The Cyprus Holding Company

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Cyprus is an EU member State since 2004 and has been using the Euro since 2008. Besides being fully compliant with all related EU legislation, the code of Conduct for Business Taxation and against harmful tax competition and featuring on the OECD White list since 2009, the Cyprus tax law is one of the most up-to-date, relevant and efficient tax systems in the EU.

There are various opportunities, both for individuals and domestic or global businesses to benefit from tax optimization in an internationally recognized, competitive and reputable business centre.

Cyprus enjoys a strategic position at the crossroads of Europe, the Middle East and Asia, making it a hub for business and trade.

As a result, Cyprus has grown into a substantial player in the international financial arena. Building on its good reputation as an international business centre and an experience of more than 35 years, the country offers high-skilled and multilingual professionals, highly-reliable infrastructure, and a stable and transparent legal system based on UK common law.

All the above make a compelling case in favour of Cyprus, and tax professionals see in Cyprus great value in establishing businesses in a modern, European and competitive tax environment.

The purpose of this document is to discuss only the major tax considerations for an international group to factor in when choosing the location of its holding company.

Traditionally, a holding company’s primary use is to hold assets and participations in other companies and generally does not carry out any trading activities itself.

The main fiscal and non-fiscal objectives are as follows:

  • Legal protection for certain trading operation assets of a group by keeping the assets in a separate holding vehicle that is not involved in trading activities.
  • Optimise sheltering of profits and repatriation strategies
  • Set up tax efficient structures for group/company shareholders by the creation of a group for corporation tax purposes bringing a more streamlined and efficient handling of group taxes
  • More practical, cost-efficient acquisition and disposal of participations with less and less barriers to capital movements in the world today. An increasing number of European countries have been introducing holding company regimes, making it difficult for multinational group to make their pick. Tax differences have become a very significant factor in strategic decisions, thus investors opt for the investment structures with the least tax leakage.

Start a conversation with us today to find out how you can benefit from a Cyprus Holding Company.

The Cyprus Limited Liability Company

The legal framework for Cyprus-registered companies is the Cypriot Companies Law, Chapter 113 of the laws of Cyprus, as amended (The Companies Law). This law is similar to the United Kingdom’s former Companies Act 1948, with the exception of several amendments since Cyprus’ accession to the EU.

According to section 29 of the Companies Law a private company is defined as follows:

“A private company means a company which by its articles of association specifically:

  • Restricts the right to transfer its shares.
  • Limits the number of its members to 50.
  • Prohibits any invitation to the public to subscribe for its shares or debentures.”

Incorporation and capacity to contract

The private Company limited by shares, known as the Cyprus Limited Liability Company, is the type of company that is chosen almost exclusively by foreign investors who identified an interest in creating a Cyprus registered company.

This structure acquires legal entity upon incorporation in the Registrar of Companies, which issues a Certificate of Incorporation and constitutes conclusive evidence that the company has satisfied all legal requirements in respect of incorporation and is duly registered under the Companies Law.

The memorandum of association of a Cyprus company includes:

  • the amount of share capital the company will have
  • how the share capital is divided into shares of a fixed amount

The standard registration timeframe of a Cyprus private Company limited by shares is five working days.

Authorised & Issued Share Capital

The company’s “authorised” capital is the amount of share capital stated in the memorandum of association and has no impact whatsoever on assessing the company’s creditworthiness. It indicates the maximum number of shares that the company can issue.

For Cyprus private limited companies, there is no maximum or minimum authorised share capital.

The authorised share capital can be denominated in any of the main currencies, with the Euro being the default currency.

The minimum fixed amount of each share is not required to be of Euro 1, thus any subdivisions of the currency are allowed for setting the minimum fixed value of a share.

The issued share capital is the number of shares from the authorised share capital that have been issued, the amount of which cannot exceed the amount of the authorised capital.

Companies are not required to issue all their authorised share capital and a Cyprus limited company can be therefore established with only Euro 1 as issued share capital.

Payment for shares

The law does not require that full payment should be made on the allotment of shares, neither does it require that payment should be made wholly in cash.

Payment for shares can take the form of services, property, goods, good will, know-how, shares in another company.

Shares may be apportioned for payment in one of the following ways:

  • 100% cash;
  • Partly cash and partly non-cash
  • 100% non-cash

Directors

A Cyprus Limited Liability Company must have a director who can either be an individual or a legally incorporated entity.

The sole director of the company cannot simultaneously be the secretary of the company.

However, this restriction is not applicable to single member private limited liability companies having a single member. In this case, the sole member can also act both as the sole’ director and the secretary of the company.

