DDP THE PRINCESS OF MEDITERRANEAN LTD Cyprus a strategic location between Europe, Middle East, Africa and Asia PRESENTATION OF CYPRUS AND WHAT DDP THE PRINCESS OF MEDITERRANEAN LTD CAN OFFER TO INVESTORS It is greatly believed that the real estate market will follow track on projected economic growth starting in 2015. This will be further enhanced by the availability of financing from local banks following a completion of their current restructuring and recapitalization efforts. The great natural environment of beaches and mountains, the highly developed infrastructure, then growing tourism market, the weather, and the low property tax, make Cyprus ideal for property investment. Added to this, is the benefit of obtaining the Cypriot Citizenship as a result of such or similar investment. Cyprus is not only an attractive place to do business, but also a unique place to reside. Real Estate has been one of the key growth sectors for decades, representing a significant portion of the country’s GDP. Cyprus continues to offer a unique attractiveness for holiday homes. In addition, with 326 days of sunshine and its enviable lifestyle, the island is a popular destination for permanent residency. At the same time, a number of large-scale development projects, ranging from residential to commercial projects including marinas, golf courses and theme parks, Hotels, are being developed. These projects offer attractive options for investment in the land development industry. Property Incentives – Residency, Citizenship, Freehold The Council of Ministers of the Cyprus Government has introduced attractive schemes to encourage property investments in Cyprus for non-EU citizens. • Non-EU residents have the opportunity to acquire a permanent residency permit with the purchase of a private home of at least €300,000 and deposits of minimum €30,000 in a local bank for three years. The attractiveness of the scheme, however, goes further and offers two or three permanent residency permits for one family, with the purchase of a house at the corresponding price. • Non-EU residents can acquire Cypriot nationality with: investment of a minimum €2 million through the purchase of shares and/or bonds of the National Investment Company and €500,000 investment in the Research and Technology Fund; or through direct investments of €5 million; or through bank deposits of €5 million in a local bank for a period of 3 years; or through payments of corporate tax or VAT of at least €500,000 annually during the last 3 years (before the application has been made). The World Bank has ranked Cyprus 39th out of 189 economies in its Doing Business report for “Ease of Doing Business”, Forbes has placed Cyprus 27th out of 145 on its Best Country for Business list and that the country came 21st out of 140 countries in the Travel & Tourism Competitiveness Report for its Business Environment & Infrastructure. • Tax incentives including a 100% tax deduction until 2016 on expenditures for acquisition of fixed assets related to innovation, research, development, Information Technology as well as renewable energy sources. • Reducing timelines for issuing building permits within a maximum of one month for small projects and 3 months for large scale developments. • Commercial buildings are now eligible to receive an additional 25-30% building coefficient, while other large scale developments in certain tourist zones are due to receive an additional 20%. Cyprus maintains a strong position as an attractive investment destination, offering many advantages, including the fact that it is an EU Member State in a strategic location that not only connects three continents but also allows direct access to a market of 500 million EU citizens. Cyprus has a robust legal and regulatory framework, as well as one of the most attractive tax systems within the EU. Cyprus tax resident companies benefit from an extensive double taxation treaty network which has 48 agreements in place. Cyprus is a truly cosmopolitan place to live, one in which the percentage of foreign residents has reached 22% of the country’s total population. It comes as no surprise that Knight Frank Global Lifestyle Review recently ranked Cyprus as the 5th best country in the world to relocate to. Among existing foreign Investors in Cyprus which revealed that 40.6% of those surveyed indicated that they plan to expand their businesses over the next 3-5 years. We presented some key sectors of the economy, focusing on potential investment opportunities in Banking & Financial Services, Shipping, Tourism, Professional Services, Large Scale Development Projects, Research & Development and Renewable Energy. Investment incentives A number of new measures have been put into place designed to reboot the economy in the wake of the massive restructuring of the country’s banking sector. The measures, among other things, aim at helping stimulate economic growth. The new measures include the