Investing for Residency and Citizenship in Cyprus

March 30th, 2016   •   Cyprus, Property, Real Estate   •   Comments Off on Investing for Residency and Citizenship in Cyprus   

Investors who invest in Cyprus real estate can gain residency or citizenship depending on the level of investment:

  1. Residency : €300,000
  2. Citizenship €2.5 million (via our collective programme, else €5.0 million)

A key factor for many investors in addition to the residency visa and passport is the return on investment (ROI).
There are two factors affecting a property’s ROI and its profitability:
• Rental income
• Capital appreciation

Rental Income

They are two types of rental.
Long term rental – is for a period of one year and more. This rental is used by Cypriots and foreigners permanently working in Cyprus. Proximity to the sea for this type of lease – is not necessary. There are disadvantages of such proximity – high humidity, the tourist noise.
Short-term rental – is for the period from several days to several weeks. It is for holidaymakers and an alternative to accommodation in hotels. Property for such rental should be located close to the sea and have swimming pool.

Yields on long-term leases are around 4% per annum. Short-term rental yields are slightly more – about 5.0%-5.5%. However, in case of short-term lease some renovation should be made from time to time.

Capital Appreciation

Capital appreciation on real estate is a factor that ultimately provides investors with greater profitability potential.
The prices in the Cyprus real estate market will grow in the medium and long-term perspective. Our optimism has solid foundation based on key economic factors. Briefly the drivers of market growth are:

1. The growth of the whole Cyprus economy. According to IMF forecasts, the Cyprus economy will grow in 2016 by 1.4%. The European Commission estimates the Cyprus GDP growth rate – 1.5% in this year and 2% in 2017.

2. Start of industrial extraction of natural gas in 2019. Large offshore gas deposits have recently been discovered in the Exclusive Economic Zone of Cyprus. The value amounts to 300%-3000% of GDP. Naturally, the gas production will boost the island’s economy. In addition, new industry will require relocating to Cyprus many foreign workers and that will push up property prices.

3. Construction of the first casino resort is set to increase the number of rich tourists up to 1.0 million a year. This will add to 2.6 million tourists currently visiting the island every year. The casino resort is planned to be the largest in Europe. The growth of tourism will increase demand for rental property and hence the price of that real estate.

4. Reduction of property taxes:
• Capital Gains Tax. Capital Gains Tax on property purchased during the period between July 16, 2015 and December 31, 2016 and sold anytime in future for a bigger price, will not be charged
• Transfer Fee. Transfer Fee for property subject to VAT payment is not charged. For a property that is VAT exempt and is purchased before 31 December 2016 Transfer Fee rate is reduced by 50%.
• VAT. When property is purchased, a reduced VAT rate amounting to 5% (subject to a number of simple conditions) will be charged instead of the current rate of 19%.

5. Non-domicile tax residents of Cyprus are exempt from paying taxes on dividends and interest on deposits, earned in Cyprus and around the world. This means that foreigners who have moved to Cyprus, do not pay taxes on the dividends earned somewhere else (the rule is valid for 17 years after the move). It is expected that many wealthy foreigners will take advantage of this opportunity. They will need premium class properties for living, rising demand and prices in this real estate segment.

Selecting Real Estate

The following are our recommendations and approach for finding properties for our clients with the greatest growth potential.
1. Property must be new, not resale. Real estate, which was built in Cyprus in large quantities, say, 10 years ago, was designed for the British – then the main buyers of Cyprus property. Unfortunately, their low requirements thoroughly spoiled that property. For a number of reasons (for example, due to the fact that houses/apartments were considered only as holidays homes), the British did not mind that properties had no heating systems and proper insulation, and the internal and external design was primitive. Currently, such Real estate is obsolete and is not in demand, despite of falling prices.

2. Property must have high specifications of construction and finishing. There must be high ceilings, efficient heating systems, expensive flooring, tiles, sanitary and kitchen ware. Real estate should look stylish and modern. Such property can be sold in future with good profit.

3. We recommend to buy in the premium segment of the market. Generally, the Cyprus property market is shifting towards more expensive housing. This is evidenced by the dynamics of sales. In recent years, sales of expensive property have been increased, while economy class property stagnates.

4. If an investor buys a property at the initial stage of construction, he/she can expect a good discount to the price. This provides a good capital appreciation.