Residency status of a director

The law does not require directors of Cyprus private limited companies to be Cyprus nationals. Any legally incorporated entity or individual, irrespective of their country of residency can be appointed as the director of a Cyprus Company.

The residency status of a director is important for tax purposes but not for legal ones.

Incorporation in Cyprus alone does not make a company a Cyprus tax resident.

The tax residence status of a Cyprus company will be determined by the tax authorities which will take into consideration the location of the central management and control of the company.

Thus, a Cyprus company will be considered as tax resident in Cyprus if the majority of the board of directors are residents of Cyprus.

Shareholders

There must be at least one registered shareholder, an individual or a legally incorporated entity (local/foreign corporations, foundations).

Secretary

A Cyprus limited liability company must have a secretary. The secretary can be an individual or a legally incorporated entity.

Registered office

A Cyprus limited liability company must have registered offices in the Republic of Cyprus.

All communications such as writs and notices can be served upon the Company to these offices.

Tax Considerations

When choosing an adequate jurisdiction for a holding company, a multinational group takes into account the following factors:

  • Tax regime concerning the realisation of capital gains from future disposal of shares in participation holdings (associate companies, subsidiary).
  • Tax regime regarding dividends paid by the holding company to the shareholders.
  • Tax regime with for the extraction of dividends from subsidiaries with no or low withholding taxes.
  • Tax regime for the taxation of any dividends received from subsidiaries.

Other considerations:

  • Controlled Foreign Companies (CFC) Rules
  • VAT
  • Thin Capitalisation Rules
  • Inheritance or Estate Taxes
  • Transfer pricing
  • Re-organisation rules
  • EU Interest and Royalties Directive
  • Stamp Duty
  • Double Tax Treaties
  • Tax Credit for foreign tax paid
  • Re-Domiciliation of Companies
  • Tax Losses
  • Capital Duty
  • Tax Treatment of Liquidation Proceeds
  • Wealth Taxes
  • Group Relief

Tax regime concerning the realisation of capital gains from the disposal of the shares in participation holdings

Whether the gain is of a capital or of a revenue nature, Cypriot legislation allows full exemption from local taxation on the realisation of capital gains from the disposal of ‘securities’.

As per the law, ‘securities’ include debentures, shares, government bonds and other securities of companies or other legal persons which have been incorporated in Cyprus or abroad.

There is no minimum requirement for any holding period, investment amount or percentage holding.

According to a circular issued by the Cypriot tax authorities, the term ‘securities’ includes; among others, options, short positions on futures, forwards on Securities, swaps on Securities, depositary receipts on Securities (ADRs, GDRs), rights of claim bonds and debentures (rights on interest of these instruments are not included), index participations only if they relate to Securities, repurchase agreements or Repos on Securities, units in open-end or closed-end collective investment schemes). It also identifies as securities specific types of participation in foreign entities. In the event of uncertainty about whether a given financial instrument falls under any of the categories described in the circular, there is a possibility to request a ruling before the Commissioner of Income Tax.

Tax treatment of outward dividends

There is no withholding tax in Cyprus on outward dividends paid by a Cypriot holding company to its ultimate parent company.

This applies to the payment of dividends to resident and non-resident Cyprus companies, irrespective of the country of residency of the parent company, EU country or not.

Payments of outward dividends from a Cypriot holding company to individuals’ non-resident in Cyprus do not suffer withholding tax in Cyprus.

However, payments of outward dividends to Cyprus residents (individuals), are subject to a 17% special defence tax at source.


Inward dividends tax regime

Dividends received from Cypriot participation holdings

Cyprus tax law allows full exemption from local taxation regarding dividends received by a Cyprus holding company from its local subsidiaries. This exemption is given irrespective of the holding period of the shareholding. Also, there is no minimum investment amount or % holding requirements.

Dividends received from non-Cypriot participation holdings

Cyprus tax law allows full exemption (under certain conditions) from local taxation regarding dividends received by a Cyprus holding company from its non-Cypriot participation holdings.

This exemption is given irrespective of the holding period of the shareholding Also, there is no minimum investment amount or % holding requirements.

The exemption will be granted only under both of the following conditions:

  • The company paying the dividend is directly or indirectly engaged in more than fifty per cent (50%) in activities that generate investment income*;
  • The foreign tax burden** on the income of the company which pays the dividend is considerably lower than the Cyprus tax burden.

*Investment income: any income that is not derived or that arises from any business, pensions, employment or annuities which are paid as a result or in connection with a past employment. Dividends and interest can be considered as investment income.

