Cyprus: The Financial Services Sector and Investment Funds

Cyprus: The Financial Services Sector and Investment Funds

The Financial Services Growth Sector in Cyprus has attracted significant amounts of Foreign Direct Investment (FDI). This also includes funds from the European Bank for Reconstruction and Development (EBRD).

The European Investment Bank has been a supporter of Cyprus for 35 years, with investments of 2.7 billion euros. Also, Cypriot banks are all fully recapitalized and regulated by the European Central Bank (ECB) under very strict guidelines. Finally, the Anti-Money Laundering Law 81(I)/2019 is in full effect across all Cypriot financial institutions.

The financial services are considered to be pivotal for Cyprus’ economy. The island is a licensing hub for investments firms that aims to gain access to the territory of EEA under a single license.

Cyprus has a strong network of financial and professional service providers who have highly skilled, educated, and multilingual teams specialized in servicing the fund industry and today offers a wide range of customized services in fund and asset acquisition structuring, fund administration, custody, audit, and other related services.

A Cyprus Investment Firm (CIF) is rightly considered as one of the most suitable options by those wishing to professionally offer and perform regulated investment services and activities within the European Union and internationally.

What are the benefits for the Financial Services Sector in Cyprus?

There are several benefits for the financial services sector in Cyprus some of which are:

The attractive and transparent tax system

Cyprus offers a low corporate tax at 12.5% and a developed network of double tax treaties, boosted investment in fintech. Moreover, there is an 80% tax exemption, on qualifying profits arising out of the exploitation of R&D intellectual property qualifying assets (the IP Box Regime), taking advantage of effective tax as low as 2.5%.
The attestation of the program’s success is the significant number of multinational companies and international banking units already operating in Cyprus. Moreover, more than 8k IT professionals serve the fintech industry locally.

Strong legal framework

Cyprus has put in place all necessary mechanisms for the prevention and suppression of money laundering and terrorist financing activities, being fully compliant with all relevant EU directives.

Freedom to provide investment and ancillary services through passporting

A CIF can use the license granted by CySEC to offer cross-border investment services or establish a branch in another EEA jurisdiction without the need to obtain any additional licenses. This is achieved through what is called passporting.

Low set-up and operational costs

The costs of incorporating a company, the administration costs, the high competence of professionals and the costs of providing professional services in Cyprus are generally lower than most other member states in the European Union that have a similar profile internationally.

Exponential Growth in Investment Funds

There is a steady growth for Investment Funds in Cyprus. More specifically, and according to CySEC, the value of Total Assets Under Management reached €8.58bn in the 4th quarter of 2020, recording a 10.3% increase over the 3rd quarter of the same year, and a 3.8% increase when compared to the 4th quarter of 2019.

Moreover, the statistics for the 4th quarter of 2020 have shown that CySEC supervises 283 Management Companies and Undertakings of Collective Investments (UCIs), of which 197 have operations. In more detail, it supervises 164 Externally Managed UCIs, 56 Internally Managed UCIs and 63 External Fund Managers.

The Total Assets Under Management (AUM) for the 4th quarter of 2020 reached €8.58 billion, with a 3.8% increase compared to the 4th quarter of 2019, and a 10.3% increase since the 3rd quarter of 2020.  The Net Asset Value (NAV) of UCIs (which are managed by the Management Companies) was €6.99 billion.

Due to the introduction of the Registered Alternative Investment Funds, the Cypriot funds’ sector was strengthened, since the time and cost required to set up an AIF was decreased.

For Investment firms, Cyprus has been the jurisdiction of choice for more than 20 years, especially for Forex CFD brokers.

The prospect of a ‘no-deal’ Brexit had seen an increase in financial services companies and fund managers looking at Cyprus as a ‘low cost’ European base to retain EU ‘passporting’ rights. Cyprus is also attractive to investors from Europe, the Middle East and Africa.

Cyprus is also a top emerging fund center in Europe, with visibility enhanced by being able to list Cyprus funds on international platforms such as Bloomberg, Clearstream, Morningstar and Refinitiv.

How can CX Financia help you?

At CX Financia, we have helped clients structure and establish their businesses in Cyprus – some of which required financial services licenses.

We will be happy to discuss your enquiries with you and assist you. You can have a look at our Investment Firms or Investment Funds Services for more information. If you have any additional questions, you can send us an email at [email protected].


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