Benefits of Financial Companies in Cyprus

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In last few years, Cyprus became one of the most advantageous tax jurisdictions for the large businessmen of Europe and, in particular, of Russia. Due to the government of the island, taxation base is always restructured, and the system becomes more popular. Cyprus has a high reputation because of low taxation rates and constancy of tax laws interpretation. The union of taxation system, first-ranking infrastructure, high living standards with highly-skilled labor supplies and European Union membership makes Cyprus one of the most attractive centers for business in the world.

financial companies

The Review of Financial Companies in Cyprus

Cyprus financial companies can be divided in two groups depending on regulating authority:

  • Financial companies regulated by Cyprus Central Bank;
  • Financial companies regulated by ‘Cyprus Security and Exchange Commission’ (CySEC)

CySEC – Cypriot Security and Exchange Commission – is Cyprus commission, which issues CySEC license. You need such license if you provide investment services, work with securities, money market instruments, make loan services, perform financial analysis or provide exchange-traded services.

To obtain such license in Cyprus is not only cheaper than in other countries of EU but also much faster. After receiving the CySEC license you can work both with European and Asian clients, for those who have Asian companies.

To be acquainted with statistic of license issuance for 2013-2014, to find out more about responsibilities of CySEC and about the organization in whole click HERE. And to know more about filing of the application for obtaining license itself click HERE.

The basis of all financial firms is the organization of Cypriot private company with limit liability (LTD – private limited company) or Cypriot open joint-stock company (PLC – public limited company), which after the registration into Registrar of Cyprus companies will apply to obtain appropriate financial license.

Financial Companies Regulated by the Central Bank

ICIS logoThe Central Bank regulates various forms of financing, which in Cyprus as a whole are called ICIS (International Collective Investment Scheme). Other terms such as UCITS (Undertakings for Collective Investment in Transferable Securities) characterize different business goals and consequently describe ICIS license type.

ICIS – investment funds. ICIS often are closed end funds. However, in this context the term ‘closed’ means that fund units are not publicly advertised. Nevertheless, there is an exception when in fact ICIS are allowed to advertise publicly its units under certain circumstances.

As opposed to other funds within different jurisdictions, including EC, ICIS is regulated fund, which has to confirm to the requirements of the prospectus for securities and be incumbent on delivery of information. Application for ICIS licenses should be provided to the Central Bank.

Financial Companies Regulated by Financial Bodies

Cyprus Investment Firm (CIF) is controlled by Financial Services Authority. Offered by CIF services encompass whole range of finance and ancillary services for which providing CIF needs appropriate license. The requirements for getting the license concern various standards regarding personnel and reporting and minimal capital requirements. CIF registration lasts on average only 4 months.

The range of licensed services starts with provision of investment consultations and finishes with the control license of customer deposits and trade at its own expense.

The license for formation Forex trading online platform is included into this category.

Legal Entities Taxation

Cyprus fulfills all requirements of international financial center. Taxation of legal entities is very attractive because of low tax rate and even the absence of taxation of some income type. Factors due to which many businessmen choose Cyprus are:

+ Corporate tax for companies equals only 12,5% and it is one of the lowest rates within the territory of European Union.

+ Absence of Annual capital tax.

+ Dividends exemption from taxation.

+ Absence of retention tax. That is dividends, which are paid to non-resident stockholders, are not taxed.

+ Exemption of income from operations with securities from capital gains and income tax. Securities include capital stock, bonds, debenture and other securities of firms and legal entities, also warrant certificates for these particular securities related to securities.

+ Property income exemption from taxation.

+ Tax of income from intellectual property rights is 12,5% from 20% of net profits, obtained by the company using its intellectual property rights.

Plans for 2016

Cyprus government strives in all cost to improve the conditions for investors and those who want develop own business inside the territory of Cyprus. What changes in tax system should be expected in 2016?

  1. CIF companiesTo reinvigorate real estate market, future profits from sale of real property, bought until the end of 2016, will be exempted from taxation.
  2. It was decided to reduce by 50% the size of fees collected while running with land plots.
  3. On January the1st, 2016 income tax exemption concerning received dividends will not be applicable in the case, when these particular dividends were exposed to the tax base within the jurisdiction of the firm. If tax exemption of dividends cannot be applied, then dividends would be taxed on income at the rate of 12,5% and they would be exempt from defense fee.

The specialists consider that in such a way Cyprus plans to stop being a magnet for short-lived companies and firms, dodging taxes in its countries, and Cyprus can involve legal and pass-through investments.

VAT is not paid. Who pays?

The basic rate of Cypriot value added tax equals to 19%. Reduced rates in the amount of 9% and 5% are in the use regarding some goods and services. Reduced rates are paid only by those legal bodies that provide such services and goods as:

  • Postal (for example, courier delivery);
  • Medical (owners of clinics, laboratories, dental hospitals; private doctors, nurses, dentists etc.; ambulances; delivery of human organs, blood);
  • Cultural (social organizations, non-for-profit organizations, libraries, museums, zoos, theatres, expositions, lectures, festivals);
  • Services connected with politics, religion, and unionism;
  • Education (private universities/schools, dancing schools, music schools, examination centers, tutors and others);
  • Protection of children and youth, kindergartens;
  • Insurance;
  • Sport services;
  • Services of national TV and radio broadcast.

In Cyprus, housing prices continue falling

The tendency of real estate cutting the prices off will last in Cyprus. By the second quarter of 2015 apartments on the island have already been down 0,4% and houses – 0,3%.

RICSRoyal Institution of Chartered Surveyors (RICS) released such data. RICS is an independent international professional organization that is of concern of experts in realty, building and land-utilization.

By the second quarter of 2015 housing prices reduced most of all in Larnaca – 1,2% for apartments and 3% for houses. And apartments in Nicosia went down in value by 1%, whereas in Paphos they appreciated by 0,1%. In Limassol and Paralimni/Faragusta housing prices are unchanged.

Compared to the second quarter of 2014, average prices of apartments in Cyprus fell by 2,6%. Retail property came down by 5,5%, offices – 1,4% and storages – 2,4%.

So it is high time to take time by the forelock. OLIESERVE can help you with general market research and also with searching for the perfect choice of real estate in accordance with your request. BUSINESS MOVE became easier and more comfortable due to our qualified employees. If you are engaged in investment or financing activity in Cyprus, you need to have financial or fund CySEC license. Our experts are competent in this matter. Together with partners, OLIESERVE is professional of registration and supporting Cypriot investment firms (CIF) regulated by CySEC.

With such reforms in taxation system, low rate of tax, low real estate price, highly experienced labor supplies and profitable location, Cyprus is on the right track to become a business center of Europe.