Special Government Bonds

The Scheme

In respect of the Cyprus Investment Scheme (CIS) an option to invest a maximum of EUR 500,000 in special Cyprus government bonds is given.

Bear in mind that these bonds can only be purchased by natural persons as per the terms of the bonds.

The Framework

The special Cyprus government bonds are issued by the Public Debt Management Office of the Ministry of Finance, through the Cyprus Stock Exchange (for and on account of the Republic of Cyprus).

The issuance is governed by the Public Debt Management Laws of 2012 and 2016 and the Public Debt Management (Collective Action Clauses) Regulations of 2012. Article 7 (2) of the Public Debt Management Laws of 2012 and 2016 specifies for which purposes the proceeds from the issuance of the bonds are used after they are credited to the Consolidated Fund of the Republic.

The terms of these bonds are determined by the General and Special Issue Terms of the Government Bond of the Republic of Cyprus.

General Terms

The Cyprus stock Exchange maintains a Registry of Holders and the bonds (after three years of their issuance) may be listed on the Cyprus Stock Exchange for trading, if the Ministry of Finance so decides.

Series Issuance

The bonds are issued in series. Each series is issued on the first business day of each month.

Interest

The interest received from the bonds is paid annually on the date specified in the Specific Terms of each series and is calculated on the following formula: Coupon x days of holding the bonds : 365. For example:

0.75% (annual coupon for series 8) x 20 days : 365 (in the year 2018) = 0.04%.

Therefore, if a person has purchased EUR 1,000 of series 8 special government bonds and has held these for 20 days in 2018, they will receive EUR 40 (1,000 x 0.04) in interest.

Transfer

The bonds may be transferred for EUR 100 or multiples thereof. Moreover, the bonds can be pledged.

Bonds held by minors cannot be transferred or pledged unless otherwise so provided through court order.

Tax treatment

In the event that the holder of the bond is a domiciled Cyprus tax resident, Special Contribution for Defence of an amount of 3% will be withheld from the interest on the bond.

Exemption from Fees and Charges

The relevant authorities do not charge fees for adding a holder on the Registry of Holders or for the issuance of the relevant certificate.

Moreover, any agreement in respect of the transfer of bonds is not subject to stamp duty.

Repayment

On maturity the bonds are repaid at their nominal value, unless they have not been cancelled previously (either through buyback or through bond exchange).

Security

The capital and interest in respect of the bonds shall be debited from the Consolidated Fund and shall have the same order of priority as any other public debt of the Republic of Cyprus.

Possibility of Buyback or Exchange

If agreed between the bond holder and the Public Debt Management Office, the bonds may be redeemed or exchanged prior to their maturity and cancelled according to the Specific Terms of the series.

Specific Terms

In the specific terms of each bond series, amongst others, the following is regulated:

  • Total Nominal Value;
  • Date of Issuance;
  • Maturity (the bonds issued at this moment have a seven-year final maturity. This can off course change);
  • Interest (the bonds issued at this moment have an annual coupon of 0.75%. This can off course change);
  • Interest Payment;
  • Repayment.

Applications

Applications for government bonds must be submitted from the 1st business day of the previous month until the 20th day of the previous month (if such is not a business day, then the last day preceding the 20th day of the previous month which is a business day should be followed).

Applications can be submitted personally with the Cyprus Stock Exchange or sent by mail (Cyprus Stock Exchange, Lord Byron Avenue 71-73, 1096 P.O. Box 25427, Nicosia).

In the event that documents are send by mail, note that these should be sent in original and that any signatures on the documents should be certified by the Embassy of Cyprus in the country of residence of the applicant. The copy of the passport should be legalized by “Apostille” by the issuing country. In the event that the issuing country has not signed The Hague Convention, then the passport should be stamped by the Ministry of Foreign Affairs of the issuing country, stamped by the Embassy of Cyprus in the issuing country and counter stamped by the Ministry of Foreign Affairs of the Republic of Cyprus.

In all cases, please note that all documents should be (translated) in English.

Documents

Prior to filling the application, the following documents will need to be gathered:

  • Copy of the passport of the applicant;
  • Copy of a utility bill (not older than 3 months. This is necessary for verifying the applicants address);
  • Letter from the bank indicating the name of the beneficiary, IBAN, SWIFT, name and address of the bank;
  • Form 1A, Form 1 and Form 9 (these will be provided to you by your law firm);
  • Power of Attorney (this will be provided to you by your law firm);
  • Proof of payment. Payment of the bonds can be done in 3 manners:
  1. Through bank transfer to the account of the government held with the Central Bank of Cyprus (IBAN:  CY59 0010 0001 0000 0000 0600 1012, SWIFT: CBCYCY2N). Proof of this transfer, indicating the name of the applicant should be enclosed in the application;
  2. By personal cheque of the applicant issued in the name of the Accountant General of the Republic;
  3. By banker’s draft issued in the name of the Accountant General of the Republic. Such should be accompanied by proof on which the applicant’s name and the account number from which the bank draft was issued, appear.

Note that on the Form 1A, the nominal value of the bonds for which the applicant wishes to apply should be indicated. The bonds are allocated at their nominal value and bonds should be purchased for a minimum of EUR 1,000. Anything beyond this minimum should be a multiple of EUR 100.

Moreover, the bonds may be purchased jointly. In such case the forms will need to be signed by all applicants.

Submission and assessment

The Cyprus Stock Exchange will accept an application if such is complete but will inform the applicant at a later stage (after the issue date of the bonds) in writing whether the application has been (partially) approved or (partially) rejected.

The application is reviewed by the Public Debt Management Office of the Ministry of Finance.

In the event that the application has been (partially) rejected, the funds paid for the bonds will be repaid (after the issue date of the bonds).

Cap

Applications are processed based on the date of submission. A monthly cap is imposed on these bonds of EUR 5,000,000. However, the Head of the Public Debt Management Office may at his discretion accept oversubscriptions.

Fixed government fees

Expense for each application Fee
Stamp on Power of Attorney EUR 6
Filling of Power of Attorney EUR 5
Opening of securities account EUR 10
Statement of Securities account EUR 4
Total EUR 25

Important to note

The Specific Terms of each series may vary and with that the application dates and other conditions. It is therefore advisable that the Specific and General Terms are revisited in the event that there is an interest in investing in special government bonds.

This memo is meant as a guideline. Any changes in procedure or law may not be incorporated herein. We advise that you contact Maritsa Chatzichristodoulou & Associates LLC at info@attorneycy.com for further information and custom advise to your particular circumstances.


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