Under the CIFs and Investment Firms Law, investment firms are controlled by the Cyprus Securities and Exchange Commission. Investment firms that offer services to third parties need to have a license from CySEC. This license allows companies to establish another branch in EEA jurisdiction without any additional license.
To get CySEC’s authorization for CIF. The company needs to follow a formal application procedure. To follow the procedure and apply for the licensing company needs to meet certain requirements.
- Capital Requirement: This depends upon the company and what services it is offering. For example, a company that does not deal with financial instruments for its own account but holds the client’s money and provides investment services must have an initial capital of €125.000.
- Other requirements: When a company applies for the license it needs to provide required documents along with a business plan, organizational and group structure, an operations manual, completed questionnaire.
- The company needs to have a physical office space in Cyprus.
- The structure of the company should be made keeping in mind to minimize the risk of conflict between company-client and client-client.
- One of the company’s directors should be a resident in Cyprus and he should act as the executive director who passes all the tests.
- Cysec should be satisfied with the company’s internal procedures which should clearly indicate that it is able to avoid conflict with its clients.
Firstly an application is sent to the registrar of the companies to get the approval of the company’s name. Then another application is sent to get the company registered. After this CySEC application is prepared. After going through all the documents CySEC authorizes the CIF and grants license. It takes up to 1-2 months to prepare the document file and submitting it. This process from collecting the paperwork, submitting it and getting the approval can take 5-6 months.
Taxes in CYPRUS
- For the CIF: 12.5% corporate tax will be charged on net profit. Profit from selling titles and dividend received will be free of any taxes.
There is no tax on capital gain except a 20% tax on gains from immovable property. If an immovable property is located in Cyprus or any gain from the sale of shares of the company (that own immovable company) will be charged for 20% tax.
Some services offered by CIF are taxable and some are not.
- For the CIF’s Expatriate Employees: An expatriate individual relocating to Cyprus (irrespective of his/her tax residency or domicile status) is eligible to income tax exemptions on employment income
CIF license benefit
Low set-up costs: Cost of set-up and providing services in Cyprus are lower than the other EU countries.
Low operational costs: If we compare it to other jurisdictions then costs for buying an office are considerably lower in Cyprus. It is lower with a percentage of 30-50%.