Country Spotlight: CYPRUS

Country Spotlight: CYPRUS

Country Spotlight: CYPRUS

 

 

QUICK FACTS

Full name: Republic of Cyprus
Capital city: Nicosia
Population: 1,179,551 (1 January 2018)
GDP in Current Prices: USD $23.96 billion (2018)
GDP real growth: 4.0% (2018)
Area: 9,253 km²
Government: Unitary presidential constitutional republic
President: Nicos Anastasiades
President of Parliament: Demetris Syllouris
Currency: Euro (€) (EUR)
HDI: 32nd (2018) – “very high”
Ease of doing business index: 57th (2018/19)
Time Zone: GMT + 2
Dialling code: 357

 

Cyprus is an island country situated in the far eastern end of the Mediterranean Sea. Geographically, it is closer to Asia than it is to Europe, lying just 70 kilometres south of Turkey, 105 km west of Syria, 207 km northwest of Lebanon and 390 km north of Egypt. Although the Greek island of Crete lies 785 km west of Cyprus, historically and culturally Cyprus is definitely in Europe.

The island is 225 km long at its largest point and 97 km at its widest, with a coastline that measures 648 km, making it the third largest island in the Mediterranean. Its climate is subtropical and is one of the warmest countries in Europe with an average annual temperature of 24° along its coast and over 340 days of sunshine a year.

Not unsurprisingly, the island is a major tourist destination, not just for its fabulous beaches with shallow turquoise waters, but also for its many historic churches and archaeological sites dating back to the Greek and Roman empires. Cyprus has long been revered as the birthplace of the goddess Aphrodite who, in Greek mythology, was born in the sea and came to the shore 25 km east of Paphos on the coast road to Limassol.

History

Its strategic location has meant that Cyprus has seen a lot of history and been a major trade hub between Europe, northern Africa and the Middle East. The earliest known settlers date back to around 10,000 BC, with some archaeological discoveries pre-dating ancient Egyptian civilisation. One of the most important finds is that of a remarkably well-preserved Neolithic settlement dating back to 6,800 BC. Khirokitia was discovered in 1934 and, after further excavations from 1977, was designated a UNESCO World Heritage Site in 1998.

Cyprus was colonised by Mycenanan Greeks during the 2nd millennium BC and was later occupied at different times by Assyrians, Egyptians and Persians before Alexander the Great seized the island in 333 BC, after which the island became fully immersed in Greek culture and language. Cyprus became a Roman province in 58 BC and subsequently part of the Byzantine Empire after the division of the Roman Empire in AD 395 between west and east. Shortly after King Richard I of England captured the island on his way to the Third Crusade, the Kingdom of Cyprus prevailed from 1192 until 1489 when it was annexed by the Republic of Venice. However, the island endured frequent attacks from the Ottoman Empire and fell under Ottoman rule from 1570.

In July 1878, British occupation began by mutual agreement as the Ottomans sought protection from Russian aggression, whilst the British were keen to protect their vital sea route to India via the recently opened Suez Canal. Cyprus became a strategic naval outpost and to this day, Britain still has two sovereign military bases at Akrotiri and Dhekelia. The British Empire formally annexed Cyprus in November 1914 following the outbreak of World War I, and held the island as a crown colony until independence was secured on 16 August 1960 in an agreement between the UK, Greece and Turkey. Archbishop Makarios III had been elected president in December 1959 and, having accepted that full union with Greece was politically unworkable; he moved more towards non-alignment and cultivated good relations with Turkey as well as with Greece after taking office as the 1st President of Cyprus.

At the time, the population of Cyprus was 573,566 of whom 77.1% were Greeks and 18.2% were Turks. However, simmering discontent over the constitutional allocation of rights between the Greek Cypriots and Turkish Cypriots led to intercommunal attacks, threats of invasion and an attempted Greek-led military coup to oust Makarios III, prompting a full-scale Turkish invasion during July and August 1974. This led to the UN-organised partition of the island and the creation of a buffer zone, commonly referred to as the Green Line, which went through the capital city of Nicosia. Around 150,000 Greek Cypriots were expelled from the occupied northern territory and between 40,000 to 65,000 Turkish Cypriots were later displaced from the south to the north. In 1983, the Turkish part of the island – some 3,355 km² amounting to 36.25% of the total island’s area – declared its independence as the Turkish Republic of Northern Cyprus, but Turkey is the only country to recognise it. The rest of the international community regard the Turkish Army based there as an illegal occupation force.