** According to the Cyprus tax authorities, the foreign tax burden is substantially lower when under 6,25%.

There is a 17% defence tax in the case of non-exemption of dividend income.

Tax regime for the extraction of dividends from subsidiary companies

Cyprus holding companies can benefit from reduced or no withholding tax when extracting dividends from foreign participation holdings by relying on Cyprus’ wide double tax treaty network, or on the EU Parent Subsidiary Directive.

There is no taxation if the participation holding is in the capital of a company registered in another member state and if it complies with all the conditions of the EU Parent Subsidiary Directive.

For investments in the capital of a non-EU company or if the conditions of the Parent Subsidiary Directive are not met, Cyprus boasts a wide network of double tax treaties at very attractive rates, particularly for Eastern European investments.

Extraction of Dividends from EU Countries

Cyprus has transposed the EU Parent Subsidiary Directive into Cypriot Law.

Cyprus companies are eligible EU-Companies that benefit from the participation exemption regime. If all conditions of the EU Parent Subsidiary Directive are met, dividends distributed by eligible EU subsidiaries to a Cyprus holding company are not to be subject to withholding taxes in the countries where the EU subsidiaries are registered.

Extraction of Dividends from Non-EU Countries

Thanks to a wide double tax treaty network, in most cases, incoming dividends received by a Cyprus holding company from its foreign subsidiary are exempt from/subject to reduced withholding taxes in the tax jurisdiction of the subsidiary.

These treaties aim to avoid double taxation of income earned in any of the countries party to the treaties.

These agreements usually allow a credit for tax levied by the country of residence of the tax payer, for taxes levied in the other country party to the treaty; as a result, the tax payer does not pay more than the higher of both rates.

Other Significant Tax Considerations
Notional interest deduction (NID)

The NID is available on new qualifying equity issued by a Cyprus company on or after 1st January 2015 and used in the business for the purpose of generating taxable income. It is calculated by multiplying the new qualifying equity amount by a reference interest rate. The reference interest rate is equal to the yield of the 10-year Governmental bond of the country in which the new capital is invested, plus 3%. The NID is deductible against the company’s taxable profits that arise as a result of the newly introduced capital and cannot exceed 80% of the taxable profit as calculated before allowing for this deduction

Controlled Foreign Companies (CFC) Rules

Germany, UK, France, Denmark and several others have implemented CFC legislation. Their CFC rules stipulate that income and in some cases capital gains of a subsidiary or sub­ subsidiary company may be appropriated to the parent company.

CFC rules in Cyprus are not as strict as those in the aforementioned countries. No income is appropriated to the parent company, even if the income arises in a tax haven company.

Thin Capitalisation

Most European countries, with the exception of Austria and Ireland (among several others), have thin capitalisation rules that impose minimum requirements on debt to equity ratio.

A company with thin capitalization is considered as such when its capital when the proportion of debt is much greater than equity, it is highly leveraged. In this case, part of the interest deduction may not be allowed and treated as a dividend distribution.

Cyprus law does not contain such provisions.

Inheritance or Estate Taxes

Cyprus law does not have any inheritance or estate taxes.

Annual corporate levy

Every company registered in Cyprus is subject to annual levy of €350. In case of corporate groups, the total payment is capped at €20.000 allocated to each Cyprus Company.

Wealth Taxes

Cyprus law does not have taxes on wealth.

Tax losses

Group relief is allowed for at least seventy-five percent (75%) group holdings and is applicable only on current year’s results assuming claimants are Cyprus tax resident companies and members of the same group for the whole tax year.

As of January 1st 2015, cross border group relief is allowed under the assumption that the subsidiary company surrendering the losses, is resident in the EU and that all other possibilities for utilising such losses in the country of residency or in the member state of any intermediary holding company, have been exhausted.

Also from the above date, intermediary companies that are not tax residents of Cyprus will be ignored for Group relief purposes, assuming they are tax residents within the EU or in a country with which Cyprus has a double tax treaty in place or an agreement for the exchange of information. Losses incurred by a Cyprus company in relation to business carried outside Cyprus, are allowed as a deduction against taxable profits generated by that Cyprus Company in the current year and any balance can be set off against profits of other group companies for the same year. Losses that cannot be utilised in the current year, are carried forward for a period of five (5) years, commencing from the end of the year to which the losses relate. Losses arising from a foreign Permanent Establishment (PE) can be deducted against the profits of the Cyprus Company.

Future profits of the foreign PE however, will be taxed at the level of the Cyprus Company up to the amount of the losses previously relieved.

