This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here. favicon LAWANDTAX-NEWS.COM
HOME | CONTACT | RECRUITMENT | ABOUT | LEGAL | PRIVACY & COOKIES Join us on Twitter Lowtax Facebook page Join our discussion on LinkedIn Join us on Google+ Delicious Subscribe to the Tax-News RSS Feed


Articles »

Country Home Pages

British Virgin Islands
Hong Kong
Isle of Man
South Africa

Daily Tax Quote

Lowtax Network Sites
Lowtax Network Portal: 'Low-tax' business and investment in the top 50 jurisdictions covered in exceptional detail.
Tax News: Global tax news, continuously updated through the day.
Expat Briefing: A free online publication serving international expatriates and featuring world news, forums, events, in-depth country information and reliable investment and personal taxation guides.
Law & Tax News: Daily news and background data on tax and legal developments for international business.
Offshore-e-com: A topical guide to offshore e-commerce focused on tax and regulation.
Lowtax Library: One of the web's largest and most authoritative business and investment information sources.
US Tax Network: The resource for free online US taxation information, covering: corporate tax, individual tax, international tax, expatriates, sales and e-commerce tax, investment tax.
Offshore Trusts Guide: OTG publishes news, features and newsletters on the use of offshore trust structures.
TreatyPro: Online tax treaty resource.
Global Incorporation Guide [GIG]: A BSI / Lowtax Network international business smart tool.

Law of Offshore

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)
Banking Laws 1997 to 2009
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
Investment Services and Activities and Regulated Markets Law 2007 (Law 144(I)/2007)
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
Merchant Shipping (Fees and Taxing Provisions) Law 2010
Partnership and Business Names Law Chapter 116
Prevention and Suppression of Money Laundering Law 1996
Prevention and Suppression of Money Laundering Law 2008
Regulation of Electronic Communications and Posts Law (112(I)/2004)


Cyprus 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 CYP250
  • 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.

Back to top

Cyprus 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 (now Section 29 of the Banking Laws 1997 to 2009). 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. This made it possible for the government to run a tax amnesty scheme targetting those with undeclared bank accounts.

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.

On December 13, 2007, the House of Representatives enacted an updated Prevention and Suppression of Money Laundering Activities Law, which consolidated, revised and repealed the 1996 law. Under the current Law, which came into force on January 1, 2008, the Cyprus legislation has been harmonised with the Third European Union Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (Directive 2005/60/C).

The present Law, as the previous one, designates the Central Bank of Cyprus as the competent supervisory authority for persons engaged in banking activities and money transfer business. Under this framework, the Central Bank of Cyprus has the responsibility of supervising and monitoring the compliance of banks and money transfer businesses with the provisions of the Law for the purpose of preventing the use of the financial system for money laundering and terrorist financing activities.

Since 1997 and by virtue of the powers vested to it under the Law, the Central Bank of Cyprus issued several Directives to banks and money transfer businesses which determine the practice and procedures that should be implemented by those entities for the effective prevention of money laundering and terrorist financing so as to achieve full compliance with the requirements of the Law.

In April 2008, the Central Bank of Cyprus has issued a revised Directive to the banks, in accordance with the provisions of the Law of 2007, requiring the introduction of new revised policies and procedures, as well as the upgrading and enhancement of the measures and systems for the effective prevention of money laundering and terrorist financing in line with the FATF standards and the Directives of the European Union in this sector. It is emphasized that the Law explicitly states that Central Bank of Cyprus’ Directives are binding and compulsory to all persons to whom they are addressed.

Since 1997, a special Unit for Combating Money Laundering has been set up at the Attorney General’s Office which is responsible for the receipt and analysis of suspicious transaction reports and money laundering investigations. In the course of money laundering investigations, this Unit may apply to the Court and obtain an order for the disclosure of information addressed to any person, including banks, who may be in possession of information related to the investigation as well as orders for the freezing and confiscation of funds and property suspected to be derived from money laundering.

