Foreign Investment Information
1.1	OVERVIEW
1.2	INTERNATIONAL BUSINESS COMPANIES (IBCs)
1.3	FOREIGN DIRECT INVESTMENT .
1.4	EXCHANGE REGULATIONS
1.5	THE EUROPEAN UNION AND CYPRUS

Acquisition of immovable property by aliens
2.1	RESTRICTIONS
2.2	APPROVAL BY THE COUNCIL OF MINISTERS
2.3	PROCEDURE TO BE FOLLOWED BY ALIENS FOR  OBTAINING A PERMITTO ACQUIRE PROPERTY.
2.4	TRANSFER FEES
2.5	IMMOVABLE PROPERTY TAX
2.6	STAMP DUTY AND MORTGAGE FEES
2.7	INCOME TAX AND CAPITAL GAINS TAX
2.8	ALLOWANCES
2.9	ESTATE DUTY
2.10	VALUE ADDED TAX (VAT)
2.11	BUYING PROPERTY AS AN INVESTMENT
2.12	RESIDENCE PERMIT & WORK PERMIT
2.13	THE JOINING OF THE EU AND WORK PERMIT -  PROPERTY OWNERSHIP

 Foreign Investment Information

1.1 OVERVIEW
The Government encourages foreign investment, particularly in capital-intensive and labour-saving industries. Although foreign investment in Cyprus by non-residents requires the prior approval of the Central Bank, applications are processed quickly and with the minimum of formalities. Foreign investment in Cyprus includes investment by a non-resident in any of three forms:

   Direct investment within Cyprus (see section 2.3)

   Shipping activities through a locally registered company wholly owned by a non-resident.

1.2 INTERNATIONAL BUSINESS COMPANIES (IBCs)
The island's strategic location together with a basket of advantages offered to entrepreneurs and investors creates an ideal business environment that has lead, in recent years, to its development into one of the major centres of international business (Offshore Centers). Advantages include: Cyprus' good industrial relations, tax incentives, excellent transport and telecommunications, availability of highly educated and low cost labour, English based legal system, high quality of life, low cost of living and very low crime level.
(a) LEGAL FORMS OF IBCs: An International Business Company (IBC) is a legal entity, registered in Cyprus, with beneficial ownership and business activities that lie outside Cyprus. IBCs may be registered under one of the following legal forms:

   Private or public company incorporated in Cyprus under the Cyprus "Companies Law
   (as amended)".The Cyprus"Companies Law (as amended) is almost identical to the UK's    former "Companies Act, 1948".

   Offshore branch of an overseas company incorporated in Cyprus under the "Companies Law    (as amended)". Note that such a branch does not constitute a legal entity different from that    of its founding overseas company. Distinguish from a local branch of a foreign company,    since this branch carries out operations in Cyprus and provides services to locals being    therefore subject to the tax regime and exchange control regulation applicable to local    businesses.

   General or Limited Partnership registered in Cyprus under "The Partnership and Business    Names Law".This Cyprus Law is based on British Legislation.

Private companies, being mostly subsidiaries of large foreign corporations, make up the majority of International Business Companies registered in Cyprus. Branches and partnerships are not that common mainly because of the financial liabilities passed onto the beneficial owners.
(b) REGULATORY FRAMEWORK OF IBCs: Certain conditions must be met by an IBC so as to obtain and keep a Central Bank permission of operation. All IBCs must:

   Belong exclusively to non-residents.

   Cover all their financial requirements in foreign exchange.

   Realize their objectives outside Cyprus. They may only carry out activities directly related to    the administration, management or control of their overseas affairs.

   Inform the Central Bank when foreign exchange is about to be converted and spent in Cyprus.

   Submit to the Central Bank annual audited financial statements.


(c) FISCAL AND OTHER INCENTIVES OF IBCs There are a number of fiscal incentives for IBCs:

    There is only a 4.25% tax on net taxable profits for IBCs registered in Cyprus. The same applies     to offshore branches of companies that are managed and controlled from Cyprus.

    International business branches of overseas corporations that are managed and controlled
    from abroad as well as international business partnerships are totally exempt from
    corporation and income tax.

    No capital gains tax is payable on the sale or transfer of shares in an IBC.

    No estate duty is payable on the inheritance of shares in an IBC.

