Cyprus: Business And Investment Opportunities in Cyprus - 12. International Banking Units (IBUs)

Last Updated: 10 December 1999

The island is emerging as an international banking centre. A substantial number of foreign banks have been granted licences to set up international banking units and conduct international banking activities from the island.

It is the stated policy of the Central Bank of Cyprus to encourage the establishment of IBUs (preferably branches, as opposed to locally incorporated subsidiaries or associated companies) and the authorities are determined to attract reputable banks with an established track record of growth and profitable operation to participate in international banking activities on the island. The Government has shown that it is willing to interpret existing legislation as liberally as possible and even to introduce new legislation where necessary in order to enable IBUs to operate effectively while still adhering to sound banking principles.

12.1 IBUs establishing businesses in Cyprus must comply with the following provisions:

12.1.1 IBUs, whether branches of foreign banks or locally incorporated legal entities, must be licensed under the provisions of the Banking Law, 1997 (66(1)/97).

12.1.2 As a rule, only branches or subsidiaries of banks enjoying a good reputation internationally, and established in countries where there are adequate banking supervision and lenders of last resort facilities, will be considered as eligible for a licence.

12.1.3 Where an IBU is a subsidiary of a foreign bank, the parent bank is expected to provide an appropriate letter of comfort.

12.1.4 They are expected to operate as fully staffed units and not merely as "brass-plate" operations.

12.1.5 Except with special permission from the Central Bank, IBUs must operate wholly on an international basis and all their dealings must be with non-residents and denominated in currencies other than the Cyprus pound.

12.1.6 All IBUs are exempt from most of the monetary policy and credit regulations applicable to local banks, such as the minimum reserve requirement, adherence to maximum interest rates, restrictions on the holding of foreign assets or investments in shares and immovable property. Ratios such as liquidity and capital to risk assets are applicable only to locally incorporated IBUs, but all IBUs are required to supply to the Central Bank such information about their activities as might be requested, to satisfy the Central Bank of their ability to meet their obligations as they fall due and of their adherence generally to sound banking practices.

12.1.7 IBUs must pay an annual fee of US$15,000 to the Central Bank as reimbursement to the latter of the cost of its supervisory function.

12.1.8IBUs must submit to the Central Bank a ‘Letter of Authorization’ which enables the latter to exchange information with the applicant bank’s home banking supervisory authorities.

12.2 Administered Banking Units (ABUs)

Applicant banks which meet the Central Bank’s eligibility rules may also be allowed to establish themselves as Administered Banking Units. ABUs are required to carry on banking business in their own name, but their day-to-day administration should be carried out, on their behalf, by another bank (the "administering bank"), which must be already licensed by the Central Bank to operate in or from within Cyprus. They must submit to the Central Bank a "Letter of Authorization" in the same way as IBUs.

ABUs must enter into a written management agreement with an administering bank.

They must pay an annual fee of US$10,000 to the Central Bank.

12.3 Taxation

If an IBU takes the form of a local branch of a foreign bank with management and control exercised outside Cyprus, no Cyprus tax will be payable; if management and control is exercised in Cyprus then tax is payable at a reduced rate of 4.25%. If the IBU takes the form of a Cyprus incorporated subsidiary of a foreign bank, then it is liable to the reduced rate of 4.25% on its net income as are all other international business companies. From a tax planning point of view, IBUs may be of interest to financial companies in countries which either do not tax at all, or tax in full, active income (and banking is considered to be such an income) emanating from foreign branches. A Cyprus IBU may engage in financing joint venture activities in countries with which Cyprus has entered into a double taxation agreement. This would result in significant tax savings as the interest article of the relevant treaty would serve to eliminate or reduce the withholding tax on outgoing interest payments. Assuming that the IBU can claim the benefit of such double taxation treaties, the net result would be that tax exposure is minimised or eliminated.

12.4 Other Advantages

All other benefits available to international business entities in Cyprus, such as duty-free concessions and exchange control exemption, also apply to IBUs and their expatriate employees.

In addition, the following advantages arising inter alia out of Cyprus' geographical position might be particularly useful to IBUs:-

12.4.1 the possibility of attracting international businesses relating to or connected with neighbouring Middle Eastern and other countries;

12.4.2. the possibility of servicing the transit trade now using the Cyprus ports en route to the Middle East and Africa;

12.4.3. the possibility of specialising in shipping and aviation finance;

12.4.4 the possibility of attracting business from the thriving international community on the island and expatriates as well as from international companies which maintain their international or regional headquarters in Cyprus;

12.4.5. the possibility of providing finance and related financial services such as leasing, asset finance, project finance, etc, to neighbouring countries, CIS, China and India with whom Cyprus has concluded double taxation treaties;

12.4.6 the possibility of playing a role in the reconstruction of Lebanon and Palestine.

The purpose of this publication is to assist clients and associates in clarifying and appreciating the range of opportunities which are available in or through Cyprus. Although every effort has been made to provide the reader with a clear and comprehensive picture of the island's beneficial regime, it should be appreciated that is not possible to cover all aspects comprehensively in a publication of this size.

Individuals or companies who are seriously considering using Cyprus for any of their international business activities are advised to obtain expert professional advice before taking positive action.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions