New and updated Regulation on the Naturalization (Citizenship) of Investors in Cyprus byInvestment on the basis of subsection (2) of section 111A of the Civil RegistryLaws of 2002-2015

The Council of Ministers of theRepublic of Cyprus, on the 13th of September 2016 has issued an amendedRegulation in relation to the Scheme for Naturalisation (Citizenship) ofInvestors in Cyprus by Exception.

One of the main objectives ofthe economic policy of the Republic of Cyprus is to further encourage ForeignDirect Investment and to attract high net worth individuals to settle and dobusiness in Cyprus.

Key factors that make Cyprus anattractive destination for investment, is the highly specialized human capital,the reliable legislative and regulatory framework, the stable tax system andthe safety and stability conditions prevailing in the country.

Within this framework and takinginto account the strong investor interest, the Government of Cyprus hasestablished and revised a "Scheme for Naturalization of non-Cypriotinvestors by exception" on the basis of subsection (2) of section 111A ofthe Civil Registry Laws of 2002-2015, with specific incentives, terms andconditions and control procedures in order to prevent abuse.

The changes are considered to bemore attractive to investors that wish to obtain an EU/Cyprus citizenship.

The threshold of investment hasbeen reduced to €2 million all together (if the investor has invested inhousing properties and the value of at least one of them is at least €500.000.If the main investment is not in housing properties then the investment is €2mplus a residential unit of €500.000).

Another important positive changeis that the parents of the main applicant are also eligible to apply and obtainthe Cyprus/EU citizenship provided that they purchase a housing property of atleast €500.000 (therefore they will not need to proceed with any mainadditional investment).

The "collective" scheme has beenabolished by the new Regulation.

On the basis of the Scheme, anon-Cypriot citizen, who meets one of the following economic criteria (A),either personally or through a company/ companies in which he/ she participatesas a shareholder - in proportion to his holding percentage, or throughinvestments done by his/her spouse or jointly with the spouse or even as ahigh-ranking senior manager of a company/ companies that meets one of theeconomic criteria (A), may apply for the acquisition of the Cypriot citizenshipthrough naturalization by exception.

Α.CRITERIA

Α.1Investment in real estate, land development and infrastructure projects:

The applicant must have made aninvestment of at least €2,0 million for the purchase or construction ofbuildings or for the construction of other land development projects(residential or commercial developments, developments in the tourism sector) orother infrastructure projects.

It is noted that investment inland under development is included in this criterion, provided that aninvestment plan for the development of the purchased land will be included inthe application. It is understood that investment in land that is situated in abuilding zone of zero development, is excluded.

Α.2Purchase or Establishment or Participation in Cypriot Companies or Businesses:

The applicant should have made apurchase or should have participated in companies or organizations establishedand operating in the Republic of Cyprus with investment costs of at least €2,0million. The invested funds shall be channeled towards the financing of theinvestment objectives of these companies exclusively in Cyprus, based on aspecific investment plan.

The applications shall beevaluated to verify that the companies or organizations have proven physicalpresence in Cyprus, with significant activity and turnover and employ at leastfive (5) Cypriot or citizens of European Union member-states. The minimumnumber of employees shall increase, if more than one applicant investsimultaneously or almost simultaneously in the same business or company. Inaddition, the employees of the companies need to have legally and continuouslyresided in Cyprus during the five years preceding the application submissiondate.

Α.3Investment in Alternative Investment Funds or financial assets of Cypriotcompanies or Cypriot organizations that are licensed by CySec :

The applicant should have boughtunits of at least €2,0 million from alternative investment funds (AIF)established in the Republic of Cyprus, licensed and supervised by the CySec andwhose investments are made exclusively in the Republic of Cyprus, ininvestments that meet the criteria of this Scheme or in areas approved by theMinister of Finance.

In order to confirm that theinvestments that meet the criteria of the current Scheme will be kept for atleast three years, the manager or the auditor of the Fund shall inform inwriting and on an annual basis, the Ministries of Finance and Interior withreference to the value of the initial investment.

The purchase of financial assetsof Cypriot companies or organizations of at least €2,0 million, such as bonds,bills and securities, issued with the approval of the CySec, by companies thathave proven physical presence and substantial economic activity in the Republicof Cyprus, and have as a purpose the financing of the investment plans of thesecompanies or organizations exclusively in Cyprus, based on an investment plan,fall under this criterion.

It is noted that the purchase byan AIF of units of other AIFs is not considered eligible.

Α.4Combination of the aforementioned investments:

The applicant may proceed with acombination of the above investments, provided that the total investment willamount up to at least €2,0 million.

Within this criterion(combination of investments) the applicant may purchase special governmentbonds of the Republic of Cyprus, up to €500.000, which will be issued by thePublic Debt Management Office of the Ministry of Finance, on condition that theinvestor will retain these bonds for a three year period. The characteristicsand the terms of these special bonds will be determined by the General andSpecial Issue Terms of the Government Bonds of the Republic of Cyprus.Investments in government bonds through the secondary market are not consideredeligible.

B.TERMS AND CONDITIONS

1. Clean Criminal Record: theapplicant must have a clean criminal record. Furthermore, his name must not beincluded in the list of persons whose assets, within the boundaries of theEuropean Union, have been frozen  as the result of sanctions.