On April 14, 2011, legislation was enacted to introduce a special bank levy under which financial institutions operating in Cyprus will be required to pay 0.095% on the total amount of deposits held at the end of each calendar year. See Cyprus Domestic Corporate Taxation for more details on the bank levy.

Back to top

Cyprus Investment Company Law

Cyprus Private Investment Funds, known as private International Collective Investment Schemes (ICIS), are private funds that can be formed under the laws of Cyprus. The Central Bank of Cyprus is the regulatory and supervisory authority for ICIS under the International Collective Schemes Law 47 (I) 1999 (the ICIS Law).

A private ICIS fund can have up to 100 investors, also known as unit-holders. The purpose of a private ICIS fund is the collective investment of funds injected in such schemes by the unit-holders. It provides an arrangement that enables a number of investors to add collectively their assets, have these professionally managed and invested by independent managers and extract their profits in a tax efficient manner.

Under the legislation, therefore, a Scheme may take one of the following forms:

  • International Fixed Capital Company (IFCC): Incorporated under the Companies Law and recognised to operate as an international fixed capital company by the ICIS Law. Its assets and unit holders are non-Cypriot residents and the share capital cannot vary, it remains fixed. The initial minimum capital required to set up an IFCC is USD100,000. If the IFCC is a private ICIS then it is exempted from this capital requirement. A private ICIS is one that has 100 or less investors.
  • International Variable Capital Company (IVCC): Incorporated under the Companies Law and operates as an international variable capital company by the ICIS Law. Its assets and unit holders are non-Cypriot residents and the share capital varies according to the participating investors at any given time. The share capital of the company is equal to the net asset value (NAV) of the shares of the company at any time.
  • International Unit Trust Scheme (IUTS): An international trust created under the International Trust Law and recognised to operate as an International Unit Trust Scheme under the ICIS Law. (See Cyprus International Trusts). The assets are owned by the Schemes Trust in fiduciary for the trust beneficiaries
  • International Investment Limited Partnership (IILP): A limited partnership registered under the Partnerships Law and recognised to operate as an international investment limited partnership under the ICIS Law. As with all limited partnerships, there must be a general partner appointed who manages the fund and is responsible for the assets and liabilities of the fund. The limited partner will also be a member of the scheme. A general partnership can also have companies as partners.

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, the Central 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 Central 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.

Cyprus Investment Firms

Cyprus Investment Firms (CIF) are companies established in Cyprus and licensed by CySEC to provide one or more investment services to third parties or/and perform one or more investment activities under the applicable laws and regulations. Accordingly, an Investment Firm licensed in Cyprus, can be used for the provision of investment services from Cyprus in all EU markets by simply passporting its license, while it can also offer investment services to third countries. CIFs are governed by Law 144(I)/2007, which replaced the Investment Firm Law of 2002.

The services can be offered on a cross-border basis or by establishing a physical presence in the jurisdiction into which the services will be provided. Cyprus Investment Firms, extensively used for forex trading, brokerage services, investment portfolio management and investment advice, benefit from Cyprus’s 10% corporate tax rate.

Investment Services subject to authorization by CySEC consist of the following services:

  • Reception and transmission of orders in relation to one or more financial instruments;
  • Execution of orders on behalf of clients;
  • Dealing on own account;
  • Portfolio management;
  • Investment advice;
  • Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis;
  • Placing of financial instruments without a firm commitment basis; and
  • Operation of Multilateral Trading Facility.

Ancillary (non-core) Services subject to authorization by CySEC consist of the following services:

  • Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management;
  • Grant credits or loans to an investor to allow him to carry out a transaction in one or more financial instruments, where the firm granting the credit or loan is involved in the transaction;
  • Provide advice to undertakings or capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings;
  • Provide foreign exchange services where these are connected to the provision of investment services;
  • Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments;
  • Services related to underwriting; and
  • Safe custody services.

