Cyprus is currently evaluating EU rules that impact dual nationality holders in the context of investment screening. The House finance committee met recently to discuss the implications of allowing individuals with dual nationality—specifically from an EU member state and a third country—to invest within the European Union.
Clarifying Investment Eligibility
During the article-by-article review of a harmonising bill, committee members expressed the need for clarification from the European Commission regarding the investment eligibility of these individuals. A representative from the Cyprus Bar Association and the Cyprus International Businesses Association (CIBA) emphasised that the matter should be addressed to avoid potential breaches of EU law, noting that the issue is not explicitly covered in the European directive.
Government Stance on Dual Nationality Investments
The Finance Ministry’s representative responded to queries about the classification of dual nationals as foreign investors. For legal entities, the requirement is that they must be established in an EU member state to qualify for investment applications within the union. However, the eligibility of natural persons with dual nationality remains under discussion, as the ministry seeks guidance from the European Commission.
Framework for Foreign Direct Investment
The bill aims to align Cyprus with European practices by introducing a national framework for screening foreign direct investments. It seeks to establish stricter controls on investments deemed strategically important while maintaining Cyprus’s appeal as a competitive investment destination.
Safeguards and Concerns Addressed
After the session, Dipa MP Alekos Tryfonides provided insights into the bill’s purpose. He noted that it creates a robust framework for controlling foreign direct investments in the EU, enhancing provisions from a previous bill and incorporating feedback from stakeholders. Tryfonides highlighted that the new legislation introduces safeguards with strict criteria, enabling the state to intervene in significant acquisitions that could pose risks to the security or public order of Cyprus.
He acknowledged that the concerns regarding potential impacts on existing foreign investments in Cyprus have been somewhat alleviated, although uncertainties remain regarding the law’s effect on attracting new investment.
Controversial Provisions Under Consideration
Among the contentious points discussed, Tryfonides mentioned the retroactive effect of the proposed legislation. This provision allows for the screening of foreign direct investments made up to 15 months prior and includes the possibility of cancelling transactions if irregularities are found. Additionally, there is ongoing debate about the threshold amount of two million euros, questioning its reasonableness in the context of investment requirements.