Double tax agreements (DTA’s)

Cyprus has currently concluded over 50 agreements for the avoidance of double taxation covering the overwhelming majority of the European countries, the United States of America, Canada, India, China, Russia and the C.I.S. countries.

EU directives

Cyprus has fully adopted all EU Tax related Directives including the Parent Subsidiary, the Interest and Royalties, the Merger Directive, and the Directive on Administrative Cooperation in the field of Direct Taxation.

Tax Credit for foreign tax paid

Irrespective of the existence of a double tax treaty, any tax on income subject to income tax suffered abroad will be credited against any income tax payable on such income.

Stamp Duty

Pursuant to the Stamp Duty Law of 1963 as amended, section 4 of the law, states that every document listed in the first schedule to the law needs to be stamped, if it concerns property that is situated in the Republic of Cyprus, or if it concerns matters or things that are to be executed or to be carried out in the Republic of Cyprus, irrespective of the country where these documents have been drafted or prepared.

Agreements with a value of up to €5.000 are not subject to stamp duty tax. Stamp duty on agreements in excess of €5.000 and up to €170.000 are subject to stamp duty tax of 0,15%. Any amount in excess of €170.000 is subject to stamp duty tax at the rate of 0,20%.

The maximum stamp duty tax per agreement is €20.000. The duty is payable within 30 days from the day of signing of the agreement.

Capital Duty

The Cyprus Companies Act Law stipulates that every company incorporated in Cyprus must pay capital duty on incorporation. This duty is equal to EUR 103 plus 0.6% on the authorised share capital, or on any subsequent increase in the authorised share capital.

This capital duty on incorporation can be avoided as follows: given the absence of capital duty payable on share premium, a company can set up a capital structure with a small authorised capital and issue the shares over their nominal value, at a premium.

Re-Domiciliation of Companies

Re-Domiciliation of Companies in and out of Cyprus is allowed. However, the legislation of the other jurisdiction must also recognize re-domiciliation.

Reorganisation rules

The Cyprus tax legislation has transposed the Merger Directive into the Cyprus income tax law. In accordance with this Directive, there are no tax consequences in the event of a reorganisation that involves a Cyprus holding company.

EU Interest and Royalties Directive

Cyprus has transposed into local legislation the EU Interest and Royalties Directive {Council Directive 2003/49/EC dated June 2003 on a common system of taxation applicable to interest and royalty payments between associated companies of different Member States).

However, Cyprus tax rules are more liberal than the Directive requirements.

  • No withholding tax on interest payments that are made to companies or individuals who are non-resident in Cyprus.
    • No withholding tax on royalty payments of which the rights have been granted for use outside Cyprus, whatever the form of the recipient of this income.

Tax Treatment of Liquidation Proceeds

Non-resident shareholders

In the event of the liquidation of a Cyprus resident company, whatever method is used, no taxes are to be paid on the distribution of assets to non-resident shareholders. This concerns dividends, proceeds from liquidation, etc. The only exception to this rule is in the case of a Cyprus Company owning immovable property situated in Cyprus. In this case, the disposal of the property situated in Cyprus can be subject to Capital Gains Tax.

VAT

Holding companies have various structures and purposes, this will determine VAT liability. Companies that do not perform any economic activities are not liable or allowed to register for VAT purposes and therefore cannot claim input VAT.

Not involved in management

Some holding companies may hold shares in subsidiaries, receive dividends but are not playing a role in the management of their investment in the subsidiaries.

If the sole purpose of a holding company is to acquire and hold interest in shares in other companies, with the goal to derive income from dividends, it is not performing an economic activity for VAT purposes and therefore does not have the status of a taxable person.

Involved in management

Holding companies are liable to register for VAT in the event that, in addition to the holding of investments, they have taxable or exempt activities such as:

  • Supplying management services against consideration to subsidiaries;
    • Providing interest bearing financing to its subsidiaries (unless the financing is sourced from dividends that are distributed by its subsidiaries to which finance is granted;
    • Trading in shares: purchase and sale of shares on a regular basis with the goal to profit from the share price fluctuations.

A holding company that is registered for VAT purposes may claim input VAT on services and goods that are acquired in Cyprus and in other EU Member States.

Shipping Companies

The Cypriot Merchant Shipping Legislation (fully approved by the EU) provides for the exemption from taxation on income for qualifying ship owners, charterers and ship managers from the operation of qualifying ships from a qualifying shipping activity. Instead, annual tonnage tax is paid, based on the net tonnage of the ship.  Exemption is also given in relation to the salaries of officers and crew aboard a Cyprus ship.