    The beneficial owners of IBCs, branches and partnerships are not liable to additional tax on
    dividends or profits over and above the amount paid or payable by the respective enterprise.

    Expatriate employees of IBCs living and working in Cyprus are taxed at 0-20%, half the rates
    applicable to locals.

    Expatriate employees who live and work outside Cyprus are exempt from income tax if they are
    paid through any bank in the island, or are taxed at 0-4%, one-tenth of the rates applicable to
    locals, if they are paid directly abroad.

   Under the Customs and Excise Law, IBCs and their expatriate employees may acquire duty free:
         Office equipment such as photocopiers, typewriters, calculating machines and computers;
         Household equipment such as television sets, video and audio recorders, hi-fi systems, washing          machines, dish washers, refrigerators and cookers;
         Motor cars including sports cars, station wagons, as well as mini-buses with a sealing capacity of up          to nine persons.

Those eligible for relief from duty are:
   (i) IBCs operating continuously from their offices that are open during normal working hours (and are not a          part of another office or a private residence), and employ full time staff.

   (ii) Full-time expatriate employees of the above enterprises who live and work in Cyprus during most of
         the year and whose remuneration exceeds CYP12.000 per annum (approx. $20.000).
       
     An eligible expatriate may acquire a second duty-free car for the use of his family if his salary,
     as declared to the Department of Inland Revenue, is more than CYP20.000 per annum.
     Transactions of IBCs are outside the scope of the value added tax (VAT), which means that offshore
     companies do not need to register for VAT purposes and cannot claim refunds of the VAT that they pay
     on their purchases. All their duty-free imports, however, are exempt from VAT. Additionally,
     telecommunication services offered to fully-fledged and fully staffed offices of offshore enterprises in
     Cyprus may be exempted from VAT with the approval of the Central Bank.

     IBCs are exempt from stamp duty on all documents relating to their business activities outside Cyprus
     while they and their expatriate employees are also exempt from the Special Contribution to the
     Defence Fund.

(d) INTERNATIONAL BANKING
     The Government's policy on international banking units (IBUs) was formulated in early 1982. IBUs in
     Cyprus may carry out any type of banking business, provided it is with non residents and in foreign
     currency. They may carry out offshore banking business with residents, but an exchange control permit
     must be obtained from the Central Bank. IBUs are exempt from monetary restrictions applicable to onshore
     banks (such as minimum reserve requirement, restrictions on the holding of foreign assets or investments
     in shares and immovable property) and are completely free from exchange controls. They have to,
     however, prepare annual accounts and submit them, after they have been audited, to the Central Bank.

     Applications for establishing an IBU, supported by the relevant information and documents, are submitted
     to the Central Bank. Applicant banks are expected to be institutions enjoying a good reputation
     internationally. Applicant banks which meet the Central Bank's criteria may also be allowed to establish
     themselves as Administrative Banking Units (ABUs) carrying on banking business in their own name but
     requiring an already licensed Bank which operates in or from within Cyprus to carry out their day to day
     administration.

     A number of advantages, particularly tax benefits, are granted to IBUs/ABUs and international enterprises
     in general. Locally incorporated IBUs are subject to a profits tax of 4.25%. Offshore branches managed
     and controlled from abroad are totally exempt from corporate or income tax. However, the income
     generated by IBUs from their onshore banking activities is subject to income tax at the full rate of
     corporation tax. Interest and dividends are not subject to withholding tax, and profits may be repatriated
     freely.

1.3 FOREIGN DIRECT INVESTMENT
Direct foreign investment includes the acquisition of property in Cyprus and the participation of foreigners in Cypriot legal entities, (which may even belong partly or wholly to non-residents and) which carry on business and derive income in Cyprus. In this section we concentrate on foreign investment by participating in Cypriot companies. Acquisition of property is viewed separately in section 3.0.

(a) NON - EU CITIZENS
     The Government has in the past years relaxed the rules governing foreign non-EU citizen direct
     investments in Cyprus. The new regulations allow foreign participation up to 100% and provides a simple
     administration procedure and straightforward eligibility criteria whereby in most cases applications for
     inward investment are reviewed by the Central Bank.

