Cyprus

Cyprus is one of the European Union’s international financial centers, largely due to a combination of its EU membership providing access to the single market, business-friendly policies from Cyprus government agencies and regulators, especially in the securities industry, a relatively large banking sector which has been traditionally oriented towards nonresident business, and its tax regime with some of the lowest corporate taxes across the continent, and a comprehensive network of double tax treaties.

Cyprus has been a significant player in the offshore industry for decades. For instance, in the 1990s and 2000s, Cypriot banks onboarded offshore companies without major restrictions. Cyprus was a favoured destination for Russian businesses due to historical ties between the two regions and the close relationships between the Cypriot elite and Russia. Cyprus companies and banks were largely used by Russian business groups to channel their investment activities overseas, serving as conduit for investments in Europe and the Middle-east.

The Greek bond crisis in 2010 and the subsequent bond haircut led to financial troubles in many Cypriot banks, which were heavily exposed to Greek debt, given the economic and cultural ties between Greece and Cyprus. The subsequent government bailout and bank bail-in triggered extensive reviews of Cyprus's banking sector from an anti-money laundering (AML) perspective by international bodies. Since then, nonresident banking in Cyprus has become significantly stricter in line with other financial centers.

That being said, banks in Cyprus are still open for nonresident business, especially for nonresident-owned Cypriot and EU companies. While economic substance requirements align with EU banking standards for commercial activities, they are relatively more lenient compared to other EU jurisdictions.

Cyprus's economy and public finances have also impressively recovered, making it one of the few EU jurisdictions constantly running budget surpluses. Relevant reports suggest that the banks are in good shape and have rebounded from the 2010 bail-in.

The country still maintains a very large banking sector relative to its local economy and GDP. Despite tighter regulations and a shift in focus, the sector's size remains significant, reflecting the country's continued role as a key financial hub within the EU.

The regulator of the banking sector in Cyprus is the Central Bank of Cyprus (CBC), which implements EU regulations and directives related to banking and financial services. Additionally, Cyprus's banking sector is subject to oversight by European Union regulatory bodies, such as the European Central Bank (ECB), given its Eurozone membership.

The banking sector in Cyprus is primarily composed of local banks and subsidiaries of Greek banks, such as Bank of Cyprus, Hellenic Bank, and Alpha Bank. There is no major presence of international banking groups, other than the French giant Societe Generale.

Offshore companies based in tax havens are still eligible for banking services, but mostly for investment purposes and they are subject to certain requirements, such as, commonly, the appointment of an auditor. Offshore companies carrying out commercial activities find it increasingly difficult to bank in Cyprus unless they have relevant economic substance and preferably a registered tax presence such as a permanent establishment in the EU. Exceptions are occasionally made from time to time on a case-by-case basis.

Foreign-owned Cypriot and EU companies, as well as non-tax haven foreign businesses entering the European market, generally find no major issue with opening accounts in Cyprus unless their activities are considered of “high risk”. Certain level of economic substance may be required for commercial activities in certain cases but as provided above, the Cypriot banking sector is perhaps one of the most lenient on this aspect across Europe.

Cyprus banks commonly serve trade, transactional, and commercial banking needs, although they all offer private banking and wealth management services. Additionally, the banking sector plays a crucial role in supporting Cyprus's very large shipping industry.

The island has also emerged as a hub for securities businesses, particularly companies dealing and/or brokering in Forex CFDs, primarily due to the approach taken by the Cyprus Securities and Exchange Commission (CySEC), its EU membership providing ‘passporting’ rights across the EU, and its competitive tax rates and incentives. Cypriot banks offer tailored banking services to support the operations of the local Forex brokers.

Cyprus has also caught the attention of large crypto asset service providers (CASP) after the entry into force of the regulatory registration scheme for CASPs under the AML/CTF regime. A number of CASP registration applications have been filed with the CySEC. However, Cypriot banks are still currently hesitant to onboard companies in the crypto asset industry, although advancements are being made in that area for those companies that are regulated by the CySEC. One can expect that once the Markets in Crypto Assets Directive (MiCA) enters into force and is fully implemented, MiCA-licensed entities will have access to a broader range of banks in Cyprus.

Cyprus also hosts a number of electronic money institutions (EMIs). EMIs are financial institutions that are authorized to provide payment services such as account issuance, fund transfers, remittances, currency exchange, or prepaid instruments (e.g. debit cards).

EMIs in Cyprus are also regulated by the CBC and must adhere to the relevant EU directives EMIs in Cyprus serve a wide range of customers, including both resident and nonresident individuals and companies, including offshore companies.

From a personal banking perspective, nonresidents are still welcomed in Cyprus banks. Typically, the initial deposits required range from EUR 25,000 to EUR 100,000 for regular personal banking, and EUR 500,000 for private banking.

Our services in Cyprus focus on assisting foreign-owned Cyprus companies in opening business accounts for transactional purposes, as well as wealth management accounts for offshore companies and non-resident individuals.