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Investing in Cyprus - Foreign Direct Investment Policy

“In order to enhance foreign investment intensity, the FDI policy has been liberalized for both EU and non-EU nationals.”

In order to attract foreign investment and enhance economic prosperity in Cyprus, the Government has liberalized the Foreign Direct Investment (FDI) policy for both EU and non-EU nationals. Administrative procedures have been simplified and no limitations apply in most sectors of the economy, as per the minimum level of investment and the foreigners’ participation percentage. Moreover, bureaucratic intervention has been reduced, fostering investment opportunities by non-residents.

Consequently, foreign companies now have the opportunity of investing and establishing business in Cyprus on equal terms with local investors; no distinction is being made between foreign and Cypriot companies.

Direct Investment
Foreign investors have the opportunity of participating in most sectors of the economy, with equity participation of up to 100% in any Cypriot enterprise, without a minimum level of capital investment. Foreigners considering of registering companies, acquiring shares of existing companies, or setting-up business activities in Cyprus, no longer need approval from the Central Bank of Cyprus.

As from 1st October 2004, foreign investors can register a company directly with the Registrar of Companies, and obtain any license, if needed, from the appropriate authority according to the nature of investment. Investors may address to the Foreign Service Centre of the Ministry of Commerce, Industry, and Tourism for further guidance and direction.

Portfolio Investment
Trading of shares by foreigners on the Cyprus Stock Exchange (CSE) is as easy as on any modern stock market. Foreign investors are subject to the same rules and regulations of the CSE as Cypriots or other EU nationals, regarding capital distribution.

Provided that the investment is in line with the CSE’s laws and procedures, investors may acquire up to 100% of the share capital of all Cypriot companies, listed on the CSE, except companies operating in specific sectors, such as the banking sector.

As far as the banking sector is concerned, no person, either resident or non-resident, may own directly or indirectly 10% or more of a banking company’s share capital or voting stock without the Central Bank approval. Banking companies are also required to obtain the Central Bank’s approval before registering more than 50% of their share capital in the name of non-residents.

Non-residents only need to remit foreign funds either to an account in their own name or in the name of their stockbroker in Cyprus. The stockbroker is entitled to possess the necessary documentary evidence for the acquisition of shares; in case of liquidation, the stockbroker will remit the original investment, adjusted to the investment’s return.

Acquisition of Real Estate
According to the “Acquisition of Real Estate (Amendment) Law” of 2003, which is in force as from 1st of May 2004:

  • No restrictions are imposed on EU nationals and EU registered companies for the acquisition of real estate linked to primary residence and Foreign Direct Investment, or the acquisition of real estate by EU real estate agents and land developers.
  • The acquisition of residence for secondary use is prohibited without prior authorization by the Council of Ministers, for a period of five years following Cyprus’s accession to EU, to EU nationals not permanently residing in Cyprus and EU registered companies not having their registered office, central administration or principal place of business in Cyprus.
  • As regards non-EU nationals, legal entities registered in non-EU countries, and legal entities registered in Cyprus with share capital controlled by non-EU nationals, real estate may be acquired subject to the approval of the council of Ministers. In case the real estate concerned exceeds 2 donums, approval may be granted only for the purposes of primary or secondary residence not exceeding an area of 3 donums, professional or commercial premises, and industrial sectors deemed beneficial for the Cypriot economy.

Exchange Control
As of 1st of May 2004, the Exchange Control Law has been abolished; hence, residents and non-residents may hold and manage assets and liabilities in any foreign currency and in any foreign country, including freely convertible and transferable balances with bank on the island.

Other Laws and Regulations
The liberalization of the FDI policy should not be interpreted as conferring the right to the companies’ foreign shareholders, principals/directors or employees’ representatives to secure residence and/or work permits.

Furthermore, it will not prejudice the stance of other governmental departments, organizations or authorities regarding the issue of any other permits or consents which may be required under separate laws or regulations.

Examples of such regulations include:

  • Private tertiary education institutions can be founded and operated only by EU nationals.
  • Based on the registration framework of certain medical professions, only Cypriots or other EU nationals are allowed to exercise their profession in Cyprus. Such professions include but are not limited to: Dentist, Dental Technicians, Psychologists, Opticians, Chemists, Dieticians, Physiotherapists, and Psychiatrists.
  • Non-EU nationals can obtain up to 5% of the total share capital of broadcasting corporations (television & radio stations), while the total percentage of share capital owned by non-EU nationals may not exceed 25%

“Foreign companies now have the opportunity of investing and establishing business in Cyprus on equal terms with local investors”