     The industrial sector, the wholesale and retail trade sector and the services sector are all open to non-
     resident investors. For the industrial and the wholesale and retail trade sectors, the Central Bank handles
     applications where foreign participation is below 50%. Where foreign participation exceeds 50%, or the
     investment is more than CYP750.000, applications are handled jointly by the Central Bank and the Ministry
     of Commerce, Industry and Tourism. For services, up to 100% foreign participation is allowed and the
     Central Bank handles the applications. Services have been split into two categories depending on the
     minimum capital required for each company to be formed. The minimum capital can be either CYP50.000 or
     CYP100.000.

     Investments in tourism are subject to the tourist policy applicable at the time. At present, this policy
     provides for up to 49% foreign participation in hotels, tourist villages, villas, etc, while 100% participation
     may be allowed for projects that enrich tourism, such as golf courses, theme parks, marinas etc.

(b) EU-CITIZENS
     On 7 January 2000 all the maximum allowable percentage of foreign participation as well as minimum
     levels of foreign investment in any enterprise in Cyprus (described above) were abolished provided the
     foreign investors are citizens of EU member states. This new policy does not touch upon limitations
     applicable under other laws or regulations (e.g. this liberalisation does not apply for the acquisition of
     immovable property). In addition, the maximum foreign equity participation of 50% in the banking sector
     remains.

(c) FISCAL AND OTHER INCENTIVES FOR FOREIGN DIRECT INVESTORS
     Low Corporation Tax: Net profits are taxed at a rate of 20% for chargeable income up to CYP40,000
     and 25% for that in excess of CYP40,000.
     Low Income Tax: Expatriates employed in IBCs are charged low rates of income tax.
     (See section 2.2 (c) )
     No Withholding Tax: Dividends paid by resident companies to foreign incorporated companies are
     exempt from withholding tax. In the case of physical persons, the tax withheld is credited against their
     own tax liability.
     No Capital Gains: Tax on profits generated by the sale of shares of companies listed on the Cyprus
     Stock Exchange (This applies until the end of the year 2001).
     10-Year Tax Holiday: Profits resulting from the operation of auxiliary tourist projects such as golf
     courses, health centers, theme parks etc are exempt from corporation tax for a 10-year period.
     Equipment Tax Allowances: There are investment allowances for equipment and machinery used in
     the manufacturing sector and considerable wear and tear allowances covering both machinery and
     certain categories of hotel buildings.

(d) DOUBLE-TAXATION AGREEMENTS
     Cyprus has double-taxation agreements with Austria, Bulgaria, Canada, the People's Republic of China,
     the Czech Republic, Denmark, Egypt, France, Germany, Greece, Hungary, India, Ireland, Italy, Kuwait,
     Malta, Norway, Poland, Romania, Russia, Slovakia, South Africa, Sweden, Syria, the United Kingdom, the
     United States and Yugoslavia.

     The main purpose of these treaties is the avoidance of double taxation of income earned in any of the
     above countries. A credit is usually allowed against the tax levied by the country of the taxpayer's
     residence for taxes levied in the other country.

1.4 EXCHANGE REGULATIONS
Prevailing exchange control legislation is applied and regulated fairly liberally. Foreign currency may only be purchased from or sold to an authorised bank. There is no limit on the amount of foreign currency or payment instruments that non-residents may import. Foreign currency notes imported in amounts in excess of US$1.000 must be declared at the point of entry if they are to be used to purchase goods for export, to open an external or foreign currency bank account, or to be transferred out of Cyprus. All payment transactions between residents and non-residents require Central Bank approval. Residents are subject to limits on the amount of money they may take abroad for tourism or business purposes. Payments for imports are made freely by commercial banks against the relevant documents.
Commissions earned by non-resident agents abroad on Cyprus exports are limited to 5% of the value of the exports. For higher percentages, the prior permission of the Central Bank is required. Non-residents investing in Cyprus with the approval of the Central Bank are able to transfer profits and dividends once they have submitted documentary evidence and a tax clearance certificate. If they sell their investments, they are allowed to repatriate all their capital, including capital appreciation and income.
Payment for the purchase of real estate by aliens should be effected in foreign currency imported to Cyprus and surrendered to an authorised dealer (commercial bank). When the property is transferred to the name of the alien, proof of the importation should be presented to the District Lands Registry Office before the registration is effected. (see the procedure of acquisition of property by aliens in section 3.3)
Capital from the sale of property may be remitted abroad immediately if the purchase was made through foreign currency that was imported in Cyprus. If the non-resident's property was not purchased by foreign currency, then the proceeds from the sale will be deposited in a bank account and the seller will be allowed to remit the money in three equal annual amounts (starting from the year of the sale) with a minimum annual amount of C£50,000. A Central Bank permit will be given only after all taxes and rates are paid.
Non-residents selling their real estate to other non-residents on the basis of an agreement concluded abroad, may receive the entire proceeds abroad without the requirement of control permit.
No controls are imposed on the movement of currency into or out of non-residents' external accounts, but the transfer of property, shares or debentures to non-residents is prohibited unless prior permission has been obtained.

