Cyprus has always been a popular holiday destination thanks to the warm, sunny Mediterranean climate all year round. The newly-amended tax law in favour of the foreign nationals is simply the cherry on the cake. Coupled with its citizenship by investment immigration scheme for non-EU nationals, Cyprus has become the perfect country for both EU and third country nationals who wish to obtain a second citizenship.
Since Cyprus is a member state to the European Union, the immigration process for European citizens is relatively straightforward. Upon arrival in the country, one is required to register with the local authorities by providing, amongst other things, evidence of sufficient recurring income and health insurance.
For non EU-nationals, the Cypriot government has introduced a citizenship by investment program which allows foreign nationals to obtain citizenship based on the following criteria:
- investment in real estate of at least EUR 2 million
- the purchase or establishment of, or participation in Cypriot businesses and companies
- investment in alternative investment funds; or
- a combination of the above.
Apart from citizenship, Cyprus also offers a residence program which enables non-EU nationals to obtain a Cypriot residence permit by purchasing new immovable property valued at EUR 300,000 (excluding VAT). In addition, the applicant must deposit a minimum capital of EUR 30,000 into a locked account at a Cyprus Bank for at least three years. The applicant is also required to show an annual income of EUR 30,000 generated from outside Cyprus.
Under the Non-Domiciled Tax Regime, various income such as capital gains, dividends and interests (realized outside of professional activities) are automatically exempt from taxation in Cyprus, even when the foreign income is remitted to Cyprus. Cyprus only applies an annual tax on Cypriot real estate at a rate between 0.6 % and 1.9%.
Nevertheless, the benefits conferred by the Cypriot tax regime is limited in time, i.e. applicable to a resident for 17 out of 20 years. A foreign national can therefore easily move to Cyprus and benefit from the tax regime for approximately 16 years. During this timeframe, he/she will not be taxed on the worldwide income in the country of origin.
Cyprus applies the European Succession Regulations, which stipulate that the court of the state where the deceased had his/her habitual residence at the time of death will be competent to rule on the succession. The applicable law determines how the estate shall be divided upon death, taking into account general rules on forced heirship etc. The Cypriot inheritance law acknowledges reserved shares for certain heirs. Nevertheless, it is possible to avoid the forced heirship rules by putting your estate in a trust. This creates the possibility to distribute your estate freely.
In addition, Cyprus does not levy tax on inheritance and gifts. As a consequence, it is possible to transfer your estate free of taxation.