A. INTRODUCTION

Investment firms are regulated by the Cyprus Securities and Exchange Commission (CySEC), under the CIFs and Investments Firms Law. ( www.cysec.gov.cy )

The investment firms that offer the services that are listed in Appendix 1 must obtain a license from CySEC. The term "investment firm" includes, amongst others, portfolio managers, broker companies, investment advisers, forex trading companies and binary options trading companies, which all fall under the definition of CIFs are regulated by CySEC.

B. LICENSE REQUIREMENTS

For CySEC to grant CIF authorisation, a formal application procedure needs to be followed, and certain requirements must be met, the most important of which are stated below.

1. Capital Requirements

The minimum capital requirement for a CIF depends on the type of services offered:

2. Other Requirements

  1. When applying for a license, a firm must provide, amongst other documents, a business plan, an internal operation manual (which should include the Anti-Money Laundering Procedures,) completed questionnaires from the members of the board, managers and shareholders.
  2. The Board of Directors of the CIF shall consist of at least two executive members and two independent non-executive members. The majority of the members shall be Cyprus residents.
  3. The Memorandum of Association of a CIF must state that the firm operates as an investment firm following the provisions of Law 144(i)/2007. Furthermore, it must state that the company offers or performs investment and ancillary services within the scope of its license.

C. TIME FRAME

Our firm has experience of setting up a Cyprus Investment Firm. We provide assistance with the preparation of the special memorandum and articles of the company. We apply to the Registrar of Companies, firstly for approval of the company's name, then for registration of the company, and then the CySEC application is prepared after collecting all necessary information from the shareholders. After examination and resolution of any issues, CySEC authorises the CIF and grants it a licence. The above procedure, from commencement to final approval by CySEC may take up to 6 months.

D. TAXES IN CYPRUS

a. Profits from CIF's activities

Corporation tax on net profit is 12,5%. However, gains from the sale of titles, and, in most cases, dividends received are exempt from tax.

There is no withholding tax on dividend, interest and royalties paid to non-residents.

b. Capital Gains

Capital gains are not taxable in Cyprus except for the 20% tax on gains on immoveable property that is located in Cyprus, and on any gain from the sale of shares in companies that own immoveable property in Cyprus. All other gains of a capital nature are not taxable.

c. VAT

Value Added Tax issues can be very complex for a CIF, due to the fact that some of the services offered by the CIF could be taxable, and others exempt. We will be happy to provide advice on all VAT issues.

D. EU Passporting

A CIF may establish a branch in the Republic of Cyprus and offer its services given that the services it provides are covered by its licence. Moreover, a CIF may provide investment and ancillary services in another country as long as it is covered by its authorisation. Note that ancillary services can be provided only in combination with investment services.

In addition, an investment firm authorised and supervised by the competent authorities of another country may offer its services in Cyprus by establishing a branch. Specifically, if an investment firm from another country wishes to establish a branch in Cyprus, then the equivalent foreign regulator should send a list of information to CySEC.

E. FEES AND CHARGES

  1. Costs of setup and obtaining CIF authorisation: Our fee for obtaining a CIF licence depends on the number of licenced services the CIF will offer. Additional costs to be invoiced as out of pocket expenses relate to the incorporation and set up of a Cyprus limited liability company and CySEC fees which start from €5.000.
  2. Cost of Administration and other services:

    We are able to provide all of the services a CIF and/or its shareholders require. We provide a full administration, tax, VAT, anti-money laundering compliance, accounting, and internal and statutory audit service.

    The cost will depend mainly on the type and size of the CIF and the level of activity. Our fee is quoted on a case by case basis.
  3. CIF costs to be included in the financial planning

    A CIF will need to maintain a minimal physical presence in Cyprus, in order to maintain its license. Outsourcing is allowed to a degree, but some personnel are still required to be located in Cyprus. Therefore, a reasonable annual budget for the CIF's operational expenses, including the salaries of employees as well as other operational expenses, (e.g. information technology, telephony, electricity, office rent, external and internal auditors, compliance, other professional fees, consumables, etc.,) but not including the salaries of their chief executive and financial officers, will be around €150.000 - €200.000 per annum.

    Setting up a Cyprus Investment firm requires prudential legal support for all necessary licensing and regulatory requirements.
  4. Why Cyprus is a Regional / International Headquartering Centre?

    The Republic of Cyprus is a Member State of the European Union and a member of the Eurozone. Cyprus is right at the top of the EU tax league table in terms of the attractiveness of its tax regime due to its combination of consistency in interpreting EU tax legislation and stability in resisting frequent changes to EU tax laws. It is a well-known fact that operating in a country with an attractive corporate tax regime provides a competitive advantage when competing with overseas businesses. Cyprus is, also, a member of the British Commonwealth, Council of Europe, IMF, UN, World Bank and WTO and is signatory to many international conventions and treaties.

    The Republic of Cyprus is a Member State of the European Union and a member of the Eurozone. Cyprus is right at the top of the EU tax league table in terms of the attractiveness of its tax regime due to its combination of consistency in interpreting EU tax legislation and stability in resisting frequent changes to EU tax laws. It is a well-known fact that operating in a country with an attractive corporate tax regime provides a competitive advantage when competing with overseas businesses. Cyprus is, also, a member of the British Commonwealth, Council of Europe, IMF, UN, World Bank and WTO and is signatory to many international conventions and treaties.

    Cyprus has proven to be an exceptional jurisdiction by virtue of its advantageous tax system. This coupled with the added advantages of EU Membership rightly justify The World Bank's characterization of Cyprus as the region's "Miracle". Cyprus is now a premier holding, finance, royalty and trading company jurisdiction.

    Below you will find facts why Cyprus is an ideal jurisdiction for an EU Base:

    • Low Tax Jurisdiction
    • Diversified, Skilful and Well-Educated Workforce
    • EU Member and International business hub
    • Utilization of EU Directives
    • Transparent regulated banking system aligned with the comprehensive EU legislative framework
    • Wide Network of DTT's
    • No Inheritance Tax – Attractive Legislation for Inheritance Tax Planning
    • Cyprus Holding Companies - Exemptions
    • Can be used as Regional office for Middle East Countries
    • Favourable Corporation Tax and Tax Exemption on Dividends
    • Administration and Operational Costs much lower than any other EU Country
    • Favourable treatments on HNWI and Non-Dom individuals
    • Significant tax reliefs for foreign employees
    • Cyprus Climate
    • Excellent infrastructure, Multilingual Country
    • No CFC Legislation
    • Flexible and Modern Legislation
    • OECD White List Jurisdiction
    • EU Passporting for funds, investment companies, public companies [through Cyprus securities and Exchange Commission, Cyprus Stock Exchange and Emerging Companies Market (ECM equivalent to UK's AIM)]

    The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.