1.5 THE EUROPEAN UNION AND CYPRUS
Cyprus has been linked to the European Union since 1972 by an association agreement providing for the free and unrestricted movement of industrial and agricultural products and the adoption of the accompanying policies required for fully implementing the customs union. Furthermore, on 4 July 1990 Cyprus submitted an application for full membership of the EU and accession negotiations started in April 1998 and it is expected that by the year 2003 full membership will be accomplished.
In its report of November 1998 on Cyprus' progress towards accession, the European Commission confirms the ability of Cyprus' economy to adjust to the challenges involved in adopting the acquis communautaire. In the report of 13 October 1999, the Commission indicated that Cyprus is a market economy that is growing rapidly, keeping inflation under control. Because of this, however, difficulties arise from macroeconomic and fiscal imbalances. Speeding up privatisation and promoting competitiveness in banking, as the European Commission suggests, could solve the problem.
Cyprus is also a signatory to the Barcelona Declaration which foresees the establishment of a free trade area between the EU and its 12 Mediterranean partners by the year 2010.
In compliance with the Customs Union Agreement with the EU, which came into effect in January 1988, Cyprus has progressively been abolishing customs duties on most imports from the EU gradually adopting the Common Customs Tariff of the EU.
The EU is Cyprus' main trading partner, accounting for approximately 50% of total trade. The United Kingdom is the country trading the most with Cyprus. EU exports to Cyprus consist mainly of machinery and transport equipment. The EU mainly imports foodstuffs, particularly vegetables, fruit and drinks, and tobacco.
The island has a considerable trade deficit vis-à-vis the Union, amounting to 1748 million ECU (EURO) in 1999. Cyprus' imports from the EU have risen to ECU 2347 million and exports to the EU amount to ECU 599 million. However, Cyprus is not depended on exports but rather on tourism. 93% of tourist arrivals originate from the EU, having again the UK as the major partner.

Acquisition of immovable property by aliens

Cyprus has proved to be an increasingly popular place for retirement and/or for the acquisition of holiday houses by foreigners. Demand, which is continually increasing, is forthcoming mainly from the European Countries, with the bulk (80%) comprising UK citizens. There are 13841 properties currently owned by foreigners of which the most are situated in the Lemesos and Pafos districts.
The upsurge of demand for property by foreigners is attributed to many factors including the relatively low cost of living and its high standard. In addition, the unique hospitality of the local population, the attractive climate, the increasingly important role of safety (Cyprus is one of the safest countries with crime at a very low level) and security, have played an important role.
Demand and market activity has caused local property values to show a steady and at times sharp appreciation, but this trend has now a slower pace. Good properties especially resales are still abundant, and local property prices are still much lower than those of other European countries. Holiday homes in Cyprus are on average 20% lower in prices than Portugal, 30% lower than Spain and 50% lower than Italy and France. In addition building quality in Cyprus is usually higher than comparable properties in the above countries.

2.1 RESTRICTIONS
Cypriots or persons of Cypriot origin and extraction are allowed to purchase real estate property without any restrictions. Aliens, however, are only given permission to acquire one of the following:

    One Apartment or

    One House or

    A building plot or land up to three donums (4,014 sq.m)

Offshore entities may also acquire premises for their business (no limit on the extend) or for the residence of their foreign employees provided the residence is registered on the employees' names.
For the transfer of real estate on an alien's name the permission of the Council of Ministers is required. This permission is obtainable by all bona fide cases, provided that the property is not intended for commercial exploitation. In certain cases, however, as seen in the direct investment section, the Council of Ministers will grant the approval for acquisition for commercial purposes if the particular project will enrich tourism.