Cyprus has been a member of the UN since 20 September 1960 and of the Commonwealth of Nations since 1961. On 1 May 2004, Cyprus joined the European Union despite unsuccessful attempts by the UN Security Council to find a peaceful resolution to the ongoing partition. Several rounds of talks were held throughout 2000-2002 ahead of an EU Summit in Copenhagen in December 2002 and in April 2003 the Turkish side unilaterally opened the border in Nicosia. However, the Annan Plan of 2004 drafted by the then UN Secretary Kofi Annan was rejected in a referendum. The net result is that the Republic of Cyprus was accepted as a full member, but the rights of membership are still suspended for Northern Cyprus.

Cyprus adopted the euro as its national currency on 1 January 2008 and is expected to be able to join the Schengen Area in the near future.

Politics

Cyprus is a unitary republic with a presidential system of government. The President of Cyprus is both head of state and head of government and he or she (although there has yet to be a female incumbent) is elected every five years during the middle of the parliamentary term. The current president Nicos Anastasiades was re-elected for a second consecutive term of office on 4 February 2018.

The House of Representatives is the parliament of the Cypriot Republic based in the capital Nicosia and was originally intended to have 50 representatives, with 35 seats (70%) allocated to the Greek Cypriot community and 15 seats to the Turkish Cypriot community. However, the Turkish Cypriots have not attended since 1964 and a decision was made in 1985 to increase the number of seats to 80, but keeping the same constitutional share so that the Greek allocation of 56 seats would be numerically sufficient to maintain the smooth running of the parliamentary committees and the legislative body. The members are elected every five years by a proportional representation system and voting is mandatory. The last election was held on 22 May 2016 and the 24 seats allocated for the Turkish Cypriots remain vacant.

Economy

Cyprus has evolved from a small exporter of agricultural products and minerals into an advanced high-income economy based on services and some light manufacturing. Despite the damage done to the island’s infrastructure and tourist industry in the aftermath of the Turkish invasion, its GDP grew steadily during the 1980s with an average annual real GDP growth of 6.1%. The 1990s saw more fluctuating swings but still maintained continuous positive growth averaging 4.9%. But 2009 saw Cyprus suffer more than most during the global economic depression having only just joined the euro zone, and the economy contracted by 2.0%.

Worse was to follow during the 2012/13 Cypriot financial crisis, which was largely caused by a series of what turned out to be bad loans made to Greek companies, during Greece’s own financial crisis as part of the wider Eurozone sovereign debt crisis. In June 2012, the Cypriot government requested help from the EU as its economy contracted by 2.9% and its international credit rating was reduced to ‘junk status’. In March 2013, the government received a €10 billion bail-out from the European Commission, the European Central bank and the International Monetary Fund (IMF) with several unpopular austerity strings attached. These included the dismantling of the Cyprus Popular bank in March 2013, with its ‘good’ assets being taken over by the Bank of Cyprus.

The economy declined a further 5.8% in 2013, but by Q1 2015 the economy had started to grow again after three and a half years of recession. The Cypriot government was praised by the EU for its financial reforms and the country was able to exit the programme in March 2016, having only drawn €7.3 billion of the available funds. Since then, the economy has been growing again at a real annual growth rate of 4% and, in 2018, the major international credit ratings agencies upgraded Cyprus’ economic outlook to ‘stable’.

The economic recovery was helped by a resurgent tourist trade and real estate market after the government re-launched its economic citizenship programme in 2014. This contributed to a huge surge in demand for luxury apartments and homes in coastal areas and town centres. Property sales rose by a reported 24% between 2016 and 2017, with over a quarter of new purchases being made by non-Cypriots, which has also had the effect of pushing prices up whilst boosting the construction sector.