Ship owners

Ship owners of Cyprus flag ships automatically fall within the scope of the tonnage tax system.

Ship owners, tax residents of Cyprus, of community flag ships and foreign flag ships may opt to be taxed under the tonnage tax system. Ship owners of foreign flag ships must comply with certain requirements to qualify for the option to be taxed under the tonnage system.

These include the requirement that a share of the fleet be comprised of EU flag ships, which share must not be reduced within a three – year period following the exercise of the option. The commercial and strategic management of the fleet be carried out from the EU/EEA.  Any ship owner opting for the tonnage tax system must remain in the system for ten years.

The exemption applies to:

  • Profits derived from the use/chartering out of the ships
  • Interest income relating to the working capital of the company
  • Profits from the disposal of qualifying ships
  • Dividends received from the above profits at all distribution levels
  • Profit from the disposal of ship owning companies and the distribution of this profit

The exemption also applies to the bare boat charterer of a vessel flying the Cyprus flag under parallel registration.

Charterers

Any charterer, tax resident of Cyprus, who charters a ship under bareboat, demise, time or voyage charter is eligible for the tonnage tax system.

The law grants the exemption provided that the option to register for tonnage tax is exercised for all vessels, and provided a composition requirement is met: at least 25% (reduced to 10% under conditions) of the net tonnage of the vessels owned or bare boat chartered in. 17 A charterer opting for the tonnage tax system must remain in the system for ten years.

The exemption applies to:

  • Profits derived from the operation of chartered in ships
  • Interest income relating to the working capital of the company
  • Dividends received from the above profits at all distribution levels .

Ship managers

A ship manager, tax resident of Cyprus, who provides crew and/or technical management services is eligible for the tonnage tax system provided it satisfies certain criteria, which include:

  • Maintain a fully-fledged office in Cyprus with personnel sufficient in number and qualification
  • At least 51% of all onshore personnel must be community citizens
  • At least 2/3 of the total tonnage under management must be managed within the community (any excess of 1/3 taxed under corporation tax) A charterer opting for the tonnage tax system must remain in the system for ten years.

Ship managers pay only 25% of the tonnage tax calculated on the net tonnage of the ship.

The exemption applies to:

  • Profits from technical and/or crew management
  • Dividends paid out of these profits at all levels of distribution
  • Interest income relating to the working capital of the company

Tonnage Tax Rates

Unites of net tonnageRate per 100 units of the net tonnage
Ship owners / chartererShip managers
0 – 1.000€36.50€9.13
1.001 – 10.000€31.03€7.76
10.001 – 25.000€20.08€5.02
25.001 – 40.000€12.78€3.20
In excess of 40.000€7.30€1.83

Any residual tonnage of less than 100 units of net tonnage shall be charged proportionally.

Administration

Tonnage tax is payable on 31 of March each year and is calculated by reference to the net tonnage of the qualifying ships under one’s ownership, charter or management.

Professional Services

Cyprus is broadly recognised as a centre of excellence in the provision of professional services.

With a profusion of highly-skilled and experienced multilingual professionals, Cyprus offers a full range of modern, advanced professional services at competitive rates.

Lawyers, attorneys, auditors, tax advisors, financial advisors and other specialists, who are often educated at the best universities worldwide, offer high-quality services to support all types of businesses, from large listed entities to family offices and entrepreneurs.

Further proof of Cyprus’ recognition as a reputable international financial and business centre is the decision of two of the world’s leading accounting organisations, the Institute of Chartered Accountants in England and Wales (ICAEW) and the Chartered Institute of Management Accountants (CIMA), to select Cyprus as the first country in the world outside the United Kingdom to train ICAEW and CIMA accountants.

Cyprus offers a wide range of professional accounting, auditing, management consultancy, taxation, financial advisory and other administrative services to both the private and public sectors.

With top international accounting firms also established in the island providing services to local as well as international investors, there are currently:

  • More than 4000 active, English-speaking, registered accountants and
  • More than 120 limited accounting firms and 40 partnerships operating in Cyprus;

While in accounting Cyprus follows the International Financial Reporting Standards (IFRS), the country’s legal system is based on English Common Law principles, incorporating the body of laws and regulations of the EU known as the acquis communautaire.

The legal industry, with over 3,000 registered advocates, that in their majority studied and/or qualified in the UK and other top worldwide destinations, and more than 160 limited liability law firms provide a wide range of high quality legal services in areas such as international law, corporate administration and management services, while most large law firms are affiliated or collaborate with international law firms.