2.2 APPROVAL BY THE COUNCIL OF MINISTERS
The definition of alien by law is any person who is not a citizen of the Republic (whether resident or not) including an alien controlled company, but it does not include aliens of Cypriot origin or the alien wife of a person who is a citizen of the republic.
For the purpose of the legislation, acquisition of real estate property includes:

    Transfer of registration

    Long leases of more than 33 years

    The acquisition of shares in a company, which owns real estate, if such an acquisition results
    in the company becoming controlled by aliens.

    The establishment of a trust or any type of set-up, which is connected with the ownership of
    real estate, for the benefit of an alien.

Any registration of property not complying with the law is invalid. The following general points of real estate acquisition are hereby provided as a very rough and general guidance.

    A foreigner can buy a house for his own use only. In case of a long established person who has
    business (e.g. offshore company) or is residing in Cyprus, a permit to buy another house may
    be forthcoming. E.g. A foreigner has a house in Lefkosia and wishes a beach-flat in Larnaka
    or a villa in Platres for holidays.

    A foreigner can buy land, for building, up to the extent of three donums. A permit to buy a plot
    of land outside the development area will most likely be refused (this is not so in the case of a
    house purchase so situated).

    No transfer of a share in property can be effected i.e. A permit will be refused in case of a
    foreigner acquiring a share in property.

    One couple (husband and wife) can only buy one house (not one house each).

    In the case of foreign companies they can buy/build their offices only. No permit will be given
    for the purchase of a residence unless the house can be registered in the name of the
    company's director and he makes the application.

    A house cannot be bought in joint ownership save husband and wife.

    In case a foreigner will construct a building, the cost must be paid in foreign currency.

    In granting a permit to build, the Government may impose a time limit to effect the
    transfer/construction of the property. Such limit may be extended, however, on application
    depending on the circumstances. A period of three years is considered as a maximum but this
    can also be extended.

    A foreigner wishing to rent property for periods of thirty-three years or more requires the
    Council of Ministers' approval.

    A foreigner can sell his house and buy another. Any bona fide repeat purchaser will be
    granted a permit.

    A foreign purchaser may let his property for periods in excess of 28 days to a resident of
    Cyprus (not short lettings). This does not apply to offices.

    Any contract in purchase/lease etc of real estate is valid even if the Council of Ministers
    rejects the foreigner's request. As such when purchasing property it is recommended that the
    contract includes a provision for such an event so as to secure a refund or other remedy to
    cover such an unlikely occurrence. The time period required for obtaining an answer from the
    Council of Ministers, provided all documentation is in order is approximately two-three
    months.

As a general rule, all foreigners are permitted to acquire house/business premises in Cyprus, provided
they have:

    No criminal record in their own country or in Cyprus.

    The financial means to support themselves in Cyprus (An income per couple in the region of
    C£10,000 p.a. is considered satisfactory).

Companies with dubious past, unclear ownership, unclear business etc are not looked upon favourably.

2.3 PROCEDURE TO BE FOLLOWED BY ALIENS FOR OBTAINING A PERMIT TO ACQUIRE PROPERTY

(a) Application to the Council of Ministers
    The prescribed application form should be completed and submitted to the District Officer in the district
    where the property is situated. (Appendix 4)
    The following is the main information required for completing the prescribed form:

    Personal details of the applicant and his financial standing.

    Particulars of the property.

    Particulars of the present owner, the sales contract and terms of payment.

    The way of acquisition, whether freehold, long leasehold, by share etc.

    The District Officer together with other relevant Government Departments will then proceed to make
    further enquiries and prepare a report, which is submitted, to the Council of Ministers through the Minister
    of the Interior. The contract is valid for the period during which the decision of the Council of Ministers is
    pending. The whole procedure may take up to three months, but in the meantime there is no restriction in
    taking possession of the property.

(b) Application to the Central Bank
On receiving the approval of the Council of Ministers to acquire the property in question, an application should be submitted to the Exchange Control Officer for the purpose of confirming that the purchase was effected in foreign exchange. The application should be submitted together with the following documents:
o Copy of receipt or certificate evidencing the importation of the foreign exchange. The Central Bank of Cyprus will provide the required certificate evidencing that the purchase under consideration was paid in foreign exchange.

    Contract of Sale

    Copy of the Council of Ministers' approval to acquire the property.

