The introduction of the Market in Financial Instruments Directive of the European Union marked a new era in the regulation of investment firms in Europe. Cyprus has implemented the Directive, offering in this way a flexible and reliable entering point into the EU market for both EU firms that require a license and for non-EU firms that wish to have a place of business in the EU.
The regulatory authority for licensing and monitoring Investment Firms is the Cyprus Securities and Exchange Commission (CySec). After the full application is submitted to CySec, the regulatory authority has the obligation to reply within six months, approving or denying the license. Firms that are eligible to obtain an investment license in Cyprus are Cyprus Firms, Branches of Investment Firms established in other Member States and third country investment firms.
1. At least four directors (two executive and two non-executive),the majority of whom must be Cyprus residents. These should also satisfy the fit and proper test (sufficient good repute, experience, professional knowledge)
2. A General Manager, who can be one of the executive directors, with satisfactory knowledge of the activities of the CIF and must be a Cyprus resident
3. Employees offering investment services must hold the certificate obtained from the Ministry of Finance and be registered under the public registry of CySec.
4. Head offices must be located in Cyprus
5. Fully staffed office with the necessary equipment and substance
6. Accounting procedures and financial statements must be audited every year.
7. Compliance officer to ensure the application of anti – money laundering procedures
CIFs, for taxation purposes, are treated as any other Cyprus legal entity. As such, a 12,5% corporate tax is applicable on net profits realized by the CIF.
Indicative tax treatment of a CIF:
• 0% taxation on dividends received from other Cyprus companies
• 0% taxation on dividends received from non-resident companies (provided that the easily-met participation exemption conditions are satisfied)
• 0% taxation on dividend distribution to non-resident shareholders
•0% capital gains tax resulting from investments and sale of securities/titles of Cyprus resident or non-Cyprus resident companies
•0% withholding tax on interest paid to residents and non-residents
Cyprus is a highly regarded and popular jurisdiction for obtaining a license for investment purposes, forex, binary options and others; a door to the investment field and a “passport” to the provision of those services in the European Union.
Over and above the taxation advantages and enhanced tax planning, Cyprus has much more to offer to foreign investors and that is to say the full implementation of the European Directives, the flexibility, the business friendly environment, the great number of Double Tax Treaties and the brilliant support of accounting, legal and banking professionals.