Trade and tourism

Agriculture has remained a strong sector for Cyprus, with citrus, potatoes and cheese amongst its main exports. In 2017, agriculture contributed 2.3% to GDP, while industry contributed 11% and services 86.7%. The main export markets for Cyprus in 2017 were Greece (12% by value), Israel (9%), Libya (8%), UK (7%) and Germany (4%). Cyprus imports more products than it exports, with refined petroleum, passenger and cargo ships and cars being the main imported goods recently. The island’s geographical location and its proximity to the Suez Canal has greatly benefited its economy as many ship management companies have established offices in Limassol. Cyprus has one of the world’s top ten merchant fleets with more than 1,600 ships sailing under the Cypriot flag.

Each of the past five years has seen an increase in the number of international tourists heading for Cyprus. 2018 saw a record breaking 3,938,625 tourist arrivals according to Cystat, an increase of 7.8% over 2017’s total of 3,652,073 and over 63.7% higher than 2013. The highest number of inbound tourists comes from the UK (36% in 2018), followed by Russia (22%). The total contribution of travel and tourism to Cyprus’ GDP last year was 21.9% and generated around 22% of employment. Cyprus has two international airports at Larnaca and Paphos – not counting the Turkish Cypriot Ercan International Airport which only flies to Turkey – and the port of Limassol, which services cargo, passenger and cruise ships, is one of the busiest ports in the Mediterranean.

Fuel for growth

Looking to the future, large gas fields were discovered off the Cypriot coast in 2011 in Aphrodite Field and industrial gas production is expected to begin in 2022. Egypt also discovered a large gas field in 2015 adjacent to the Aphrodite field and has been in discussions with Cyprus about a shared undersea pipeline. In February 2019, US energy giant ExxonMobil confirmed it has discovered a huge natural gas reserve off the south coast of Cyprus within the island’s Exclusive Economic Zone (EEZ) and there is speculation that the find could prove to be a game-changer in the region’s energy resources, even potentially helping to resolve the ongoing dispute with Turkey over the island’s partition.

 

Citizenship by Investment

Cyprus first introduced its Citizenship by Investment programme in 2002 but with a highly prohibitive minimum entry figure of €15 million. In the wake of the 2012/13 financial crisis, the government effectively re-launched the programme in May 2013 and every year since has seen an increase in the number of applications, coming mainly from Asia, the Middle East and Eastern European countries. The minimum investment was reduced to €2,000,000 in 2016, and a further review in May 2018 put a cap of 700 approved new applicants a year under the Cypriot Investment Programme (CIP) and tightened up on due diligence.

With the number of yearly applicants soon reaching the self-imposed cap for approvals in 2018, the Council of Ministers approved further amendments to the CIP effective from 15 May 2019. To qualify for the scheme, applicants must meet the following requirements:

  • Own or purchase a permanent private residence in the Republic of Cyprus valued at €300,000+ VAT or more.
  • Possess a valid passport and have a valid Schengen Visa.
  • Not have been refused for citizenship by another EU member state.
  • Invest €2,000,000 in real estate property development, infrastructure projects or in businesses recognised under the Registered Alternative Investments Organisations (UCITS), including investment made within the Cyprus shipping industry. (The option to invest in government bonds has now been abolished).
  • Furthermore, the investment is required to be maintained for a period of at least five years from the date of naturalisation, whereas previously the period was three years.
  • In cases where residential property is acquired and had already been used for the purposes of the CIP, the required investment amount increases from €2 million to €5m.
  • A donation of €75,000 must be made to the ‘Research Promotion Foundation’.
  • A donation of €75,000 must also be made to the ‘Cyprus Land Development Corporation’.

Benefits of Cyprus permanent residency

  • Visa-free entry to 173 countries including freedom of movement throughout the European Union.
  • There are no language requirements and no requirement to live in Cyprus.
  • Cyprus allows dual nationality.
  • Citizenship is also passed on to all future generations subject to basic documentation.
  • Advantageous tax system for businesses; corporate tax rate in Cyprus is 12.5%.

Call +507 8339 685

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