    Certificate of Registration of the property if available.

(c) Application of transfer to the District Lands' Office
The transfer of ownership is effected by a simple process of registration with the District Lands' Office. The prescribed application form should be completed for submission in person to the District Lands' Office together with:

    The registration certificate of the property.

    Copy of the Council of Ministers' permission to acquire the said property.

    The Central Bank's certificate evidencing that the property was acquired in foreign exchange.

    Evidence of payment of all the property taxes to date (these taxes may include sundry town
    taxes, sewage tax and road construction tax).

The information that is required to complete this application is the following:

    Name and address of seller and purchaser.

    Identity card or passport number of the purchaser.

    Particulars of the property.

During the course of the registration procedure, the value of the property will be reviewed by the District Lands' Office valuers, for the purpose of determining the amount of transfer fees payable, who may or may not accept the purchase value stipulated in the sales contract. The purchaser is liable to the payment of transfer fees on the basis of the value of the property as assessed by the District Lands' Office valuers (the basis is the open market value of the property on the date of the original transaction/sales contract). The purchaser and seller may give specific powers of attorney to any third party to attend and effect the transfer on their behalf. If all documentation is in order, the transfer procedure takes a few hours.

2.4 Transfer Fees.
The purchaser will be liable to pay the following transfer fees for the property acquired, when this is registered in his name at the Lands' Office. The fees are charged on the property's market value at the date of purchase.

2.5 Immovable Property Tax.
The registered owner of the property is liable to an annual immovable property tax calculated on the market value of the property as at 1st January 1980.

2.6 Stamp Duty and Mortgage Fees.
Unless otherwise stipulated in the contract, the purchaser is liable for the payment of stamp duty at the rate of 1,5 per thousand of the value up to C£ 100,000. Thereafter the rate becomes 2,0 per thousand. Although the non-affixing of stamps does not invalidate the contract, the stamp duty plus a fine will be payable when the document is produced to the court or any Government department. In order to avoid the payment of a fine, which could be substantial, the documents should be stamped within 30 days of their signing.
In case of mortgage, the registration fee is 1% of the amount secured, plus the relevant stamps.

2.7Income Tax and Capital Gains Tax.
Dealers in land are treated under the income tax laws whereas non dealers under the Capital Gains Tax ones. Capital Gains Tax is levied at the rate of 20% on gains arising from the disposal of immovable property or the disposal of shares of companies the assets of which consist mainly of immovable property. Note that no Capital Gains Tax is paid when selling shares of companies which are listed on the Cyprus Stock Exchange (this applies until 31/12/2001).
As a general rule, the gain is the difference between the sales proceeds and the original cost of the property. In case of property acquired before 1/1/1980, the gain is the difference between the sales proceeds and the market value of the property as at 1/1/1980. The assessed value on this date is fixed by the Inland Revenue and it is known prior to acquisition. However, the Director of the Inland Revenue may, in certain extreme cases, make his own assessment as to the market value of the property on the date of its disposal. The cost of acquisition and sale includes interest payments paid for the acquisition. Additions to the property etc are also deductible from the gain. On the acquisition cost, the inflation rate (as this is so published by the Government) is added on. Thus the tax is charged on a gain which takes into account the inflation (which for the last years is 2,5% - 3,0% pa). The Gains Tax as a whole, has minimal effects since the appreciation of value coupled with the following allowances and inflation leaves little for taxation. In the case of companies these allowances are not applicable.

2.8 Allowances:
The following lifetime allowances are available to individuals: o The first C£ 10,000 of gains arising from the disposal of any property.

    The first C£ 15,000 of gains arising from the disposal of agricultural land by a farmer (subject
    to certain conditions).

    The first C£ 50,000 of gains arising from the disposal of a house used by the owner for his own
    habitation (subject to certain conditions).

The above allowances are not available separately. An individual claiming a combination of the above allowances is only allowed a maximum of allowance of C£ 50,000.
Cyprus residents and companies registered in Cyprus are subject to Capital Gains Tax when disposing property, wherever it is, whether in Cyprus or abroad.
Non residents are only taxed when selling property situated in Cyprus. They can be totally exempt from this tax if they prove that they acquired the particular property by importing foreign currency between 1/8/1980 and 13/7/1990.
Losses are calculated in the same way as gains and can be set off against capital gains of the same and future years.

