Fintech Revolution

Cyprus had made some revolutionary steps when it comes to investing in fintech entities and the hundreds of gaming, foreign exchange companies and cryptocurrency entities are here to prove it.

Etoro, BDSwiss, Wargaming, Nexters Global are just a few albeit notable examples.

Cyprus outstanding and universally renounced benefits alongside its modern and flexible legal framework have transformed the island to a place of opportunity when it comes to fintech.

From the ease of setting up a fintech company to the resounding IP tax rate of 2.5%, Loizides & Economou LLC is here to explore why Cyprus is legitimately considered to the next universal fintech hub.

Fintech Revolution: World-Renowned Tax Incentives

  • Cyprus has encouraged research and development by introducing a significant 80% tax exemption on profits arising from the exploitation of intellectual property (including patents and copyright software) based on the nexus approach and subject to capital expenditure being written off for a five-year period on qualifying assets. The 80% tax exemption combined with the 12.5% corporate tax rate (among the lowest in Europe) results in an effective tax rate of 2.5%
  • Double tax treaties in respect to more than 60 countries
  • Incentives for new tax residents allowing up to 50% deductions
  • Capital gains and security trading exemption
  • Dividend income exemption based on relaxed conditions
  • Dividend income, royalties and interest are not subject to withholding
  • Tax neutral foreign exchange gains or losses
  • Notional interest and expense deduction under certain circumstances

Fintech Revolution: EU Passporting rights

Cyprus-based fintech companies can take advantage of a single license to provide services across the EEA thus expanding their commercial horizons at virtually no additional cost.

Fintech Revolution: Start-up Visa Scheme

Small to mid-range fintech companies can also take advantage of the recently introduced start-up visa scheme pursuant to which non-EEA entrepreneurs involved with innovative business may be provided a visa to work in Cyprus subject to certain criteria, such as a €20,000 funding and Cyprus based headquarters.

Fintech Revolution: Universal IP Protection

IP protection is at the centre of fintech investment. Cyprus has taken note of that by establishing a robust and universal IP protection framework:

  • Patent protection at an international level under the provisions of the Patent Cooperation Treaty 1970 and under the Convention of the Grant of European Patents (EPC). The patents granted under the EPC or the Patent Cooperation Treaty can then be enforced as national patents to any relevant jurisdictions
  • Copyright protection under the provisions of Law 59/76, Berne Convention for the Protection of Literary and Artistic Works and the World Intellectual Property Organization Copyright Treaty
  • Trademark protection in over 80 countries

Fintech Revolution: Constant and Solid Governmental Support

  • Establishment of the Innovation Hub allowing innovative oriented entities to acquire ongoing access to CySEC's regulatory insights
  • Establishment of Ministry of Research, Innovation and Digital Policy as part of the Ministry of Finance ongoing projects to promote, guide and develop the digital transformation of Cyprus. The said Ministry alongside the Institute for Research and Innovation guarantee that fintech companies will receive specialized support and funding opportunities
  • State participation in important blockchain initiatives such as the European Blockchain Partnership, the Declaration on the Utilisation of Distributed Ledger Technology (DLT)

Fintech Revolution: Our services

The nature of the financial activities alongside the country of establishment determines the type of license under which the fintech company will be operating. Whereas some categories of fintech companies can operate under the legal framework prescribed for limited liability companies, credit institutions, electronic money companies, investment funds and foreign exchange companies shall seek specific licenses from the relevant competent authorities.

Loizides & Economou LLC is trusted leader in establishing, directing, and managing fintech entities.

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.