Cyprus: Cyprus Business Headlines: The Introduction Of The EURO And Other Important News

Last Updated: 3 April 2008


Following the introduction of the euro on 1 January 2008 the dual circulation period of one month, in which the Cyprus pound remained legal tender in Cyprus alongside the euro, came to an end on 31 January. With effect from 1 February any remaining Cyprus pounds will have to be exchanged for euro at a bank. Commercial banks will accept Cyprus pounds for exchange into euro until 30 June 2008 and the Central Bank of Cyprus will exchange currency until the end of 2017.

A survey carried out by the Research Centre of the European University Cyprus on behalf of the Central Bank of Cyprus indicates that the changeover to the euro has gone very smoothly so far, with most members of the public having completed the transition early in January. The smooth transition appears to have allayed concerns about the effects of the introduction of the euro, with a majority now believing that the euro will have a beneficial effect both on their personal finances and on the economy of Cyprus.

However, the change to the euro does not mean that the Cyprus pound has completely disappeared. Most Cyprus legislation passed before the euro changeover expresses monetary amounts in Cyprus pounds and has not been amended to replace the old currency with the new. So it is not time to throw away the calculators just yet!


A new Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income between Cyprus and Moldova was signed by the two countries' respective Ministers of Finance on 28 January 2008. When ratified, the new agreement will replace the existing arrangements under the 1982 Cyprus – USSR treaty. There is already a significant amount of investment between Cyprus and Moldova, which aspires to join the EU in due course, and both governments have expressed confidence that the new agreement will bring Cyprus to the top of the list of foreign countries investing in Moldova.


Law 131(I)/2007 has amended the Cyprus Companies Law so that small groups of companies are no longer required to prepare consolidated financial statements and clarified the requirements regarding intermediate holding companies. To qualify for the "small groups" exemption none of the companies in the group may be a public company and the group must satisfy at least two of the following three criteria:

  • aggregate gross assets before deduction of liabilities do not exceed €14.6 million;
  • aggregate turnover does not exceed €29.2 million;
  • average aggregate number of employees does not exceed 250.

The exemption is not available if other legislation to which the group is subject requires the production of consolidated financial statements.

Intermediate holding companies whose ultimate holding company publishes consolidated financial statements in line with generally accepted accounting principles are also exempt from the obligation to prepare consolidated financial statements.

The amendment of the law will remove an administrative burden from small groups of companies and reduce their costs.


Cyprus has now passed the necessary legislation to implement Directive 2004/39/EC of the European Parliament and of the Council on Markets in Financial Instruments and Directive 2006/31/EC of the European Parliament and of the Council of 5 April 2006. Together, these directives establish a comprehensive regulatory framework for the execution of transactions on behalf of investors by stock markets, alternative trading systems and investment firms, with the objective of protecting investors, developing a single market in investment services across the EU, and promoting fair and transparent integrated financial markets.

The new Investment Services and Activities and Regulated Markets Law of 2007, number 144(1) of 2007, which was passed on 25 October 2007, replaces the Investment Firms Law of 2002 with effect from 1 November 2007. As well as implementing the MiFID Directive it also harmonises domestic law with relevant European directives regarding investor compensation schemes; capital adequacy of investment firms and credit institutions; organisational requirements, operating conditions for investment firms and recordkeeping obligations for investment firms, transaction reporting, market transparency and admission of financial instruments to trading.


Law No. 70(I) of 2007 introduced an increase in the penalties for breaches by Cyprus companies of their obligations regarding annual meetings and annual returns.

Failure to lay the financial statements, the directors' report and where required, the auditors' report before the company at an annual general meeting within the prescribed time limit is now a criminal offence and each responsible director is liable to a fine of up to CY£5,000 (€8,543 from 1 January 2008).

Failure to circulate the financial statements, directors' report and where required, the auditors' report to all members and debenture holders of the company not less than 21 days before the date of the annual general meeting is now a criminal offence for the company and each responsible officer, punishable by a fine of up to CY£3,000 (€5,126).

Failure to forward the annual return to the Registrar of Companies within 42 days after the annual general meeting is a criminal offence for the company and each responsible officer, punishable by a fine of up to CY£25 (€42) for each day that the default continues. The Registrar of Companies may also impose an administrative fine of up to CY£5,000 (€8,543) on the company regardless of whether any other prosecution takes place.

Failure to annexe the financial statements, the directors' report and, where required, the auditors' report to the annual return is also a criminal offence for the company and each responsible officer, similarly punishable by a fine of up to CY£25 (€42) for each day that the default continues. The Registrar of Companies may also impose an administrative fine of up to CY£5,000 (€8,543) on the company regardless of whether any other prosecution takes place.


The French international construction group Vinci has announced that the Kinyras consortium, in which it has a 40% stake, has been named as the preliminary preferred bidder for the 30-year PPP contract to build and operate the motorway between Paphos and Polis in the west of Cyprus.

The project consists of the financing, design, construction and operation of a 31 km stretch of motorway at a cost of EUR 470 millions. Vinci's partners in the Kinyras consortium are local companies J&P and Cybarco.

As yet there has been no official announcement by the Cyprus government.


The Central Bank of Cyprus extended its network of bilateral ties in the domain of supervision of credit institutions by signing a Memorandum of Understanding with the Estonian Financial Supervision Authority on 7 November 2007. A similar Memorandum of Understanding with the National Bank of Kyrgyz Republic was signed on 5 December 2007.

The Memoranda of Understanding set out a framework for cooperation and information exchange between the two supervisory authorities with a view to facilitating the consolidated supervision of cross-border establishments and securing the safe and orderly functioning of credit institutions in their respective countries, in accordance with their national laws and regulations.

Memoranda of Understanding have now been signed with the banking supervisory authorities of eighteen countries.


The annual market freedom assessment compiled by the Heritage Foundation, a Washington-based think-tank, and published in the Wall Street Journal rates Cyprus twenty-second out of more than 150 countries studied in terms of market freedom. Cyprus ranks eleventh out of the 41 countries in the European region.

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