Energy
Oil and gas

The discovery of hydrocarbons in Cyprus’ Exclusive Economic Zone (EEZ) has created new and exciting prospects for Cyprus to become an energy hub in the Eastern Mediterranean.  

Prospects in the energy sector are all the more promising thanks to the island’s geostrategic location, connecting Europe and the Black Sea with markets in the Middle East and Asia and its role as a pole of stability and security in the region of the Eastern Mediterranean.

Recent developments have attracted worldwide interest and significant investments from leading international energy giants, such as Noble Energy, Delek, Total, ENI and KOGAS, ExxonMobil as well as renowned international providers operating in the oil and gas auxiliary services sector. Comprehensive strategies are being developed to exploit the country’s wealth not only for local needs, but also for export purposes.

Exploration licences have been granted for several offshore blocks within Cyprus’ EEZ. A consortium of Italy’s ENI and Korea’s KoGas are also exploring three offshore blocks while French oil major Total has exploration rights over one block in the Cyprus EEZ. US firm Noble Energy, operating block 12, the ‘Aphrodite’, and also developing Israeli Tamar and Leviathan gas fields, found an estimated 4.5 trillion cubic feet of natural gas, enough to meet Cyprus’ domestic gas demand for over 100 years.

An initial development and production plan for ‘Aphrodite’ had been submitted in March 2015, while Cyprus is expected to make 70% of the profits from the liquefaction of natural gas. Investments of approximately €3 billion will be needed to build the exploitation structures of the field and the pipelines towards Egypt.

The 3rd licencing round was successfully completed with 6 offers from 8 companies for plots 6,8,10. Both existing and new companies such as ExxonMobil, Qatar Petroleum and Statoil, have placed their bids, showing the continuously increasing international interest for Cyprus’ new oil and gas realities.

Emphasis has also been given on fostering multilateral cooperation with neighbouring countries in exploiting the reserves and building prospective regional pipelines.

Regional cooperation has been successfully enhanced through agreements signed with Israel, Egypt and Lebanon, while Egypt and Cyprus have signed a deal for the transfer of natural gas via pipeline. The deal allows a direct subsea pipeline from Cyprus’s exclusive economic zone (EEZ) to either Egypt’s EEZ or onshore Egypt, for domestic consumption or re-export.

Moreover, Cyprus offers a secure and convenient base for operations for various auxiliary services to the oil and gas industry as well as for company headquarters to support activities in the EMEA region.

An important step in Cyprus’ ambitious plan to evolve as a regional energy hub is the operation of a €300 million oil storage terminal, which opened for business in November 2014, designed and constructed by VTTI Energy Partners LP. Its strategic location makes it the first terminal of its kind in the Eastern Mediterranean, connecting Europe and the Black Sea with markets in the Middle East and Asia. 

The asset currently comprises 28 tanks and capacity of 544,000m³, and offers access to a deep water marine jetty, as well as to road tanker loading facilities. A Phase 2 expansion is currently under evaluation and would create an additional 13 tanks and further capacity of 305,000m³, while the existing Larnaca oil storage facilities are relocated to Vasilikos as well.

Renewable Energy

The energy policy of Cyprus is harmonized with the European Union goal of promoting the use of energy from renewable sources, as a major step towards the reduction of global warming and climate change phenomena.

The EU RES Directive sets out specific national targets to be achieved by each individual Member State, regarding the share of RES generated in each Member State by the year 2020. For Cyprus, the national target states that the share of energy produced from RES must be at least 13% out of the gross national final consumption of energy in 2020.

In light of the above, the Cyprus Government has launched a number of financial measures in the form of governmental grants and/or subsidies, which aim at providing support and incentives for the promotion of RES-E utilization in Cyprus.

The main types of RES technologies which are promoted under these measures for integration in the Cyprus power system are the following:

  • Solar energy
  • Wind energy
  • Biomass

Cyprus ranks first in the world in solar energy use for water heating in households, and has achieved significant progress in the production of energy from Renewable Energy Sources (RES).

Cyprus has already exceeded its intermediate 2020 targets, with RES comprising of about 8.7% of its total electricity generation, compared to the 7.45% threshold for 2015- 2016. In addition, Cyprus holds the EU-28 record according to the “European Solar Thermal Industry Federation” for use of solar water heating systems per capita.

Currently, more than 93% of households and 52% of hotels in Cyprus heat water through solar power heating systems.

Cyprus is on track in achieving its Renewable Energy Sources (RES) target, i.e. to supply 13% of the island’s energy by 2020.

The most important projects relating to power generation from RES concern wind parks and photovoltaic (PV) parks, concentrated solar thermal plants and biomass and biogas utilisation plants. 6 wind parks are currently in operation, while as regards solar energy, 4 PV parks have been connected to the national grid so far, generating 1,000,000 kWh.