following: The amount of time required to issue planning permission has been reduced to a maximum of one month for small projects and three months for large projects. Building coefficients have been increased by 30% in residential areas for large commercial developments. The coefficient will be increased by 25%t on the outskirts of residential areas for large commercial or office developments. It will increase by 20% in certain tourist zones for large-scale property and from 10% to 15% for areas available for golf courses. The green light has been given for casinos. Permits for joint tourist developments such as condo hotels will now be given. Foreign nationals are encouraged to invest in Cyprus by being given permanent residency status. According to the President of the Republic, foreign investors who held deposits prior to 15 March, and who lost at least €3m as a result of the resolution of Laiki Bank and the restructuring of Bank of Cyprus, are eligible to apply for Cypriot citizenship. The Cyprus real estate market has historically been divided into (i) the major urban centres of Nicosia, Limassol and Larnaca primarily driven by local demand and (ii) the seaside resort areas of Paphos and Famagusta mostly driven by foreign demand. PAPHOS LIMASSOL FAMAGUSTA The Real Estate Sector 4 Steps of a Successful investment 1. ECOMOMY AND BANKS The economic situation in Cyprus at the moment is considered severe and therefore is also the reason that we have some very excellent opportunities to offer in the real estate market. We have agreements in place between banks and distressed property owners that require urgent sale assistance. As an example, if an owner that has financial difficulties possesses two or three properties on loan at the bank, he may agree to “lose” one property in order to reduce the bank finance balance so that the company may continue its operations. Consequently, in light of the economic slowdown both overseas and locally, the Cyprus property market has undergone a significant correction during 2012 and 2013. The Cyprus economy is slowly in the process of recovery, with the recession being contained at lower levels than originally projected. However, unemployment rates still remain high while the government is diligently working at identifying means for job creation. Concurrently, both prices and rental rates for all property types have experienced declines, most evident in the markets of Nicosia and Limassol. This decline is largely driven by two factors: (i) The economic slowdown which has affected local consumer demand and (ii) The tightening of lending criteria which has resulted in a significant liquidity crunch. Furthermore, a significant reduction in the number of building permits issued suggests that construction activity will remain in a declining trend in the short-term. The seaside market of Paphos has arguably been the least affected, primarily due to an increase in recent demand from Chinese investors. It is important to state that the current situation in the Cyprus banking sector together with the capital controls adversely affect the ability to finance the real economy and potential real estate projects. A recent slowdown in the rate of decline in property prices in most of the markets and property types is a strong indicator that the market is starting to stabilise. Further evidencing that confidence still remains in the sector is the fact that new projects have been either announced or completed in recent months. The government has taken significant steps in stimulating the industry, such as the announcement of a new urban planning policy and the promotion of large-scale developments (e.g. marinas, casinos, condo hotels, etc). Recently, it was discovered that Cyprus has significant natural gas reserves within its Exclusive Economic Zone. The first exploration license was granted to Noble Energy International Limited whose initial drilling results indicated an estimated gross resource range of 5 to 8 trillion cubic feet. As part of the second round of licensing, the Cyprus government signed agreements with the Italian- Korean ENI/KOGAS consortium for hydrocarbon explorations in three blocks and with French TOTAL for another two blocks. It is anticipated that new drillings will commence by the end of 2014. It is greatly believed that the real estate market will follow track on projected economic growth starting in 2015. This will be further enhanced by the availability of financing from local banks following a completion of their current restructuring and recapitalization efforts. The great natural environment of beaches and mountains, the highly developed infrastructure, then growing tourism market, the weather, and the low property tax, make Cyprus ideal for property investment. Added to this, is the benefit of obtaining the Cypriot Citizenship as a result of such or similar investment. 