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Cyprus Investment Program

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The Cyprus Investment Program (CIP) (Greek: Κυπριακό Επενδυτικό Πρόγραμμα, ΚΕΠ) was an immigrant investor program conceived by the Government of Cyprus in order to attract foreign investors in exchange for Cyprus citizenship. Details of the scheme were made public after a leak of documents, the Cyprus Papers, to Al Jazeera which caused a controversy in Cyprus and led to the end of the program.[1]

Background

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The program was initiated in 2007. From 2007 to November 1, 2020, just over 7,000 people received Cypriot citizenship. The minimum investment was 2 million euros and citizenship was extended to the family of the investor as well.[2] In 2013, the required minimum investment for citizenship was lowered from 25 million in 2007 to 2,5 million.[3] Applicants did not need to physically stay in Cyprus or pass a langugage test to acquire citizenship.[3]

Corruption and investigations

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One of the reasons for citizenship by investment is tax evasion and visa free travel.[3][4]

An independent inquiry committee (Nikolatou Report) later found that 53% of the passports were illegally issued.[5][6][7][8] On 22 August 2022 a report by the Audit Office of Cyprus revealed that the Ministry of the Interior did not disclose required information about applicants to the Council of Ministers, and that the improper granting of citizenship had resulted in recorded losses of €200 million in taxes and €25 million in non collection of fees. Furthermore, investment contracts worth €1 billion had been canceled, while contracts worth €3.5 billion had not yet materialized.[9] Additionally, the Audit Office Report revealed that a number of investors who bought property in order to gain citizenship were leasing the properties to third persons, something that was against the terms of the Cyprus Investment Program.[10]

Another iregularity discovered by the Audit Office was the application of a reduced VAT rate, a social measure stipulated by an EU Directive, which lowered the rate from 19% to 5% to first time owners of a house in order to help people struggling financially. The reduced rate was given to investors even though they could not qualify for it, there was even a case when a €14,5 million apartment in a tower was granted the social measure of lower VAT rate. This abuse benefited 1.298 investors that bought property amounting to €1,6 billion and the total losses in uncollected taxes were at least €204 million. The violation by Cyprus of EU Directive 2006/112/EC will be investigated by the European Commission.[11]

In July 2021, the European Commission sent a letter of formal notice to Cyprus for its failure to properly apply EU VAT rules for dwellings, giving Cyprus two months to take “appropriate steps.”[12][13] The inspector of taxes in 2020, Giannis Tsagaris, stated that if the European directive concerning VAT for the acquisition of housing is applied incorrectly, Cyprus will be asked to pay lost income from own resources, to cover the difference between reduced and normal VAT rate saved by investors. Based on information available in 2020 investors paid €125 million in VAT while at the standard rate of 19%, they would have paid four times the amount, leaving ordinary taxpayers to pay the €375 million deficit.[14]

Court cases

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Up to 2024 four court cases have been filled in Cypriot courts.[15]

On 12 September 2022, former House of Representatives president Demetris Syllouris, former AKEL MP and speaker of the House of Representatives between 2016 and 2020, and real estate developer Christakis Giovani, as well as lawyer Andreas Pittadjis, and Antonis Antoniou, the executive director of the Giovani Group were brought before the court, facing five counts on two charges - conspiracy to defraud the state, and influencing a public official in violation of the law recognizing the Council of Europe Convention on the Criminalization of Corruption.[16] On 11 October 2023 all charges against Pittadjis were dropped.[17]

The fourth case includes ten defendants, one of them is the former Minister of Transport, Communications, and Works, Marios Demetriades. The defendants face 59 charges, including conspiracy to defraud and corruption. The evidence collected icludes 200 box files, underscoring the extensive investigative work involved. The trial is set to begin on October 30, 2024.[15]

Effects on the local population

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The influx of foreign investors has created a number of problems for the local communities that are priced out from rentals as well as gentrification.[18] Russians have been the top foreign buyers of Cypriot properties.[19] Other studies have shown that there are detrimental effects on the local landscape and environment due to the increase demand of buildings to be sold to foreign investors and especially an increase in inequality between the locals and the rich investors.[20] According to the 2022 Eurobarometer, 94% of the 505 Cypriots surveyed believed corruption to be a widespread problem in the country.[16]

After the imposition of sanctions on mainly Russian companies in the Republic of Cyprus, many investors have moved to the occupied northern part of the island, where there is a growing presence of Russians, 39,000 according to estimates, and Iranians.[21] The area of Trikomo has been especially built up with luxury hotels, apartments and casinos for a foreign clientele including Russians and Israelis, most of the land belongs to Greek Cypriots that were displaced during the 1974 Turkish invasion.[22] The unregulated development has also caused environmental damage to the area, such as the dumping of the waste of these developments on the roadside.[23]

Revocation of passports

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By January 2023, 222 holders of so-called "golden passports" had had their citizenship stripped.[5] As of October 2023, 233 have been revoked.[24]