Renewable energy is definitely rising and is expected to experience considerable growth in coming years, while the Cyprus government is also welcoming companies with expertise in renewables to bring their operations, know-how and advanced technology to the country.

Banking, Financial Services

Cyprus has a sophisticated and advanced financial services sector, which is expanding rapidly year on year.

Banking is the largest component of the sector, having emerged strong, fully recapitalised and well-regulated out of the financial crisis of prior years. The banking system is fully harmonised with EU legislation and directives. Commercial banking arrangements and practices follow the British model and there are currently over 40 Cypriot and international banks operating in Cyprus. All banks maintain correspondent networks around the world and carry out both traditional and specialised financial transactions.

The Cyprus financial services sector is diverse, comprising of domestic banks, International Banking Units (IBUs), insurance companies, and other companies that offer financial intermediation services. A significant number of international banks operate subsidiaries, branches or representative offices in Cyprus. Banks located in Cyprus offer an array of services ranging from asset management, private banking, international, corporate and investment banking, retail banking, syndicated loans, custodian services and more. In line with business changes, Cyprus’ banking infrastructure has rapidly evolved and adopted the use of advanced technology systems, implemented measures to improve risk management and acquired highly-trained personnel.

For a complete list of credit institutions operating in Cyprus, visit the website of the Central Bank (www. centralbank.gov.cy).

Cyprus’ banking and financial services sector legislation is in line with international best practices and has a simplified. Combined with an effective and transparent tax system, which is fully EU, OECD, FATF, FSF and MONEYVAL compliant, the banking sector is in a position to service clients of all sizes and industries.

The Central Bank of Cyprus, an autonomous institution established in 1963, is the supervising authority of the banking system in Cyprus. The Central Bank of Cyprus follows the Basel Committee and European Union banking regulation directives. In January 2008, the Central Bank of Cyprus was integrated into the Eurosystem under the European Central Bank.

Other regulatory authorities involved in the monitoring of financial institutions include:

  • The Cyprus Securities and Exchange Commission
  • The Co-operative Credit Societies’ Supervision and Development Authority
  • The Commissioner of Insurance Companies (Ministry of Finance)
  • Authority for the Supervision of Pension Funds (Ministry of Labour, Welfare and Social Insurance)

Investment Funds

Cyprus is fast becoming one of the top emerging investment fund centres in Europe thanks to its continuous efforts to upgrade its legislative and regulatory regime, and its strong network of financial and professional services providers. Determined to stay at the forefront of industry developments, Cyprus offers unique access to high-growth markets, compliance with EU fund regulations and international best practices, as well as high quality and cost-efficient support services. The country’s population is one of the most highly educated within the EU, and the expertise of its service providers has established Cyprus as a location of choice for international fund promoters and investors seeking secure and advantageous fund solutions. Service providers support funds throughout their entire life cycle: regulatory approval, administration, custody, annual audit, listing on the Cyprus Stock Exchange (if applicable), order routing, registration, clearing and settlement.

The Cypriot regulatory authorities have worked diligently to bring the funds’ framework in Cyprus up to par with other international jurisdictions. These efforts include the transposition of the Undertakings for Collective Investment in Transferable Securities (UCITS) IV Directive in 2012 and the Alternative Investment Funds Managers Directive (AIFMD) in 2013. Through the laws transposing these two directives, Cyprus offers a European passport to the fund management industry and outstanding possibilities for cross-border and global fund distribution.

The alternative investment funds industry in Cyprus has experienced significant growth in the last few years, with the establishment of a significant number of both UCITS Management Companies and UCITS funds, a trend which is expected to continue.

In an effort to further enhance and grow the Cyprus Investment Funds Industry, the Cyprus Investment Promotion Agency (CIPA) established the Cyprus Investment Funds Association (CIFA), as a natural development of the progress made in promoting Cyprus as a competitive investment funds jurisdiction. In extending its local network, CIFA has established close cooperation with the competent Regulatory Authorities, the Ministry of Finance as well as the relevant Industry Associations and Professional Bodies. At an international level, CIFA is taking the necessary steps to become a national member of widely recognised and respected international bodies. In 2016, CIFA was granted full membership of the European Fund and Asset Management Association (EFAMA).

The increasing number of applications being received by the Cyprus Securities and Exchange Commission (CySEC) for Cyprus Investment Firms (CIFs) is indicative of the enduring attraction of Cyprus as an investment base. The number of CIFs has registered an impressive increase over the years, surging from 50 in 2005 to 195 in June 2015, with the trend expected to continue.