2. HOTELS FOR SALE Tourism In 2013, 2.405.387 tourists visited Cyprus, a number which is slightly lower (-2, 4%) compared to 2012, providing considerable support to the economy. The tourism sector has nevertheless experienced substantial growth over the last five years, averaging around 2.315.000 tourists per year. What’s more, tourist revenue has increased steadily year-on-year as exhibited on Graph 5. Graph 5 Source: CySTAT The increase in tourist revenue may be attributable to the rise of tourists from Russia who opt for the all-inclusive packages, resulting in higher hotel revenues. Russia has become the second largest tourist market for Cyprus, following the UK In 2013, tourist arrivals from the UK accounted for 37% of the total. There has been a significant drop in arrivals from the UK in the last two years and this may be due to the Sterling – Euro exchange rates as well as due to the promotion of other attractive and cheaper tourist destinations. Meanwhile, the number of tourists from Russia has almost doubled in the last three years. There are various challenges faced by the tourism sector in Cyprus which hinder faster growth. The government aims to assist this through a number of measures, including the extension of the tourist season to cover the months of December to March inclusive. This is meant to tackle seasonality, which currently results in most of the tourist seaside hotels to close during the winter. In addition, the real estate component of the tourist industry needs further improvement in order to enhance the valuefor- money proposition for tourists. This means both the upgrading and upscaling of hotels and existing infrastructure (including archaeological and other cultural sites), as well as the addition of new, varied projects such as casinos, marinas, golf courses, theme parks and other facilities. We have a good case of buying hotels, commercial buildings etc in Cyprus at the moment. 3. Construction Defining your requirements Budget Finding the right plot Location Surveying the land Planning Permission Dealing with planning Officials The legal process THE INVESTOR CAN BUY ALL THE MATERIALS OF THE CONSTRUCTION of the building we have the license of building from a house to a hotel. According to the ‘Indicators of confidence and economic sentiment’ published by the European Commission, the construction confidence indicator in Cyprus exhibited an improvement from -62,2 in January 2013 to -54,5 by year-end. Nevertheless, the construction sector continued to show a steady decline during the first ten months of 2013. The Construction Production Index indicates a 22,4 point fall in construction activity from Q3 2012 to the same quarter in 2013 . More specifically, there has been a decline of 20,5 points in the construction of buildings (from Q3 2012 to Q3 2013) and a decline of 27,0 points in the construction of civil engineering or infrastructure projects. The decline in the construction activity is fuelled by the lack of liquidity and capital restrictions, the strict lending criteria as well as the high unemployment which lead to low consumer confidence. The costs of construction materials increased from 2006 onwards. This is depicted in the Construction Materials Price Index with an increase from 117 to 126 from 2009 to 2012, as shown in Graph 6. From 2011 to 2012 the price index remained largely unchanged, a trend which is expected to also be evident through 2013. Graph 6 Source: CySTAT Comparing material average prices for 2012 to eleven month average prices for 2013, there is a slight increase in minerals and mineral products, whilst other types of basic construction materials exhibit either a small decrease or remain at the same levels. The relatively stable material prices indicate stable demand and might be considered as a forward indicator of a decline in demand driving material prices downwards in the future. The lower demand is evident in the 32,1% fall in the sales of cement (within the ‘Minerals’ category) compared to 2012. Significant developments In order to facilitate economic recovery and encourage investment, the government of Cyprus is currently promoting more real estate development projects on the island. Over the last few years there have been significant developments towards the creation of marinas in Larnaca, Ayia Napa and Paphos. In addition, some of the most recent developments include the following: - The government has decided to grant one license for a large integrated casino resort in Cyprus and is currently looking for investors internationally; and - The Cyprus Tourism Organisation (‘CTO’) has defined the framework of the statute regarding the introduction and implementation of Condo Hotels in Cyprus, It is expected that both the above initiatives will increase tourism and related investment into the Cyprus property market. 