5. Real estate on the first line to the beach in Limassol and other cities is characterized by permanently good demand. The demand is high while the supply is limited (only few plots of land on the first line in the cities are available). This pushes the prices on sea front properties up.

6. Properties in the tourist area of Limassol, located in walking distance to the sea, are very popular among foreign buyers. Their prices steadily grow. First of all, this applies to large 3 and 4 bedroom apartments.

7. There are several prestigious hills in the nearest suburbs of Limassol. Buying a luxury villa on one of these hills – is a good investment for an applicant for passport.

8. Properties on golf resorts have good prospects. Not any golf property, but having certain specific characteristics. For example, the panoramic unobstructed sea views. Such properties are often sold before their construction is even started.

9. The growth of the culture of the Cyprus construction industry, combined with the increased requirements of buyers have led to the emergence of properties with unique (for Cyprus) and advanced (for the world) architectural solutions. These properties will give a high profitability due to its fashionable image. And also due to the fact that the time of design, obtaining of all necessary permissions and construction of such properties is so long, that they will never be in excess.

Estimations of ROI (Return on Property Investment)

Let’s now estimate the possible figures of ROI, which can be received from the Cyprus property recommended above. The total profitability is a sum of Rental income and Capital appreciation.

• The average annual rate of long-term rent in Cyprus is 4%.
• Property market value will grow (according to conservative estimates) by 30% over the next 5 years, an average of 6% pa.

Together combined this gives an average return of 10% per annum.

Next Steps

Our assessment of the Cypriot property market is very positive over the coming years. However investors should be aware that in any market, property prices can vary, they can fall and they may not achieve the predicted forecasts.

Please contact us on 0044 207 060 1475 for a personal assessment with one of our Cyprus real estate consultants.

Cyprus Citizenship Program “Simple and Fast”

November 6th, 2015   •   Citizenship, Cyprus, Investor Visa   •   Comments Off on Cyprus Citizenship Program “Simple and Fast”   

The investment immigration program in Cyprus has proven to be the most popular route for High Net Worth investors seeking a second passport in Europe. Since inception the investment programme has boosted the
economy by over €2 billion, according to Minister of Interior, Socrates Hasikos.

The Cyprus program offers full EU citizenship and a second passport to an investor and his or her family (including dependents up to age 28) within just 90 days and with no residency requirement currently. Although pressure from the EU may change this in the coming year. The scheme has a very high approval rate and the process and requirements are very straightforward. Unlike certain other programs in Europe such as Malta, the funds are invested, not donated, and Cyprus offers an exit strategy after just 3 years.

Cyprus Commerce Minister, Giorgos Lakkotrypis recently commented on the efficiency of the Cyprus citizenship program. “The process” he says. “Very simple.” Applicants fill out a three page form, invest €2.5 million in a villa, and pay €7,000 in fees. Then, as long as they’re able to produce a Certificate of Clean Criminal Record, “within 90 days, they can get their European passport.” “Within 90 days,” he repeats. “Lately, we even achieve 70 days. It’s a very fast and easy process and has very high approval rate.”

Rumours of changes to the program have circulated in recent months and change is expected in 2016 under pressure from the European Union for Cyprus to ensure applicants have greater ties with the island and potential residency requirements prior to approval of a passport. Such changes would not apply in retrospect to those investors who had already gained their passports.

Clarification on Portugal Golden Visa Limit

October 30th, 2015   •   Investment, Investor Visa, Portugal, Portugal Golden Visa, Real Estate   •   Comments Off on Clarification on Portugal Golden Visa Limit   

A revision of rules for the golden visa in Portugal has left many potential applicants confused as to the rules and a great deal of misleading literature posted on the web suggesting the Portuguese golden visa limit has been reduced.

The qualifying real estate investment level for the golden visa in Portugal is €500,000. Earlier this summer the Portuguese government introduced a new investment level of €350,000 for certain categories of real estate.

The law states the following: “Acquisition of immovable assets, the construction of which has been completed, at least, 30 years ago or located in an area of urban regeneration and execution of refurbishment works in the acquired immovable assets…equal to or above 350 thousand euros;”

The point here is that even though this new option applies, it only applies to property that is over 30 years old or located in an urban regeneration area. It involves the execution of refurbishment works. This is an important aspect.

