Tax reforms and the introduction of a new concept of domicile are set to enhance Cyprus’ offering and attract more high-net-worth individuals and top-level professionals such as fund managers and investment analysts to relocate to Cyprus, says Kikis Treppides.
Celebrating 30 years of service to international investors, audit and tax consultancy K. Treppides & Co says the secret to its success is maintaining the high quality of its services. Over the decades, the firm has established itself into a market leader position and with its proactive and forward-thinking approach is set to guard its position for the future.
Your firm has seen much success over the years, how is the business doing today in light of the recent financial crisis?
We continue to enjoy a high level of confidence from investors, who seek our advice in relation to regulated financial entities such as investment funds, investment firms and financial institutions. Although we are still operating with the tag of an accounting firm, we are considered the largest independent consulting firm in Cyprus and are starting to compete with international firms based abroad. The Cyprus services sector took a series of demand shocks in the past eight years ranging from the 2008 Russian crisis, the banking crisis of 2013 and the Ukraine-Russia turmoil in 2014-2015 culminating in the Russian CFC rules. These served as an additional challenge to the decline of mainstream attraction to Cyprus Special Purpose Vehicles (SPVs) and tax planning via the Cyprus company, given the difficulty in opening bank accounts and many countries aggressively trying to stem tax planning opportunities for their nationals. However, we foresaw these challenges and redirected resources in to more high-value engagements with a distinct FinTech flavour. Our firm now enjoys market leader positions in CySEC-regulated investment firms and funds as well as Central Bank of Cyprus regulated Payment and Electronic Money Institutions. Redirecting our focus has permitted our group to remain profitable and expand in both turnover and staff. We further boast one of the largest receivership and liquidation departments in the country, picking up business in times of hardship for other industries. Our Financial Regulation & Advisory arm now has 45 members and three partners with a growth trajectory in the foreseeable future.
How important is the role of professional and financial services in the recovery of the Cypriot economy?
The professional and financial services sectors have and always will be key factors for growth in Cyprus. They have been net contributors to the Cyprus economy for decades and their resilience was proved throughout the financial crisis, as not only did they survive but grow. As key employment sectors they contribute to the wider economy either directly or indirectly, maintaining income streams for the banking and real estate sectors. Thanks to the expertise and solid foundations of the professional services sector, the majority of legal and accounting firms have sustained their clients and attracted more international business to Cyprus.
What are your thoughts on the increasing volume of new EU and international regulation?
The current EU and global compliance and regulatory requirements are certainly imposing more burdens on business, but they also represent new opportunities. The professional services sector has identified the opportunity for Cyprus to be established as a hub for investment firms, financial institutions and funds. These services will be one of the strong pillars for growth. Cyprus was an early adopter of the Foreign Account Tax Compliant Act (FATCA), the US tax legislation that has transformed the landscape in terms of exchange of information between international tax authorities. Cyprus has also adopted the revised European Savings Directive (EUSD) and is set to implement the upcoming Common Reporting Standards (CRS), which is a tax authority’s dream. Cross-border cooperation both politically and in business is at the core of Cyprus, who has always been friendly with Europe and its neighbours in the region, establishing it as an effective stepping stone for MENA, Eurasian and Eastern European countries into Europe and vice versa. This has given impetus to various companies setting up regional and EU headquarters in Cyprus.
What key developments or incentives in Cyprus should foreign investors be aware of?
Cyprus has enjoyed an international reputation as a solid economic and business model, and the recent crisis has not altered this. The existing legal system, beneficial tax regime and the highly qualified professionals continue to provide expert services to investors. The recent tax reforms in Cyprus will enhance our offering. Part of these reforms are the 50% reduction of transfer fees on real estate until the end of 2016 and the exemption from capital gains from future sale of property acquired by the end of 2016. Also municipal property tax will be abolished with local authorities compensated for this loss in their income. Perhaps the most revolutionary aspect is the introduction of the new concept of domicile. Foreign individuals classed as tax residents under the usual day-counting basis can qualify as non-domiciled if they meet certain criteria. Non-doms income from dividends will be exempted from the special defence contribution, thus capping the effective dividend tax rate at a lower percentage. This provides a real advantage to individuals moving to Cyprus and becoming tax residents. The target is to attract high-net-worth individuals and top-level professionals such as fund managers and investment analysts to relocate to Cyprus.
How do you see Cyprus developing in the short to medium term?
I expect more multinational firms and banks will be encouraged to set up operations and regional headquarters in Cyprus, as we provide an excellent location to service the Middle East and North Africa while providing a secure and stable location offering all the benefits of a Euro-area country. Cyprus is in the progress of being re-branded, so to speak. The country has unjustifiably been associated with a tax haven reputation, leading uninformed investors to perceive it as an unreliable fragile economy with a risk-related attitude. Cyprus has long been a robust EU-compliant jurisdiction adhering to the highest professional standards, and evidence of this is how fast the country exited the 2013 crisis. Naturally there are still some challenges ahead before we can reach the growth of previous years, but most European economies face the same challenge at the moment. Going forward, Cyprus should be seen as a high-compliance and resilient jurisdiction offering cost-effective expert services.
Kikis Treppides is the founder, Chairman and Managing Partner of K. Treppides & Co Ltd. He holds a Banking Degree from the International Banking School of Prague - Czech Republic, is a Fellow Certified Chartered Accountant (FCCA) and an Associate of the Institute of Bankers (AIB), as well as a practicing member of the ICPAC and of the ACCA. Kikis has served for a number of years as member of the International Business, Shipping and Foreign Investments Committee of ICPAC and is a member on the Board of Directors of several of international business associations such as the Cyprus-Russia, the Cyprus-China, the Cyprus-Bulgaria, the Cyprus-Romania and other Business Associations. He has extensive experience in the banking sector and is considered among the founders of the establishment of the Cyprus international business centre and a pioneer in providing services to international business companies.