network of double tax treaties with around 60 countries has strengthened Cyprus’ position as a preferred location for both global and regional headquarters of multinational companies. Location is a crucial part of international business operations, as the importance of creating substance through fully-fledged offices is a must nowadays. The maritime industry is a successful example of this, with Cyprus considered one of the most influential global hubs for ship owning and management services. Cyprus is the largest third-party ship management centre in Europe and the largest crew management centre in the world, while its international ship register is the third largest in Europe and the 10th largest in the world. Cyprus and China already have strong ties through the maritime sector, with Chinese crew making up a major proportion of the staff on Cypriot-managed ships and Cyprus-based shipping companies building billion-euro vessels in China over the last decade.
With natural gas deposits in both Cyprus’ EEZ as well as in neighbouring waters, the developing oil and gas sector as well as the renewable energy sector have great potential for more Chinese investment in the future. As a leader in renewable energy technology, China’s know-how could be of great value as Cyprus aims to meet its target to supply 13% of the island’s energythrough renewable energy sources by 2020.
The recent bilateral agreement for innovation, science and research between Cyprus and China has also given scope to attract Chinese hi-tech giants to invest in the island’s first Science and Technology Park. With China already managing around 120 similar tech parks, Cyprus is keen to draw innovative ideas and expertise in developing the project and has around €30 million in available funding for 2014-2020 from the joint China-EU fund for common research projects. The education sector in general has already seen an increase of Chinese students in universities as well as private high schools, proving there is potential for Chinese educational institutions to join their foreign counterparts in setting up campuses in Cyprus.
Tourism has long been a driving force of the Cypriot economy and arrivals as well as expenditure have seen increases in the last few years, with 2015 proving a record-breaking year. Cyprus is currently looking at attracting over 300,000 Chinese tourists annually by making its tourist visa process easier by using independent providers within China. Attracting new investor interest has been a key aim through the diversification of the tourism product. Extending the tourist season, developing agro- and wellness tourism, as well as constructing multipurpose projects such as a casino resort, luxury marinas and golf courses are all part of Cyprus’ efforts to upgrade its offering.
The privatisation of several state-owned entities in Cyprus by 2016, present an interesting new FDI opportunity. Targets for privatisation are the Electricity Authority of Cyprus (EAC), the Cyprus Telecommunications Authority (CYTA) and the Ports Authority. There are already competing entities in the telecommunications, internet provision and energy sectors, but the state entities represent the dominant providers in the country. Cyprus’ two international airports in Paphos and Larnaca, upgraded under a Build-Operate-Transfer (BOT) arrangement, are also attracting a growing number of airlines seeking to use Cyprus as an air-transport hub.
Strong Foundations for Future Growth
The resilience of the Cyprus economy throughout the international financial crisis has not gone unnoticed, and the country’s improved economic performance and investment potential as well as its ability to bounce back from receiving a financial EU bailout in 2013 has led the Eurogroup to brand Cyprus as a success story. It is important to note that all the fundamentals and advantages that established Cyprus as an attractive international business centre continue to be protected, sparking a new rise in investor confidence. With new incentives coupled with the promise of better governance and less red tape many industry experts and multinational companies have recognised this as a ripe time to invest in the Cypriot market.