To qualify for the golden visa under such an investment requires the necessary permissions for renovation work on the building. Such permissions and payments to contractors all need to be done legally and of course within the tax structure so the necessary paperwork, proofs and payments are fully in order. To undertake such a project would mean employing project managers and the necessary architects. The applicant would have to have all the licences in place prior to any application being submitted which will of course delay any application for the visa. To mitigate any risk it is vital to ensure that any such property would qualify within this category. Clients would need to ensure they build sufficient time into their schedule to take care of all these additional aspects.

Clients visiting to invest €500,000 in a location such as Lisbon can usually complete the necessary tasks within a few days, accompanied by ourselves and our lawyers in a methodical, established and time proven manner. The alternative investment of €350,000 will require far more time and hands on management. Golden Visa applicants should be wary of companies offering such management for a fee and in particular remain conscious of the scope for overpaying for assets requiring reconstruction without the necessary independent professional advice from architects and surveyors. For any international client not residing in Portugal and trying to manage from a distance it can be problematic, time consuming and expensive.

The €350,000 is reduced by a further 20% to €280,000 for renovation in low density, less developed areas of the country. This naturally does not apply to the cities or the more populated coastal regions creating issues for any future rental income potential.

Cyprus Capital Gains Tax Boost for Investors

July 10th, 2015   •   Cyprus, Investor Visa, Property, Real Estate, Taxation   •   Comments Off on Cyprus Capital Gains Tax Boost for Investors   

Applicants for the golden visa programme in Cyprus who are investing in real estate have received a boost following changes to the Capital Gains Tax law in Cyprus. Those acquiring a property in Cyprus before 31 December 2016 will avoid any capital gains tax on sale of the real estate irrespective of the date of sale of the asset.

The change is part of a package of measure introduced by the Cypriot government and enacted into law on 9 July 2015. A key change is the exemption from taxation for personal investment income for non-domiciled individuals who will no longer be subject to the Cyprus Special Defence Contribution (SDC) of 17% on dividends and 30% on interest.

Together with existing income tax exemptions this means that non-domiciled individuals will pay zero tax in Cyprus irrespective of whether the income is earned in Cyprus or abroad. The measures have been introduced to encourage high net worth investors to invest and reside in Cyprus.

Cyprus Prepares to Join Schengen

April 30th, 2015   •   Cyprus, Investor Visa, Passport, Residency, Schengen Travel   •   Comments Off on Cyprus Prepares to Join Schengen   

Clients investing €300,000 for residency in Cyprus will soon benefit from being able to travel across the Schengen zone in Europe.

Cyprus has begun preparations to join Schengen which it hopes to achieve by August 2016. Before the island becomes a full member of the visa-free area there are a number of assessments that need to be completed including air boarders, visa control, police co-operation and personal data protection.

The Schengen Agreement has led to the creation of Europe’s borderless Schengen Area. Currently, 22 of the 28 EU member states participate in the Agreement. Of the six EU members that do not form part of the Schengen Area, four – Bulgaria, Croatia, Romania and Cyprus, are legally obliged and wish to join the area, while the other two – Ireland and the United Kingdom maintain opt-outs.

In addition, all four European Free Trade Association (EFTA) member states – Iceland, Liechtenstein, Norway, and Switzerland – have also signed the Schengen Agreement, even though they are outside the EU. One of the main benefits of being part of the agreement is that people can move freely across the boarders without the need for separate visas or passport checks. In the past, tourists entering the EU would have needed a separate visa for each country they wanted to visit. It was designed to promote trade and integration between different nationalities as well as encourage tourism from emerging markets such as China and India.

Those investing €2.5 million for citizenship and an EU second passport are not affected by such changes. A Cyprus  passport allows freedom to live, work and travel throughout all countries in the EU.

Pafilia

May 18th, 2012   •   Cyprus, Portugal, Property   •   no comments   
Pafilia

These exquisite sea view apartments are ideally situated in the heart of Limassol, set on a fabulous plot within walking distance to the beautiful sandy beaches and town centre. Its contemporary architecture and luxury finishes are a unique feature and furniture packages can be included upon request.

Pine Cliffs

May 16th, 2012   •   Portugal, Property   •   no comments   
Pine Cliffs

Superb option for golden visas clients. These luxury apartments on this five star resort are fully managed and offered with a minimum 5% guaranteed rental for 5 years.