‘Golden’ passport scheme tightened after EU report
Cyprus has made changes to its lucrative citizenship for investment scheme to make it more “trustworthy” after the European Commission said it could help organised crime gangs infiltrate the bloc.
Finance Minister Harris Georgiades said Cyprus’ cabinet approved a series of tighter checks to its much- criticised passport for Investment scheme, so it becomes “more targeted and trustworthy”.
The Cabinet approved new criteria which will see a Cyprus passport being granted in exchange for an investment of EUR 2.5 mln, raising it from EUR 2 mln, including the purchase of a residency.
Provisions were also made for a mandatory donation of EUR 75,000 to the Research and Innovation Foundation and a second EUR 75,000 contribution to the Cyprus Land Development Corporation to be used for affordable housing.
Georgiades said the results of an economic impact study of the scheme was presented before the Cabinet.
“But what emerges from the study, is that trade and investment with a positive contribution to the growth rate of an economy are two different things,” Georgiades said.
“The scheme is quite important for the real estate and construction sector, but with little overall impact on the economy,” he added. The Minister argued that despite 24% of transactions in the real estate sector were made in the scheme’s framework and the sector has recovered partly because of the scheme, however, the economy and its growth rate are not dependent on the specific sector.
Georgiades said stricter criteria will ensure due diligence procedures are more stringent and effective, such as the scrutiny of each applicant conducted by an international agency, would be investors must obtain a Schengen visa and applicants will be excluded if rejected by other Member States with similar schemes.
He said the scheme, launched in the aftermath of 2013 bailout crisis, has granted 1,864 citizenships bringing in EUR 6.6 bln.
For the period 2016-2019, the total contribution of the programme to growth is 1.2% GDP out of a total of 13 percentage points, which is the growth rate over the last three years, said Georgiades.
The Cabinet decided to alter the scheme’s criteria in order to protect the financial benefits making it more reliable at the same time, said Georgiades.
“I believe that the mandatory contribution to the Foundation for Research and Innovation will further encourage the creation of an eco-system of business innovation, while the mandatory contribution to the Cyprus Land Development Corporation is to go to financing housing programs mainly for affordable housing.”
The changes come after an EU report last month suggested Cyprus was not doing enough to ensure transparency to combat illicit and criminal activity.
Cyprus, Malta and Bulgaria are the only members of the 28-member bloc which run schemes selling citizenship, while 20 countries, including those three, sell residence permits.
“Investor citizenship and residence schemes pose risks for the Member States and the Union as a whole, including in terms of security, money laundering, corruption, circumvention of EU rules and tax evasion,” said the report.
Although individuals who purchase citizenship and residence in EU states can do it for legitimate reasons, the commission said the risks are further compounded by shortcomings in the transparency and governance of such schemes.
The report highlights shortfalls among all three in checking the origins of wealth of individuals who purchased their citizenship. It said these countries also did not allow easy identification of those who bought their passports.
Last month, Cypriot President Nicos Anastasiades told reporters that Cyprus was being unfairly singled out by its critics.
He said Cyprus had only granted 0.3% of all citizenships granted across the EU.
The study commissioned by Brussels said that the information available on both investor citizenship and residence schemes operated by Member States is “incomplete”.
Additional provisions
Added to the scheme is the inclusion of investments in the shipping sector as eligible investments based on specific measurable criteria.
Registered Alternative Investment Funds have also been included, as well as the possibility for these Organizations to invest up to EUR 200,000 in the Cyprus Stock Exchange’s secondary market.
There is an obligation to maintain the required investments for a period of at least five years from the date of naturalization, instead of three.
Investment in government bonds as an acceptable investment within the scheme has been scrapped.
Where the investment relates to the purchase of real estate or property as well as in the case of a permanent homeowner, planning permission, a completion certificate and a bank waiver will be required.
The applicant should be in possession of a residence permit in the Republic of Cyprus for at least six (6) months prior to naturalization as a Cypriot citizen.
An Annual Implementation Report that includes the number of naturalizations, nationality of the applicants and the sector in which the investments were made will be prepared for the sake of transparency and correct information.
Reaffirmation of the ban on the advertising of the Investment Programmes in public places and on the Internet, with particular emphasis on the visibility of the Cypriot passport and the symbols of the Republic and the EU.