After the Russian invasion of Ukraine, Cyprus revoked the passports of some Russians that were blacklisted in the EU for sanctions.[6] Five "golden passport" holders have been targeted by US sanctions for arms dealing.[25] In December 2023 the US Treasury sanctioned two former Afghan officials for misapropriating millions in U.S. government funds designated for Afghan security forces by selling fuel at inflated prices. Mir Rahman Rahmani, member of parliament and speaker of the House and his son Ajmal Rahmani, also an MP. Ajmal Rahmani received a Cypriot passport in 2014 and Mir Rahman Rahmani in 2017, through FidesCorp, a Cypriot corporate service provider owned by Savvas Poyadjis, an ex son-in-law to Demetris Syllouris.[24]

Investigations

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Cyprus government investigations

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Journalist investigations

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See also

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References

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  1. ^ Unit, Al Jazeera Investigative (2020-10-13). "Cyprus abolishes citizenship through investment programme — Investigation News". Al Jazeera. Retrieved 2023-09-17.
  2. ^ Kambas, Michael (2022-09-12). "Four go on trial for graft over Cyprus passports scheme". Reuters. Retrieved 2022-10-01.
  3. ^ a b c Langenmayr, Dominika; Zyska, Lennard (2023-05-01). "Escaping the exchange of information: Tax evasion via citizenship-by-investment" (PDF). Journal of Public Economics. 221: 104865. doi:10.1016/j.jpubeco.2023.104865. ISSN 0047-2727.
  4. ^ "Three Russians Who Got Cypriot Passports Charged With Tax Evasion". The National Herald. 1 January 2023.
  5. ^ a b "Cyprus so far strips 222 people of 'golden passports'". AP News. 2023-01-18. Retrieved 2023-09-17.
  6. ^ a b "U.S. charges Russian billionaire Oleg Deripaska with violating sanctions". in-cyprus.philenews.com. Retrieved 2022-10-01.
  7. ^ "Most Cyprus passports issued in investment scheme were 'illegal' — Corruption News". Al Jazeera. 2021-04-16. Retrieved 2023-09-17.
  8. ^ "Πόρισμα Νικολάτου: Παράνομο το 53,24% των πολιτογραφήσεων - Πόσες αντιστοιχούν στις τρεις προεδρίες". ΠΟΛΙΤΗΣ. Retrieved 2024-10-03.
  9. ^ "Σαθρότητα μέχρι τέλους στο ΚΕΠ διαπιστώνει η Ελεγκτική". www.philenews.com. 22 August 2022. Retrieved 2022-08-24.
  10. ^ Παϊζάνου, Ελευθερία (2022-08-26). "Πολιτογραφήσεις: Και μειωμένο ΦΠΑ και έσοδα από ενοίκιο". Φιλελεύθερος.
  11. ^ Παϊζάνου, Ελευθερία (2022-08-24). "Μεγιστάνες με έκπτωση στο ΦΠΑ – Τα κραυγαλέα παραδείγματα". Φιλελεύθερος.
  12. ^ "July infringements package: key decisions". European Commission. 2021-07-15. Archived from the original on 2021-07-15.
  13. ^ "Commission urges Cyprus to comply with EU VAT rules for dwellings". en.philenews. 2023-06-01.
  14. ^ "Απάντηση Γ. Τσαγκάρη στις αιχμές για ΦΠΑ στις οικίες". Stockwatch - Παράθυρο στην Οικονομία (in Greek). 2022-02-14. Retrieved 2024-10-03.
  15. ^ a b "Marios Demetriades: Truth and justice always prevail". knews.com.cy. Retrieved 2024-09-04.
  16. ^ a b Sayki, Inci. "Four Charged Over Cyprus' Golden Passport Scheme". OCCRP. Retrieved 2024-09-04.
  17. ^ "All charges dropped against lawyer in golden passports case". cyprus-mail.com. 2023-10-11. Retrieved 2024-09-04.
  18. ^ "Cypriots priced out as Russians, Israelis eye coastal city - Al-Monitor: Independent, trusted coverage of the Middle East". www.al-monitor.com. 5 April 2023. Retrieved 2023-04-08.
  19. ^ fm (2023-03-13). "Property sales boosted by Russians". Financial Mirror. Retrieved 2023-07-09.
  20. ^ Rakopoulos, Theodoros (2022-06-01). "The Golden Passport 'Russian' Eutopia: Offshore Citizens in a Global Republic". Social Anthropology/Anthropologie Sociale. 30 (2): 161–178. doi:10.3167/saas.2022.300210. hdl:10852/98563. ISSN 0964-0282.
  21. ^ "Growing Russian investment in occupied north raises concerns". in-cyprus.philenews.com. 2024-06-20. Retrieved 2024-06-20.
  22. ^ "Reports on Trikomo properties on Greek Cypriot land gather steam". cyprus-mail.com. 2024-01-10. Retrieved 2024-06-20.
  23. ^ "Tankers caught dumping raw sewage on ground in Trikomo". cyprus-mail.com. 2024-05-22. Retrieved 2024-06-20.
  24. ^ a b Cosma, Andreas. "US Treasury Sanctions Former Afghan Officials with Cypriot Passports". OCCRP. Retrieved 2024-10-04.
  25. ^ "Five Cyprus Golden Passport Holders Sanctioned for Russian Arms Trading". www.occrp.org. Retrieved 2023-04-20.
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