How to Obtain Cypriot Citizenship for Investment

How to Obtain Cypriot Citizenship by Investment and Avoid a Loss-Making Deal

For decades, Cyprus has attracted foreign investors with its pristine beaches, excellent living conditions, strategic location at the crossroads of three continents, and favorable tax regime. Purchasing real estate in Cyprus has long been an ideal option for those planning to relocate, retire, acquire a second home, or for offshore companies and international corporations. Today, Cyprus’s investment program seeks to attract foreigners with enticing service packages that offer buyers a fast track to European citizenship, though these come with risks.

Investment History in Cyprus

The island first caught the attention of foreigners in the 1960s when European tourists began showing interest in purchasing real estate in the stunning coastal regions, particularly around Famagusta.

Transactions were halted during the 1974 occupation, but thanks to Cyprus's resilience and hospitality, the market rebounded swiftly. Swedish buyers were the first to explore new opportunities in the real estate market, followed by investors from Lebanon and wealthy families from Kuwait. Later, Cyprus attracted British and Russian investors. However, they mostly invested in modest homes and middle-class properties rather than making high-end investments akin to those in London, Paris, or Moscow.

After the global financial crisis, which peaked in Cyprus in 2013, public and private sector strategies for attracting foreign investment required reassessment and restructuring. Since the country’s rapid economic recovery depended on large-scale investments, Cyprus focused on the real estate market and favorable tax conditions to increase interest from wealthy investors.

To this end, the government created and actively promoted a new investment program requiring a real estate purchase of €2.5-3 million, allowing investors to acquire Cypriot and thus European citizenship.

However, the market has suffered significantly: since 2008, sales have dropped by more than 50%. Most developers were on the brink of bankruptcy. As they turned to banks for loans and real estate agencies sought quality properties to sell, it became increasingly difficult for investors to purchase high-quality, well-located properties without risking a 50% chance of seizure during or even after the transaction.

Cyprus recovered from the three-year downturn and returned to economic growth in the first quarter of 2015, continuing to exceed expectations. There was an economic boom, and the luxury real estate market began to grow exponentially. Acquiring citizenship became easy, with luxury properties being sold across the island. Thanks to the program, developers could market their properties as secure investments. To date, nearly 5,000 passports have been issued.

In February 2019, the Council of Ministers approved and announced several changes to the investment program aimed at creating a business innovation ecosystem, as well as facilitating the funding of affordable housing through a mandatory contribution to the Cyprus Land Development Corporation (KOAG). The new plans were also intended to prevent excessive real estate growth driven by foreign investments.

In essence, these changes made obtaining investment citizenship slightly more expensive and added bureaucracy. The tightening of controls and procedures and the promotion of new investment opportunities beyond real estate signaled the government’s intention to derive more benefits from the program for the country and its citizens, not just for developers.

While the new measures positively impacted the market and property prices across the island steadily rose, private developers saw the upcoming changes as an opportunity to pressure investors into buying “here and now,” using fear tactics that such an opportunity might not arise again.

These aggressive marketing tactics led to a sharp drop in investments after the official implementation of the updates in May.

An Unconventional Approach: Protecting Investments in Cypriot Citizenship through Innovative Strategies

Despite the increased interest from developers in purchasing property in luxury areas and the availability of attractive secondary market options at 2014 prices, the sudden decline in citizenship applications revealed certain risks.

The first cycle of the “Citizenship by Investment” program was favorable for investors, as they protected their investments by planning to resell properties to subsequent investors to effectively manage their capital and profit. However, this strategy fails when interest in investment citizenship declines. The high cost of the acquired luxury property significantly complicates the situation when the program no longer attracts the same number of investors.

Nevertheless, there is no reason why a savvy and sensible investor should let doubts about the program’s success, caused by unfortunate manipulative scare tactics, affect the realization of a great investment opportunity.

As with all investments, impulsive behavior and imitation are not the best tactics. In light of changes to the investment program, buying on the mass market during this second cycle is unlikely to yield a profit and may result in a loss.

However, for strategically minded investors, real estate investments in Cyprus can still be a safe and effective option. All that is required is to avoid hasty decisions and overly promising offers, and to turn to logical and proven ways of maximizing potential profits.

Two examples of reliable investment return strategies:

#1: Avoid investing in residential real estate currently saturating the market, and use investments for unique and unconventional opportunities. This means purchasing or developing projects that are of interest not only to wealthy golden visa buyers but also to international and local investors.

