Governor of the Central Bank of Cyprus Constantinos Herodotou told an online conference hosted by Invest Cyprus, the national investment promotion agency, that the prospect of a ‘no-deal’ Brexit had seen an increase in financial services companies looking at Cyprus as a ‘low cost’ European base to retain EU ‘passporting’ rights.
Titled ‘Cyprus’s Proposition for the UK’s Financial Services Industry’, the conference focused on Cyprus’s post-Brexit offering to financial services firms, fintechs, investment funds, asset managers and insurers. Speakers pointed to the island’s access to the EU and high growth markets, a modern flexible legal framework based on English common law, the highly-educated workforce and its low business costs compared to Malta, Netherlands, Ireland and Luxembourg.
A survey of conference participants, which included financial institutions, fintechs, funds managers, legal and accountancy firms highlighted industry concerns over Brexit, with 76.9% of participants claiming the future of the UK financial services sector depended on the outcome of the Brexit negotiations. Just 2.6% said Brexit would have no impact.
Some 40% said EU passporting rights were the most important factor for them to consider moving their business, followed by ease of doing business (20%) and the tax regime (20%). Around 5,476 firms based in the UK currently benefit from passporting, while 8,000 companies in the European Economic Area (EEA) use the mechanism to offer services in the UK.
“In recent years we have clearly noticed an increase in number of institutions licensed by us and we view this interest in obtaining licences from the Central Bank of Cyprus positively, while at the same time maintaining high supervisory standards,” said Herodotou.
“Anti-money laundering compliance constitutes a permanent challenge for all members of the eurozone and the euro system. For the Central Bank of Cyprus, it is of utmost importance that all supervised institutions exhibit the necessary compliance culture … In this manner, we add value to the institutions licensed by us which, in turn, can take pride in working in a reputable, cooperative regulated environment.”
Vice-Chair of the Cyprus Securities & Exchange Commission (CySEC) George Theocharides said CySEC had established an innovation hub to foster the dialogue with the industry and provide informal feedback into how regulation applied to new fintech.
He further highlighted the incentives available in Cyprus to UK funds and fund managers: “First, as a full EU member state, regulated fund activities enjoy access to the EEA market and associated passporting regime. Also, the fund regulatory framework is set up in such a way that ensures full alignment between possible investor types and corresponding risk appetite.
“I should also mention that the funds eco system in Cyprus is well developed with a strong network of ancillary professional services and, lastly, on a practical point, licensing supervisory processes for the CySEC licensed fund managers and investment funds, including legal, regulatory, commercial documentation takes place entirely in English.”
Chief Executive of Invest Cyprus George Campanellas said: “All the ingredients that have made Cyprus a top destination for shipping management exist also for hosting tech companies coming to the island. For the tech sector, the attractive intellectual property regime in our country allows for up to 80% of qualifying profits and intangible assets to be tax deductible expenses, so the effective tax rates for taking advantage of IP can be as low as 2.5%. We believe in the next period we will see more companies choosing the island to host their European operations.”
Sovereign’s office in Cyprus has the expertise and experience to assist firms with the establishment and licensing process in Cyprus for any of the licences below:
- Alternative Investment Fund (AIF)
- Investment Firm (CIF)
- Insurance Company
- Credit Acquiring Company
- Payment Institution (PI)
- Electronic Money Institution (EMI)