4. Cypriot citizenship Your Passport to EU and Middle East In an effort to restart the economy and promote foreign investment in Cyprus, the Cyprus government recently announced further relaxations to the set of criteria for granting the Cypriot citizenship by exception to foreign investors. Criteria for granting the Cypriot citizenship by exception include the following: (a) The applicant should make the following investments and donations to governmental funds: (i) An amount of at least €2 million to be invested in shares and/or bonds of the Cyprus Investment Company that will be formed; (ii) At least €500.000 shall be donated to the Research and Technology Fund. OR (b) The applicant should have direct investments in Cyprus of at least €5 million, for a period of at least three years. Examples of direct investment include purchase of real estate, acquisition of companies based and having activites in Cyprus, purchase of shares of companies registered in Cyprus and so on. OR (c) The applicant should have deposits in Cyprus banks amounting to €5 million, for a period of three years. OR (d) The applicant may choose to have a combination of any of the above criteria ((a), (b) and (c)), amounting to €5 million. OR (e)The applicant should be a shareholder or the ultimate beneficiary of a Cyprus company that has its head office and business operations in Cyprus. In addition, the Cyprus Company should have paid in the Republic of Cyprus at least €500.000 per year during the three years preceding the filing date of the application. In case the Cyprus Company employs at least five Cypriot citizens, the minimum amount paid is reduced to €350.000 per year (as described above); if it employs at least ten Cypriot citizens, it is reduced to €200.000 per year. This amount can include payments made to public Cyprus funds such as Corporation tax and VAT as well as fees for professional services obtained in Cyprus (legal, accounting, audit). OR (f) If the applicant was a holder of deposits in the Bank of Cyprus and / or Laiki Bank and suffered an impairment in value of his / her deposits of at least €3 million as at 15 March 2013, as a result of the measures imposed on the two banks. If the impairment suffered is lower than the amount specified above, he / she may still apply for Cypriot citizenship, provided that he / she invests the remaining amount (i.e. sum of €3 million) in mixed investments and donations to governmental funds (point a) or in direct investments (point b). An additional prerequisite is that the applicant must have a clean criminal record and own a permanent residence in Cyprus, the purchase price of which should be at least €500.000 (plus VAT). b. The applicant will be required to invest a reduced amount of €2.0 million in any of the above categories, on the basis that they participate in a collective investment scheme worth in excess of €12.5 million. B. Terms and conditions: It is noted that in addition to satisfying any one of the above criteria, the applicant must: a) Have a clean criminal record; and b) Own a permanent residence in Cyprus of a market value of at least €500,000 excluding VAT (This condition does not apply if the in-vestment is exclusively in real estate and land developing). Immigration permits The Ministry of the Interior released a more efficient procedure for granting an immigration permit to third country nationals that intend to take up permanent residency in Cyprus, provided that they fulfill certain criteria. The application form must be accompanied by a title deed or a contract of sale that has already been submitted to the Department of Lands and Surveys, for the acquisition of a house, apartment or any other building situated in Cyprus, of a minimum market value of €300.000 (plus VAT). Further, the applicant must submit proof of payment for at least €200.000 (plus VAT) in respect of the above mentioned property. Transfer of immovable property Fees on transfer of immovable property are imposed by the Department of Lands and Surveys in order to transfer the ownership of the property to the purchaser. The fees are payable upon transfer of ownership. The purchaser is responsible for the payment of transfer fees, except if other arrangements are made between the purchaser and the vendor. The rates used for the calculation of fees on transfer of immovable property are shown on Table 5. Table 5 Immovable Property Rates on Transfer fees Up to €85.430 3% €85.431 - €170.860 5% €170.861 and over 8% Source: Inland Revenue Department In accordance with the legislation enacted in 2011 which amends the Land Transfer Fees law, for any transfers of new properties until 31 December 2016, no property transfer fees will be imposed in the event where the real estate transferred is subject to VAT. This applies in the event of transfer of buildings, or part of them, that (i) are sold for the first time after the issue of their planning permission or building permit and (ii) the dates of both the conclusion of the sale agreement and the date deposited to the District Land Registry fall within the period