2.9Estate Duty.
Estate duty was abolished as from 1/1/ 2000.

2.10Value Added Tax (VAT).
Since May 2000 a revised flat rate of 10% was introduced on goods and services. Real Estate is excluded from VAT as are most food items, medicine and other essentials.

2.11 Buying Property As an Investment
Buying property in Cyprus for letting is not allowed to foreigners except in the case where an already owned residence is rented to permanent residents for periods of more than 28 days. For this reason a holiday home or a permanent retirement home cannot be looked upon as an investment for income as such. Nevertheless local property values have shown a steady upward movement over the years and property, especially near the beach, has shown a considerable appreciation. This appreciation holds good mainly for particular projects and not so much for the odd apartment here and there. Beach property is much in demand and we foresee a considerable appreciation over the near future. Joining the EU is very near (year 2004) and its implementation will cause a sudden and very sharp appreciation in local property values. In addition local holiday home projects are priced between 20% - 30% lower, than a comparative counterpart in Portugal or Spain. Local property is therefore believed to offer good value for money and the island's increasing popularity by the international market further supports this.
As a general rule we could say that property income returns are in the region of 5% - 8% p.a. of the current value. In addition the annual appreciation on real estate values are in the region of 5% - 10% (depending on location etc).

2.12 Residence Permit & Work Permit
According to the Aliens and Immigration Laws and relevant Regulations, the Competent Authority for the issue of Temporary Employment Permits to aliens is the Migration Officer. The foreign national seeking employment must secure, while being abroad, through personal efforts, a local employer who should submit an application to the Migration Officer on his behalf. The application should be accompanied by a short curriculum vitae of the alien, a contract of employment and copies of certificates of the alien's qualifications and work experience in the field of the proposed employment. A work permit is granted only on a temporary basis and for a specified position, provided that no suitably qualified Cypriot citizens are available and that the Public Interest of Cyprus is not negatively affected.
In the case of immigration, the Minister of Interior may grant a permit to an alien, on application. This occurs only when the Immigration Control Board recommends to the Minister that such person belongs to one of the following categories:
(a) For Farming. The possession of adequate land or of a permit to acquire such land and of a
      capital of at least C£250,000 is required.

(b) For Mining. The possession of a mining permit and a capital of at least C£200,000 is
      required.

(c) For persons intending to deal with a trade or business. A capital of at least C£150,000 is
      required.

(d) Self-employed. Applicants under this category are required to have academic or
      professional qualifications for which there is a demand in Cyprus.

(e) Persons to whom permanent employment is offered which is in the interest of the
      economy of the island and does not create local competition.

(f) Persons wishing to reside in Cyprus and have a secured annual income, high enough, to
      offer them a decent living without having to engage in any business or profession.
      An annual amount of around C£5,000 per person is usually considered satisfactory.

Buying property in Cyprus does not imply the issue of a residence permit nor of a work permit. The fact, however, that a Council of Ministers' permission for acquiring property was given to the foreigner will make an application for residence permit be looked upon most favourably by the Immigration Control Board (and in fact this is rarely refused).
To obtain a Cypriot citizenship, a written application must be sent to the Migration Department. Each case is looked individually and most of the times applications are rejected. Successful applications are usually the ones made by:
(a) Foreigners married for over five years with persons of Cypriot origin.

(b) People residing in Cyprus that have concentrated 10 years of stay on the island within a
      period of 13 years. In the case of people that had been working for these years, such as
      IBC's employees, athletes, football trainers etc a residence permit will not be granted if
      Cypriot residents' interests are threatened.

2.13 The Joining of the EU and Work Permit - Property Ownership
When Cyprus joins the EU, the restrictions on real estate purchases will be lifted in accord to the EU directions. This implies that property purchases by EU citizens will be free of restrictions. In addition, EU citizens will not require a work permit. This suggests that the so far untapped investment market and the younger generation groups will invest in Cyprus both in terms of work and investment/coupled with work (e.g. a pottery, a pub, a restaurant etc for the EU citizen to work). Such a development is expected to increase demand of real estate sharply with an analogous reflection on property prices. A rough estimation is that beach and prime location property will double in price upon joining the EU, whereas the remaining properties are expected to increase in prices by approximately 20%-25%.