CyprusProfile talks to Charalambos Samir, Founder & CEO of ConnectedSky Legal & Corporate Consultants Ltd about prospects for the Cyprus economy.
What key areas of opportunity or growth do you see in your sector, and what are your expectations for Cyprus in 2017?
Regardless of the economic challenges the country has faced in 2016, its continuing attraction from a corporate perspective has yet to disappoint. With a steady increase in the numbers of applications filed for the registration of new companies, Cyprus has clearly maintained its position as a jurisdiction of preference.
Within the current challenging financial environment where low and/or zero tax jurisdictions are no longer fully compatible with the new regulatory framework such as the Common Reporting Standard (CRS), it became apparent that the Cypriot Tax Laws are of significant advantage to both individual and corporate investors.
Even from an international perspective, the island’s progress has not gone unnoticed. International Credit Rating Agencies have expressed their increased confidence through various upgrades and the international markets have furthermore rewarded the island with successful bond issues, generating over €2 billion. Whilst correctly anticipating the growing foreign interest, Cyprus furthermore climbed 13 places in the rankings of the World Bank’s 2016 Doing Business Report confirming its position as a top Foreign Direct Investment (FDI) location.
Even though Cyprus is undoubtedly a newcomer when compared to mature fund centres such as Ireland and Luxembourg, it seems that investor interest is on the rise in what could potentially turn into a multi-billion business. Efforts from the Cypriot regulatory authorities resulting in an advantageous EU-approved legislative framework have cleared the way for Cyprus as a growing domicile for investment funds and asset management. Combined with the country’s attractive fiscal framework, fund managers and promoters have progressively been moving into Cyprus thus reshaping the Cypriot fund landscape and raising investor confidence.
Distinctly, Cyprus is becoming a more attractive financial centre, especially for Cyprus Investment Firms (CIF) and Alternative Investment Funds (AIF). In this context, the Cyprus Securities and Exchange Commission is encouraging such developments and has performed amazingly to help promote Cyprus as a financial centre. We expect to see an increase and even a high demand of international investors needing to establish a Cyprus Investment Firm or Alternative Investment Fund for their international business.
The biggest changes in corporate and legal sector in 2016 have been with regard to the compliance and due diligence procedures as to find and prevent money laundering and other illegal activities. Although these changes began some years ago, last year there was clearly more pressure applied to strengthen internal procedures, which has definitely been a positive occurrence. For example, to open a new bank account, banks must now have personal meetings with the beneficial owners of a company either through a Skype conference call or through a personal meeting. As lawyers, we are the introducers to the banks and the banks themselves need to know who the people behind the company are. This trend will continue in 2017, too.
Another significant change in 2016 has been the investment needed to apply for citizenship and the acquisition of a Cyprus passport. Previously 5 million Euro, the fee has now dropped to 2 million Euro. In addition, last year the collective investment scheme has been abolished – in the past, five persons needed to invest 2.5 million Euro each (12.5 million Euro total) to acquire a Cypriot passport, but if one application was rejected, all were frozen. These new changes and the new minimum investment have made applications more attractive. In addition, investors can ‘top up’ the application and invest an additional half a million Euro to apply for a Cypriot passport for their parents. This completely new legislation effectively means that an investor can apply for a Cypriot citizenship and passport for himself, his wife, children and parents for a total amount of 2.5 million Euro, rather than the 12.5 million Euro that would have been necessary previously. The application procedure usually takes between 3-6 months, which is being accepted by clients a logical and proper period for their application to be processed.
In the light of the above, in 2017 we expect to see an increase of foreign investors looking to invest in real estate and to acquire a Cypriot passport, with a specific emphasis in seaside cities such as Limassol, Larnaca, Ayia Napa, Protaras and Pafos. Investors who are looking to either purchase or build real estate, hotels, apartments, offices or a combination of any of the aforementioned. Also in 2017, we are expecting many companies to re-domicile to Cyprus. To transfer-in their headquarters from abroad, which will allow them to benefit from the various tax schemes that Cyprus has to offer.
Moreover, the setting up of so-called ‘substance’ in Cyprus is generating considerable foreign interest, particularly from investors in China, Russia, Ukraine and Poland. Clients understand that if they have a Cypriot company, they will need to have substance as well. This concretely means that the management and control of the company needs to be run from a fully-fledged office with local staff who were hired in Cyprus, and not from a virtual office, which again will boost Cyprus economy.
I strongly believe that everybody collectively needs to promote Cyprus as a financial and properly regulated business partner. All lawyers, auditors, legal practitioners and other business professionals need to maintain high levels of standards and ethics. We must not overcharge clients; we should maintain competitive prices and offer quality services that are even better than Luxembourg. We also need to look at the concept of setting up family offices in Cyprus, something that is becoming more popular internationally (in London, Switzerland and Luxembourg). There is a great need for this service here.