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Table
Of Statutes
This
is a non-exhaustive list of the main Cyprus statutes affecting
offshore business. The statutes are listed in alphabetical
order, and for each one there is a brief description of its
relevant content if it is not obvious from the title –
click on the statute for a fuller description of the statute
or the legal regime it forms part of.
Banking
Business (Temporary Restrictions) Law of 1939 (banking licences)
Banking Law 1997 (secrecy, confidentiality,
offshore banking)
Capital
Gains Tax (Amendment) Law No. N119(I) of 2002
Central Bank of Cyprus Law 37 of 1975 (secrecy)
Companies Law Chapter 113 (types
of company)
Companies (Amendment) Law of 2000 (Law 2(I)/2000)
Companies (Amendment) (No. 3) Law of 2000 (151(I)/2000)
Companies (Amendment) Law of 2001, Law 76(I) of 2001
Customs and Excise Duties Law 34
of 1975
The
Cyprus Mutual Fund Law 2002
Cyprus Trustee Law Chapter 193
Exchange Control Law Chapter 199
Income Tax (Amendment) Law 15 of
1977 (set up offshore regime)
Income Tax Law No. 118(I) of 2002
Insurance
Companies Laws 1984-1990 (deals with captives)
Insurance
Regulation 1995 (deals with captives)
International
Collective Investment Schemes Law No. 47 (1)/99
International Trusts Law 69(I) of 1992
Legal
Framework for Electronic Signatures and for Relevant Matters
Law (N.188(I)/2004)
Liberalisation
of Investment Laws 1997
Merchant
Shipping (Registration of Ships, Sales and Mortgages) Law
45 of 1963
Merchant
Shipping (Fees and Taxing Provisions) Law 38(I) of 1992
Partnership
and Business Names Law Chapter 116
Prevention and Suppression of Money Laundering
Law 1996
Regulation
of Electronic Communications and Posts Law (112(I)/2004)
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Trust
Law
Cyprus
trust law began with the Cyprus Trustee Law Chapter 193, based
on the English Trustee Act 1925, but the island's trust regime
was brought into line with normal international practice with
the International Trusts Law 69(I) of 1992. The result is
that there are three types of trust available, of which only
the last will normally be of interest to the international
settlor:
Local Trusts are governed by English common law and the original
Trustee Law. The settlor and beneficiaries are normally residents
of Cyprus, and the trust and its property are subject to exchange
controls.
Offshore
Trusts are equally outside the International Trusts legislation,
and are the same as Local Trusts except that their beneficiaries
must be non-resident and all the trust's activities must be
outside Cyprus.
International
Trusts are the normal form of Cyprus Trust used by foreign
settlors. International Trusts have the following key characteristics:
- the settlor
must be non-resident
- the beneficiaries
must also be non-resident (except for local charities)
- one of the
Trustees must be Cypriot (individual or corporate)
- the trust
period may be up to 100 years (longer for charitable trusts)
- confidentiality
is protected in the law, and foreign judgements are specifically
non-recognized
- there is
no registration requirement
- trust documents
are in English
- trust assets
may not include immovable property in Cyprus
- creditors
have to prove intent and must claim within two years
- there is
Stamp Duty of EUR400
- broadly speaking,
the income and assets of International Trusts are not taxable
in Cyprus
It is often
possible to combine Cyprus International Trusts with the island's
network of double-tax treaties
to create very advantageous results.
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Banking
Law
For the offshore investor, Cyprus banking law provides a reasonable
but not outstanding level of non-disclosure.
Offshore
entities must disclose beneficial ownership to the Central
Bank on formation, but Central Bank employees are bound to
secrecy by Section 3 of the Central Bank Law 37 of 1975. Offshore
entities also have to disclose this information to their local
agent, but he can only be forced to divulge it with a Court
Order.
