Cyprus Relaxes Investment Controls For EU Accession

Tax-news.com

18 January 2000

The Cyprus Central Bank announced last week that as part of the EU accession process it will relax its foreign investment and exchange control rules in relation to the EU.

Under the revised rules EU nationals will be allowed to hold up to 100% equity in Cypriot companies, including companies listed on the Cyprus Stock Exchange. The only exception to this rule will be for banks where the 50% equity restriction for foreign investors will still apply.

Exchange control restrictions on outgoing direct investment by Cypriots in EU based companies have also been relaxed, with only a minimum participation requirement of 10% applying for Cypriots investing in EU based ventures. The current restrictions on outgoing investments in equities, bonds and property have not been changed and will remain in place until the 2003 deadline the EU has set Cyprus for harmonisation.

The announcement should prove to be a boost to the offshore sector in Cyprus. Apart from encouraging more investment from EU countries, the new rules will also allow owners of Cyprus based International Business Companies (IBCs) to extend their activities through mergers and acquisitions of locally owned companies - particularly those which would otherwise qualify as IBCs apart from the fact that they are locally owned.

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