These projects should capitalize on Cyprus's tourism sector, which will always play a dominant role in the island’s economy.

Moreover, they should offer flexible and sustainable application options that help investors plan successful resale and exit strategies in line with future market changes.

Such projects could include hotels, office spaces, hostels, housing for staff at new hotels opening in Cyprus, and other similar developments.

#2: Transition from buyer to developer. This allows investors to choose their plots of land and control all stages of construction, adapting the project to their needs. At the same time, it’s important to consider the needs of the local market to ensure a quick and profitable resale if necessary.

Investors following this path own the entire process and can manually select a team to create plans, obtain licenses, and hire contractors and builders to ensure a high-quality result without hidden costs. This scenario allows investors to save money that would otherwise be paid to the developer, while also overseeing the process, management, and promotion when renting or selling the property.

Consulting Local Experts

Since the above exciting scenarios for investors seeking potential returns require specific skills, local representation will help optimize all processes and ensure a smooth completion of all stages. A local partner who knows the Cypriot market and can provide advice on developing a fruitful exit strategy after a five-year ownership period or maximizing profits in both the short and long term is essential.

Pandomus Group can help you determine your real estate investment strategy through innovative projects like those mentioned above. It’s a reliable way to ensure profitability and take advantage of investment citizenship benefits, regardless of the future of the program.

With deep knowledge in this area and a rich history of working with investments since 2003, we have earned an impeccable reputation, consistently identifying new risk-free opportunities that perfectly suit the current and future needs of our clients.

Pandomus Group operates as a multi-family real estate agency and aims to assist in developing, planning, navigating, and executing your carefully considered investments in Cyprus, with guaranteed prosperity for your chosen asset.

We are known for our reliable, practical planning approach and fact-based investment forecasts. Additionally, we work with a vast network of experts who share our common goal of making your investments profitable as quickly as possible. Our experience is surpassed only by our flexibility, and we handle projects of any scale: building new properties, facilitating the transition from investor to developer, and ensuring resale opportunities, all in your best interest.

What our services include:

• Market research
• Land acquisition
• Business plan and feasibility study
• Legal expertise
• Negotiations
• Architecture and design
• Licensing
• Accurate cost estimation
• Construction supervision
• Quality control
• Asset management
• Project promotion

Investment citizenship is a valuable tool, but it’s equally important to find the right partner. With the right strategies, the risks of the investment process can be significantly minimized. With Pandomus by your side at every step of the way, you’ll have everything you need to ensure a high return on investment and enjoy all the advantages of investing in a European state without unnecessary hassle.

Get ready to think creatively and go beyond the ordinary, while we ensure thorough planning and meticulous management from start to finish. We will tailor a partnership package for you, including only the services that suit your goals and needs.

Cyprus Investment Citizenship on Hold!

The news of changes to the rules for obtaining Cypriot citizenship was one of the most discussed topics in the citizenship by investment market this summer. However, a recent statement by the Republic’s government came as a real shock – as of November 1, 2020, the country’s “Citizenship by Investment” program is being discontinued.

The reason for this is the increased cases of fraud, which have been investigated by international organizations and brought to light. The "last straw" was the exposure of the misuse of authority by the President of the Cypriot Parliament, Demetris Syllouris, and Member of Parliament Christakis Giovanis. However, even before this incident, Cyprus's passport program had been criticized by official Brussels for its lenient approach to applicants and issues with its legality, allowing questionable individuals access to the European Union.

Important! The Cypriot government emphasizes in its statement that it has no intention of completely abandoning the practice of investment citizenship but is merely suspending the program in its current form.

Investigations into “golden passports” at the European Union level have led to a national review. The government has initiated the creation of special commissions staffed with professional lawyers.

Issues with the legality of the program in this country have been known for some time. Attempts to rectify the situation by tightening requirements for investors did not yield the expected results. Therefore, the decision to suspend the issuance of economic citizenship in Cyprus was a necessary step.

But there is good news! Foreigners who managed to apply for the program can still expect to receive citizenship under the previous conditions.

The high demand for a Cypriot passport is understandable. Cyprus’s investment program stands out among those offered by other European countries.

Loyalty — The Key Secret Behind the Popularity of Cyprus's Program

For several years, both Cyprus and Malta remained leaders in the European Union for directly selling their passports to third-country nationals. Over the course of six years, around three thousand foreigners, including many Russians and Ukrainians, became "new Cypriots" through the program. Wealthy applicants lined up for a Cyprus passport, and immigration officials struggled to keep up with processing the applications.