Trustees
do not have to register the beneficiaries of a trust, but
a trustee opening a bank account must disclose beneficial
ownership. Confidentiality on the part of commercial banks
is covered by the Banking Law 1997. Normally speaking, local
banks apply about the same standards of confidentiality as
apply in English law. In December, 2003, the Government announced
plans to breach banking confidentiality, allowing the tax
authorities access to residents' bank accounts. It is not
yet clear whether these plans will go ahead.
The rules
for exchange of information with foreign states are a complex
mixture of the local taxation laws, the network of double-tax
treaties, and international agreements for mutual legal assistance
and the exchange of information to which Cyprus is a signatory,
now further complicated by the EU acquis communitaire which
substantially worsens the position of individuals and corporations
as regards secrecy. However Cyprus law does provide for normal
judicial appeal procedures against treaty requests for information
and cooperation.
The Cyprus
Government has taken strong measures to prevent the use of
the island for money laundering, partly in response to an
influx of doubtful money and unwanted organizations from Russia
and other CIS countries in the early nineties. The Prevention
and Suppression of Money Laundering Law of 1996 has been largely
successful: in April 1998 a Select Committee of Experts from
the Council of Europe reported enthusiastically about the
island's measures to control money laundering.
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Cyprus Investment Company Law
In 2001, as part
of preparations to join the EU, Cyprus began to construct
a modernised regime for mutual fund operation. The
Cyprus Mutual Fund Law came into force in March, 2003,
allowing both native and foreign firms to offer mutual funds
to Cypriot residents. It has been decided by the SEC that
prospectuses can be written in English, though rules will
require that a potential purchaser of the fund has a sufficient
enough grasp of the language to understand the implications
of buying into the fund.
The
major objective of the new law is to provide transparency
in the market place. All funds will have to publicise their
bid/offer rates and make clear commissions and costs in their
promotional literature.
The
Central Bank of Cyprus (Bank) which is the regulatory and
supervisory authority for Schemes, their managers and trustees,
may upon a written application, recognise a company incorporated
under the Cyprus Companies Law, a trust created under the
International Trust Law or a partnership registered under
the Partnership and Business Names Law, as an International
Collective Investment Scheme.
Uder
the new legislation, therefore, a Scheme may take one of the
following forms:
- International
Fixed Capital Company (IFCC)
-
International Variable Capital Company (IVCC)
-
International Unit Trust Scheme (IUTS)
-
lnternational Investment Limited Partnership (IILP)
All four legal types of Schemes, can either be of limited
or unlimited duration.
A
Scheme, once recognised, may be designated by the Bank as:
- A
Scheme to be marketed to the general public;or
-
A Scheme to be marketed solely to experienced investors;
or
-
A private international collective investment scheme.
A manager of a Scheme must be approved by the Bank. In this
respect, a manager must on an ongoing basis, satisfy, among
other, the Bank that, having regard to the investment policy
and the particular investment objectives of the Scheme for
which it acts as manager that it has sufficient financial
and operational resources at its disposal to meet its liabilities,
as well as sufficient investment expertise to conduct its
business effectively.
Trustees
of Schemes must also be approved by the Bank. Under the Law,
only the following can act as trustees of Schemes:
- A
Cyprus local or international bank or an overseas bank established
in a jurisdiction which in the opinion of the Bank exercises
adequate banking supervision and which has such minimum
paid-up share capital as the Bank may from time to time
prescribe; or
-
A local or international or an overseas professional trustee
company which is adequately supervised and which has such
minimum paid up share capital as the Bank may from time
to time prescribe; or
A company incorporated in the Republic, which is a subsidiary
of a person referred to at (1) and (2) above, provided that
its liabilities are fully guaranteed by that person.
Every Scheme, its manager and trustee are subject to on-site
inspections by the Central Bank of Cyprus. In addition, the
Bank may, under certain circumstances, apply to the Court
in order to appoint an inspector to investigate the affairs
of the Scheme, its manager or trustee, or any associated undertaking
of any of the aforementioned.
Every
Scheme, its manager and trustee will also be subject to off-site
monitoring and will, therefore, be required to furnish the
Bank with such information and returns concerning the business
of the Scheme, its manager or trustee as the Bank may specify
from time to time.
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