The Central Bank of Cyprus, within the policy for
harmonization with the European Union (EU) acquis
communautaire, announced the introduction of additional
liberalization measures with respect to investments by
non-residents in Cyprus and by Cypriots abroad. Specifically
the following measures have come into effect since 7 January
2000:
1. Investments in Cyprus by citizens (physical or legal
persons) of EU member states.
a. Direct investment.
All restrictions concerning the maximum allowable
percentage of foreign participation as well as the minimum
level of foreign investment in any enterprise in Cyprus are
abolished, provided the foreign investors are citizens of EU
member states.
The new Central Bank policy does not touch upon limitations
applicable under other laws or regulations . Such limitations,
for example, apply to the acquisition of immovable property.
b. Portfolio investment
Henceforth, investors who are citizens of EU member states
may acquire up to 100% of the share capital of Cypriot
companies listed on the Cyprus Stock Exchange. In the banking
sector, the maximum foreign equity participation remains 50%,
in accordance with the policy announced in July 1999. In case
of liquidation of sizable portfolio investments undertaken
after the issue of this announcement, the Central Bank
reserves the right to demand the gradual transfer abroad of
the capital gain, in order to mitigate possible negative
effects on the balance of payments and foreign exchange
reserves.
2. Investments abroad by Cypriots
a. Direct investment
Henceforth, citizens of Cyprus are allowed to undertake
direct investment abroad without restriction as to the sector
of the investment or the amount of foreign exchange involved.
The transfer of capital abroad will be effected as soon as the
Central Bank is satisfied that it is a genuine direct
investment and that it does not involve a portfolio investment
(e.g. purchase of foreign stocks or bonds) or deposits with
foreign banks. Where the foreign exchange cost is substantial
the Central Bank reserves the right to take measures in order
to mitigate the impact on the balance of payments.
It is clarified that the term direct investment means any
investment undertaken in order to create, extend or maintain a
lasting and long-term relationship with an enterprise in
another country and implies control or participation of the
investor in the management of the enterprise to a significant
degree. A direct investment is considered to take place when
the equity holding is more than 10% of the share capital of
the enterprise involved. An equity holding of less than 10% is
considered to be a portfolio investment.
The aforementioned liberalization measures do not affect
the obligation of all investors to register their investments
with the Central Bank and to furnish it with any information
and statistical data the Central Bank may deem necessary. For
these purposes the Central Bank has prepared special forms,
which must be completed by all investors.
