Legislative Background

The Cypriot government established the Cyprus Investment programme (CIP) in order to attract foreign direct investment and high-net-worth individuals to live and work on the island. Overall, the programme has been a resounding success. What's more, it also turned out to be an important safety net and a much-welcome stream of investment in the aftermath of the 2013 financial crisis.

It has not all been smooth sailing, however. Its popularity with third-country nationals aside, the CIP has received a great deal of criticism from the European Union (EU). The EU has repeatedly pointed out gaps and loopholes in the CIP that could be exploited for money laundering purposes. As a result, the EU has been pressuring Cyprus and other member states to amend their Citizenship by Investment Programs and bring them in line with the common European legal framework.

To address the EU’s criticisms, the Cypriot authorities have introduced a number of changes to the CIP over the years. Among other things, the amendments sought to enhance the legal and financial oversight over the CIP and to better protect the interests of individual applicants.

The New Rules Explained

The latest amendments represent the government’s most recent attempt to further improve the programme and make it even more efficient. The new rules introduce stricter regulations and supervision requirements. These ensure that both the programme and the applicants are in full compliance with EU law and anti-money-laundering legislation.

The amended rules were published in Cyprus’s Official Gazette on August 18, 2020, upon approval by both the Council of Ministers and House of Representatives.

Exclusion of High-Risk Individuals

To strengthen the control over the granting of Cypriot citizenship, applicants who fall into one or more of several high-risk categories will no longer be eligible to take part in the CIP. The high-risk categories are listed in the new provisions.

Two-Stage Screening Process

In addition to tightening the eligibility requirements, the amended CIP rules introduce a new, stricter applicant vetting procedure. From now on, candidates will go through screening twice. First, when making the application and then a second time prior to its approval.

Revocation of Citizenship

The new rules allow Cyprus to revoke a successful applicant’s citizenship if they no longer meet the requirements of the CIP. For the purposes of clarity and to eliminate any doubts and loopholes in the law, the provisions expressly list the grounds for revocation. The new regime empowers the Government to carry out ongoing reevaluation of candidates even after they obtain citizenship to ensure the integrity of its CIP scheme.

Mandatory Donation

The financial eligibility criteria remain the same. The only change has to do with the mandatory donation that candidates have to make upon approval of their application. From now on, the minimum donation amount increases from €150,000 to €200,000. The aim is to further boost the CIP’s social responsibility.

Special Natural­ization Control Unit

The Government has also set up a new Special Natural­ization Control Unit that will be responsible for screening CIP applications. In addition, the Unit will carry out ongoing monitoring to ensure that successful candidates continue to meet the eligibility criteria and all other requirements after being granted citizenship.

In addition to tightening the candidate screening process, the introduction of the Special Natural­ization Control Unit should expedite the application process. The goal is to eliminate the application backlog and ensure that all future applications are handled within the legally mandated deadline of six months.

Honorary Naturaliza­tion

The amended rules also introduce for the first time a new category of naturalization. The so-called Honorary Naturalization will be granted to foreign nationals with exceptional contributions to Cyprus for reasons of public interest. Honorary Naturalizations will be granted upon the recommendation of religious bodies, public organizations, or government bodies.

Supervision of Registered Service Providers

Furthermore, the new provisions now require stricter and continuous supervision of registered Service Providers, as per the CIP Code of Conduct. Only registered Service Providers will be allowed to provide services under the CIP. What’s more, they will have to adhere to a set of strict guiding principles; the failure to do so will result in sanctions for non-compliance.  

Source of Funding

A further amendment requires that all funds used by candidates for the purposes of their CIP application must come from either their personal bank account or from that of their company.

Parents-In-Law

Another change in the CIP rules that is likely to be popular with prospective candidates is that the parents-in-law of the main applicant can now also apply for Cypriot citizenship. To become eligible, the parents-in-law must own a permanent private residence in the country that is worth €500,000 (+VAT) or more.

Parents-in-law may submit their applications either at the same time as the main applicant or at a later date. This rule is in line with the Government’s attempt to reduce the backlog and processing time required to naturalize a whole family. As a result, it is now possible for all members to move to Cyprus together.

Development Companies

Under the new provisions, candidates will no longer be able to register Development Companies to channel their investments. In addition, if an applicant wishes to participate in a company formed and operating in Cyprus, they must now prove that this entity:

  • Has a physical presence in the country
  • Carries out substantial activity
  • Has a significant turnover
  • Employs a minimum of nine Cypriot or EU nationals

The Future of the Citizenship by Investment Programme

The latest amendments should increase the transparency and accountability of the CIP before, during, and after the submission of applications. The new safeguards address the EU’s criticisms and minimize the risk of money laundering. What's more, they also render the CIP more efficient and effective for prospective candidates and their families.

Foreign investors who choose to participate in the programme will benefit from faster turnaround times, clearer rules, and a higher level of service from their registered Service Providers. That protects the interests of applicants and their family members and should make the CIP even more attractive.

The inclusion of the parents-in­-law and the possibility for simultaneous fill­ing will certainly prove to be a selling point. However, the increased mandatory donation is likely to deter some potential candidates. It could also make the CIP less attractive than similar Programs in other member states. Time will show how this change will be received.

Finally, we have the exclusion of high-risk individuals from the Programme and the possibility for revocation of citizenship. These should both strengthen the international credibility of the CIP and safeguard Cyprus’s economy and national security.

It remains to be seen how international investors and Cyprus’s European partners will react to the new rules. However, we should take the initial reactions with a grain of salt given the impact of COVID-19 on cross-border travel.

Need Help with Your CIP Application?

Do you want to learn more about the CIP scheme? Are you not sure whether you and your family are eligible under the new rules? To find out, contact us today for an expert consultation.

Our team has a successful track record of helping clients from all over the world obtain Cypriot citizenship. You could be one of them.

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