Insurance Services

Cyprus undertook a thorough review of its insurance legislation in 2002, in preparation for accession to the EU in 2004.

The Law on Insurance Services and Other Related Issues of 2002 took effect on January 1st, 2003 and has since been updated to maintain full compliance with all EU directives.

The law aims to protect policyholders’ interests, ensure confidence in and stability of the insurance market and achieve market transparency.

The Insurance Law covers local insurance companies, insurance companies incorporated in another EEA (EU together with Norway, Iceland and Lichtenstein) state and third-country (non-EEA) insurance companies.

The requirements are broadly similar for all, except that certain exemptions are available for companies regulated in another EEA state.

Τhe Insurance Companies Control Service established under article 4 of the Insurance Law, is responsible for supervising the operations of insurance companies.

Information and Communication Technologies (ICT)

ICT is an important driver of productivity, growth and economic performance crossing horizontally all sectors of the economy. The government of Cyprus has identified ICT as one of the country’s priority growth sectors and has developed a Digital Strategy and Action Plan for immediate implementation. Furthermore, in order to promote applied research, development, innovation, technology and entrepreneurship in Cyprus, the Government is looking to promote the establishment of a new large scale Science Technology Park (STP). It is a high impact project, that will host research centres, business incubators, spin-off innovative enterprises and other local and international knowledge based companies, with the aim of promoting new and more competitive knowledge-based products and services.

Main advantages and opportunities of the ICT sector:

  • ICT Ecosystem: Major multinational firms in the ICT industry, including ICT consulting firms, operate regional headquarters in Cyprus using the country as a regional base and gateway (into and out of the EU) for corporate services, such as sales and marketing, project management, software development, systems integration, testing services, training and development, disaster recovery and business continuity, as well as joint R&D among countries of the region.
  • Skills and Expertise: Existing knowledge base and available expertise of highly educated and experienced resources. Cyprus has a very high number of university level educated ICT professionals with international experience and expertise in various technologies and industry sectors. Cyprus has the 2nd highest percentage within European Union countries of University graduates, which reflects the high quality of professionals. 
  • EU Research Funds: As an EU member state, Cyprus attracts EU research funds for Industry-University partnerships. Invest Cyprus acts as a catalyst for the provision of advanced R&D infrastructures and Cypriot talent to foreign companies, who wish to establish Industry-University partnerships with the Cyprus network of Universities and Research Centres. The Cyprus Research Promotion Foundation is currently evaluating and funding companies and projects that have their R&D facilities in Cyprus
  • Taxation: Cyprus offers an attractive and fully transparent tax regime, fully compliant with EU, OECD and international laws, with one of the lowest corporate income tax rates in the EU at 12.5% and an attractive IP regime.

New IP Box main features:

  • Cyprus IP box is fully aligned with the OECD/G20 BEPS Action 5 report.
  • The regulations will provide that qualifying IP types will include patents and copyrighted software.
  • 80% deductions is provided for qualifying profits from qualifying IP.
  • In effect, only 20% of the qualifying profits will be taxed at the rate of 12.5%.
  • A taxpayer may elect not to claim all or part of the available 80% deduction for a particular tax year.
  • Qualifying tax losses in the new Cyprus IP box are restricted to 20% of their amount.
  • The closing of the old Cyprus IP box with transitional rules up to June 30, 2021.

Cyprus welcomes and has the know-how to support Foreign Direct Investment for expansion and development of projects on e-Government, e-Business, e-Learning, e-Inclusion, e-Health and overall ICT services. The country has aligned its ICT and innovation strategy with the flagship initiatives “Digital Agenda for Europe” and “Innovation Union” of the “Europe 2020” growth strategy of the EU.

Source: http://flexi-news

BEINSPIREDBYFLEXIGROUP

We are a team of experienced professionals, all sharing a unique drive for learning and development through teamwork. The Group utilizes its various core activities to implement customized solutions for its clients. Our collective experience spans the areas of Global Corporate & Fiduciary Services, Assurance & Advisory Services, Fund Administration, Tax Advisory, Corporate Governance, Financial Services, Private Wealth Services and Compliance. 

Start a conversation with us today to find out how you can benefit from a relationship with Flexi Group.

Please get in contact with our Head of Business Development:

Mrs Daniella May / Head of Business Development

Tel.: + 357 7000 2 5555 / + 357 22 87 57 55

E: inquiries@flexi-group.net

We also organize calls using Skype. Our flexi Skype ID is web@flexi-group.net

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