2. Residence in the Republic ofCyprus: In all cases listed in Part A, the applicant must possess a permanentprivately-owned residence in the Republic of Cyprus, the purchase price of whichmust be at least €500.000, plus V.A.T.

It is noted that members of thesame family, who apply separately as investors, can collectively acquire aresidence, provided that the total value of this home-property covers theamount of €500.000 per each applicant.

In case that the purchase valueof the permanent privately owned residence in Cyprus exceeds the amount of€500,000, part of this additional amount can be used for purposes ofsupplementing the total amount of the investment made on the basis of thecriteria of Part A above.

Additionally, it is noted thatif the applicant has invested in housing unit/units on the basis of theaforementioned criterion A.1, the purchase of another permanent residence inCyprus will not be required, if at least one of these housing units is worth atleast €500,000, plus VAT, provided that the applicant retains the possession ofthe residence for life.

3. Residence Permit in Cyprus:The applicant, prior to his/her naturalization as a Cypriot citizen must hold aresidence permit in Cyprus.

If the applicant does notalready hold a residence permit, he/she may apply for an immigration permit onthe basis of Regulation 6 (2) of the Aliens and Immigration Law, simultaneouslywith the application for naturalization. If the application for acquiring animmigration permit is made solely for purposes of acquiring the Cypriotcitizenship, in accordance with the provisions of this Scheme, there are noother conditions than those stated in both Part A and Part B of this Scheme.

It is noted that all of theabove also apply for the adult members of the family of the investor, who willapply for naturalization.

In case the application fornaturalization is rejected for any reason, the immigration permit, obtained inaccordance with the provisions of this Decision, will be canceled immediately.

C.SUBMISSION OF DOCUMENTS

For the evaluation of theapplications the form (M127) as well as the following documents must besubmitted:

1.Clean Criminal Record:

Certificate of Clean CriminalRecord from the country of origin and the country of residence (if different).

2.Residence in the Republic of Cyprus:

(a) Contract of Sale.

(b) Title Deeds or Proof ofRegistration of the contract with the Lands and Surveys Department.

(c) Proof of payment of theagreed purchase price.

(d) Copy of the wire transfer toa Cypriot commercial banking institution in the name of the seller or theseller's company.

(e) An evaluation certificatefrom an independent registered land surveyor, if required by the Ministry ofInterior or the Ministry of Finance.

3.Criteria regarding the investment (when applicable):

(a) Certificate of Registrationof the company/ companies by the Registrar of Companies.

(b) Certificate of shareholdersby the Registrar of Companies or certificates evidencing that the applicant isthe beneficiary owner of the

company/ companies.

(c) Audited accounts of thecompany (or companies) for the last three years preceding the year of theapplication.

(d) If the applicant is ahigh-ranking senior manager, the submission of the employment contract and thereceipt from the Department of Inland Revenue are additionally required.

(e) If the investment is made bythe spouse of the applicant or jointly, a marriage certificate is required.

Furthermore,depending on the case, the following are required:

1.Investment in real estate, land development and infrastructure projects

(a) Contract of sale.

(b) Title Deeds or Proof ofRegistration of the contract with the Lands and Surveys Department. (c) Proofsof payment of the agreed purchase price.

(d) Copy of the wire transfer toa Cypriot commercial banking institution in the name of the seller or the seller'scompany.

(e) An evaluation certificatefrom an independent registered land surveyor, if required by the Ministry ofInterior or the Ministry of Finance.

(f) Investment Plan forthe development of the purchased land, if the investment involves the purchaseof land under development

2.Purchase or Establishment or Participation in Cypriot Companies or Businesses

(a) Contract of sale.

(b) Proof of payment ofthe agreed purchase price.

(c) Certificate ofshareholders by the Registrar of Companies.

(d) Copy of the wiretransfer to a Cypriot commercial banking institution in the name of the companyor the organization.

(e) Specific investmentplan.

(f)  Copies of theemployment contracts of the Cypriot or European Union citizens employed by thecompany in which the applicant has invested.

(g) Confirmation fromthe Social Insurance Department as to the insurable income of the Cypriot orEuropean Union citizens employed in the company.

(h) Copy of the SocialInsurance Contributions for every Cypriot or European Union citizen employee.

(i)  RegistrationCertificate (MEU1) or Permanent Registration Certificate of Union Citizen(MEU3) for employees that are European Union citizens.

3.Investment in Alternative Investment Funds or financial assets of Cypriotcompanies or Cypriot organizations that are licensed by CySec:

(a) Title/Titles andother relevant documents of the financial assets / units purchased.

(b) Copy of the wiretransfer to a Cypriot commercial banking institution in the name of the companyor the organization.

(c) Specific investmentplan.

(d) Confirmation by theCySec.

4. Investment ingovernment bonds:

(a) Proof from thePublic Debt Management Office for the purchase of special government bonds.

(b) Copy of the wiretransfer into a bank account of the Treasury of the Republic of Cyprus.

Any other document thatmight be requested either by the Ministry of Interior, or by the Ministry ofFinance.

None of the above affects theabsolute discretion of the Cabinet of Ministers on taking a decision.