that this law applies. Land transfer fees are reduced by 50% if the transaction is not subject to VAT. Property taxes Property tax is imposed on all types of property in Cyprus. The tax is estimated using the tax rates multiplied by the value of the property (based on market values as at 1 January 1980) for each proprietor. Proprietor is defined as a person who is entitled to be registered as the owner of the immovable property, whether he / she is registered or not. According to the law, immovable property includes land, buildings built on land, trees planted or grown on land, privileges, rights of use, any rights and benefits relating to land or are considered to be related to land or buildings or any type of works, wells, manholes, drill wells, etc. Immovable property tax rates The immovable property tax is imposed on an annual basis, on the value of immovable property (as at 1 January 1980) owned by each person. Table 6 Value (€) - 1980 Tax rate (%) Tax 1 - 40.000 40.001 - 120.000 120.001 – 170.000 170.001 – 300.000 300.001 – 500.000 500.001– 800.000 800.001 –3.000.000 3.000.001 and over 0, 6 0, 8 0, 9 1, 1 1, 3 1, 5 1, 7 1, 9 240- 240 640- 880 450- 1.330 1.430- 2.760 2.600 -5.360 4.500- 9.860 37.400- 47.260 Source: Inland Revenue Department Immovable property owners with total immovable property value not exceeding €12.500 (as at 1 January 1980), are exempt from immovable property tax. Immovable property owners with total immovable property value of €12.501 and over are subject to immovable property tax on the total value of their property, according to the table above. Every proprietor is required to submit to the Inland Revenue Department the tax form as well as the tax due that arises in accordance to the immovable property declared within. The immovable property tax should be paid by 30 September of that year. A discount of 10% is available if tax is paid earlier. VAT rates The standard VAT rate is 19% as of 13 January 2014. No VAT is charged on acquisition of buildings for which an application for a town planning permit was submitted prior to 1 May 2004, as well as for transfers of plots of land. A one-off VAT charge of 19% is charged on buildings for which an application for a town planning permit was submitted post 1 May 2004. No VAT will be payable for the acquisition of a property for which VAT has been previously paid. Further, no VAT is added on the sales price for the purposes of calculating the property transfer fees. The VAT rate is reduced to 5% on the purchase or construction of a residence. Land developers and interested buyers should fulfill the following conditions, collectively, in order to be eligible for the reduced VAT rate: (a) Regarding the use: The qualifying residential property is used or is intended to be used by the beneficiary for his / her main and permanent residence; (b) Regarding the process: The beneficiary must submit a declaration with the VAT authorities for certification; (c) Regarding the rightful person: An applicant is defined as a beneficiary provided that: (i) He / She is a physical person; (ii) Is 18 years old or over; and (iii) Is a citizen and permanent resident of the Republic of Cyprus or of any other Member State of the EU; (d) Regarding the property: (i) The application for the planning permission or building permit must have been submitted after 1 May 2004; (ii) The property must be intended to be used after its purchase or construction as the permanent and main place of residence; (iii) The total area of the property should not exceed 275m2; (iv) In cases of families with more than three children, the area is increased by 15m2 for every child after the third child; The 5% reduced VAT rate is applied only on the first 200m2. In addition, certain procedures should be followed by the Land Development Contractors, Building Contractors and beneficiaries. The reduced VAT rate is also applicable on purchase or construction of residential buildings for third country citizens (e.g. Russia, USA, China, etc), provided that the residential buildings will be used as their primary and permanent residence in the Republic. Stamp duty Stamp duty is a tax which is charged on certain types of instruments which deal with Cyprus situated property, irrespective of whether execuited in Cyprus or outside Cyprus. As from 1 March 2013, the stamp duty levied is 0% for amounts up to €5.000, 0,15% for amounts between €5.000 and €170.000, and 0,2% for amounts over €170.000, up to a maximum stamp duty of €20.000. Municipal tax Proprietors also incur municipal tax on immovable property (Town Rate). This is an annual tax which is levied as a result of property ownership within the limits / boundaries of each municipality at 0,15%, with certain exceptions included in the legislation Please let me know if there is any additional information we can provide.
Posted on: Fri, 21 Nov 2014 07:42:51 +0000
Trending Topics
Recently Viewed Topics
© 2015