What explained the program’s success? It turned out that, in large part, it was due to the authorities' lenient approach to vetting new investors. Market analysts noted that Cyprus, in its pursuit of investors’ money, often made careless decisions when granting passports. The country saw an influx of wealthy foreigners whose fortunes had questionable origins. Many were outright fraudsters, such as Malaysian national Jho Low, whose story gained widespread attention. He obtained a Cyprus passport and thus became a citizen of the European Union, even though he is pursued in his home country as a financial speculator.

Cyprus’s Mistakes: Who Will Pay for the Carelessness?

This negligence on the part of the Cypriot authorities was not only noticed by independent analysts. Since 2017, official Brussels structures responsible for investment and migration policies have begun criticizing Cyprus for its irresponsible approach to granting passports to foreigners.

The Cyprus Investment Programme was placed on a “blacklist” of unreliable programs. In international financial circles, it became widely believed that even individuals with a clear criminal past could purchase a passport from this country.

The reputation of the program was irreparably damaged, and serious investors increasingly turned to more attractive countries from a legal perspective.

Delayed Response: What Will the Tough Measures Lead To?

Naturally, this situation alarmed the Cypriots. The government urgently began searching for effective countermeasures to repair the program’s negative image. Officials implemented a series of measures, including:

• Significant changes to the program's conditions, which came into effect in 2019;
• Introducing a multi-level vetting process for applicants;
• A decision to review previously approved applications, with the possibility of revoking passports issued earlier.

The last point caused real panic among both existing and potential residents. The draconian regulatory policies scare off investors even more than the previous carelessness. Cyprus now finds itself in an unfortunate situation. The image of irresponsibility remains, but it's compounded by a reputation for excessive regulation and difficulty passing the vetting process. Cyprus is quickly losing its clients, who are looking for more suitable alternatives.

Who to Choose? New Market Leaders

But who should an investor choose if they had been counting on Cyprus’s citizenship and are now forced to abandon their plans for the reasons outlined above? There are at least several countries directly selling their passports, which can replace Cyprus. Some of them are European nations, while others are located far from Europe. The following table clearly shows the key features of programs that, in our opinion, are alternatives to Cyprus:

Important! The amounts listed are for a single applicant and do not include additional related costs.

It's impossible to give a definitive answer to this simple question, as each investor has their priorities. For example, Vanuatu and Dominica are certainly cheaper. However, these micro-states are far from Europe (Vanuatu is in the Pacific Ocean, Dominica is in the Atlantic). Their passports are highly regarded because these countries are members of the British Commonwealth.

Malta has nearly exhausted its initially set limit, and its extension remains in question. Additionally, the country subjects applicants to very thorough and detailed scrutiny, which greatly extends the waiting time.

Greece has introduced an attractive program, but it is just starting, and there have been no real residents under it yet. Furthermore, the program's launch may be delayed due to the coronavirus pandemic.

Montenegro’s program is also very new. In February 2020, it was reported that the first investor, an Egyptian citizen, received his second passport after fulfilling all the conditions. The entire application process took him about 9 months. It’s important to note that Montenegro, unlike Malta and Greece, is not part of the EU but plans to join in 2025.

Citizenship via Residency Status

So far, we’ve only discussed countries that sell their passports directly.

It’s worth remembering that some countries have investment programs that allow for the purchase of so-called Golden Visas, granting residency status. Sometimes these visas can later open a path to citizenship for residents.

The problem is that, as a rule, one must live in a residency status for a long time to achieve this.

However, there are pleasant exceptions that can be considered as alternatives to Cyprus’s program. Among EU countries, these include Spain and Portugal. The minimum investment level in these countries is €500k (in Portugal, there's even an option for €350k). Moreover, these investments are refundable, and one can even return them with a profit.

Of course, a significant disadvantage is that citizenship is not granted immediately; one must first live with a residency status. In Portugal, this period is 6 years, while in Spain, it is 10. However, in many key aspects, the rights and privileges of a Golden Visa holder are not much different from those of a “full-fledged” citizen.

Conclusion

Thus, having lost Cyprus, the citizenship market now offers clients new, attractive, and, in their ways, convenient alternatives. As we have seen, these programs are often much cheaper, and their client vetting procedures are easier and more accessible.

Additionally, the analysis of events demonstrates to other countries participating in this market that excessive regulation, just like over-leniency, hurts the fate of investment programs.