The prospect of a no-deal Brexit has seen an increase in financial services companies looking to Cyprus as a ‘low cost’ European base to retain EU passporting rights, an online conference heard.
A survey conducted among 150 electronic money and payment institutions, funds managers, and law and accounting firms at the conference highlighted new industry concerns over Brexit, with 76.9% of participants claiming the future of the UK financial services sector depended on the outcome of the Brexit negotiations. Only 2.6% said Brexit would have no impact.
The conference, ‘Cyprus’s Proposition for the UK’s Financial Services Industry’ hosted by Invest Cyprus, focused on Cyprus’s post-Brexit solution to financial services firms, Fintechs, investment funds and asset management companies and insurers. Setting out a vision of Cyprus as a professional services hub at the heart of Europe, conference speakers, including the Governor of the Central Bank of Cyprus, Constantinos Herodotou, and senior representatives of EY Law, Deloitte, PwC and KPMG Cyprus, said the failure to agree new rules for the UK-EU relationship had led renewed interest in Cyprus.
CBC Governor Mr Herodotou said: “In recent years we have clearly noticed an increase in the number of institutions licenced by us and we view this interest in obtaining licences from the Central Bank of Cyprus positively while at the same time maintaining high supervisory standards.
“Anti-money laundering compliance constitutes a permanent challenge for all members of the eurozone and the euro system. For the Central Bank of Cyprus, it is of utmost importance that all supervised institutions exhibit the necessary compliance culture. The MONEYVAL Committee of the Council Europe has recognised the great steps by the Central Bank of Cyprus to enhance AML/CFT supervisory practices. In this manner, we add value to the institutions licenced by us which, in turn, can take pride in working in a reputable, cooperative regulated environment.”
Speakers further highlighted the island’s access to the EU and high growth markets, a modern flexible legal framework based on English common law, highly educated workforce and low business costs compared to Malta, Netherlands, Ireland and Luxembourg. Companies operating on the island include the UK marine insurer Steamship Mutual, and international tech companies Wargaming and AmDocs, which has around 1,000 software programmers living and working in Cyprus.
“The main driver is the speed of getting over the line in Cyprus, compared to other jurisdictions,” said Christia Evagorou, senior manager of Funds Services at PwC Cyprus. “It tends to be quicker to obtain authorisation here and the process tends to be less expensive. The Central Bank does not impose a fee on applications, which others do. We’re also seeing interest from other e-money and payment institutions within EU area and outside which shows Cyprus is being used as an anchor for jurisdictions to reach the Middle East and Asia.”
In a survey of conference participants, 40% said EU passporting rights were the most important factor for them to consider moving their business, followed ease of doing business (20%) and the taxation environment (20%). Around 5,476 firms based in the UK currently benefit from passporting, while 8,000 companies in the European Economic Area use the mechanism to offer services in Britain.
George Campanellas, Chief Executive of Invest Cyprus, the national investment promotion agency, said the island’s handling of the pandemic and its pre-Covid economic growth meant it was recovering quicker than other economies. “All the ingredients that have made Cyprus a top destination for shipping management exist also for hosting tech companies coming to the island,” he said, “For the tech sector, the attractive intellectual property regime in our country allows for up to 80% of qualifying profits and intangible assets to be tax-deductible expenses, so the effective tax rates for taking advantage of IP can be as low as 2.5%. We believe in the next period we will see more companies choosing the island to host their European operations.”