However, it must be noted that a licence cannot be granted for the provision of non-core services alone.

Law 144(I)/2007 was published in the Cyprus Gazette on November 26, 2007. This legislation, effective November 1, 2007, brought Cypriot investment law into compliance with the European Union Markets in Financial Instruments Directive (MiFID). MiFID is a European Union instrument which provides a harmonized regulatory regime for investment services across the 30 member states of the European Economic Area (the 27 Member States of the European Union plus Iceland, Norway and Liechtenstein). The main objectives of the Directive are to increase competition and consumer protection in investment services. MiFID retained the principles of the EU ‘passport’ introduced by the Investment Services Directive (ISD) but introduced the concept of ‘maximum harmonization’ which places more emphasis on home state supervision.

As a result of the legislation, CIFs are required to classify their clients as retail clients, professional clients or an eligible counterparty as follows:

  • Retail Client: a client who is neither a professional client nor an eligible counterparty and who receives the highest level of protection under Law 144(I)/2007 Sections 36, 38 and 39.
  • Professional Client: a client who possesses the experience, knowledge and expertise to make their own investment decisions and properly assess the risks that they incur.
  • Eligible Counterparty: any of the following entities which a CIF is authorized to receive and transmit orders, and/or to execute orders on behalf of clients, and/or deal on own account: CIFS, credit institutions, insurance undertakings, UCITS, pension funds, and other financial institutions authorized by an EU member state or regulated under community law.

The law stipulates that investment advisers must be suitably qualified. It is a criminal offence to accept payment for investment services without a licence under the law. Those found guilty of an offence under the law face fines, imprisonment, or a ban from providing investment services for up to five years.

An investment company must satisfy the following requirements before a licence will be granted under Law 144(I)/2007:

  • Initial share capital:
    • for reception, transmission, execution, portfolio management and investment advice: EUR200,000
    • For reception, transmission, investment advice without handling any clients’ funds/instruments: EUR80,000
    • for professional indemnity insurance with coverage in all member state countries for at least EUR1m for each loss and a total of 1.5m annually for all losses due to negligence: EUR40,000
    • for own account, underwriting and operation of Multilateral Trading Facilities: EUR1m
    • for reception, transmission, investment advice without handling client funds/instruments and insurance intermediary: EUR40,000
    • for professional indemnity insurance with coverage for all member states for at least 500,000 for each loss and 750,000 for all losses for each year: EUR20,000
  • The memorandum of association of an investment company must state that it is operating as an investment company and provides the services provided in their license, which was granted to them by the Cyprus Securities and Exchange Commission.
  • Company directors must have good standards of integrity and experience, and the company must be managed by at least two such people. Similarly, the employees of the investment company must have sufficient integrity, skills, knowledge and expertise so as to be able to carry out their duties properly.
  • The names of the shareholders or beneficial owners of the investment company must be disclosed.
  • The head office of the investment company must be located in Cyprus.
  • The investment company must be a member of the investors compensation fund.

Taxation of Collective Investment Schemes

In 2009, the The Cyprus Income Tax Law N.118(I)/2002 was amended to clarify that interest income earned by a collective investment scheme (CIS) is subject only to income tax (less any allowable expenses) and exempt from the Special Defence Contribution. This amendment was made in a bid to attract more investment schemes to set up and operate from Cyprus and to improve taxation for companies holding interests in Cypriot and non-Cypriot CISs.

In addition, the changes mean that the redemption of a unitholding in a collective investment scheme will not be considered as a reduction in capital under the Special Defence Law, therefore there will be no tax obligations on the distribution arising from the redemption.

Furthermore, the Special Contribution for Defence Law was amended in order to abolish the minimum participation requirement of 1% when it relates to dividends received from abroad by a Cyprus tax resident company. This makes it easier for portfolio investors to benefit from the dividend participation exemption.

The result of the amendment is that interest earned by a Cypriot company is now reduced to a maximum rate of 10% in all cases, whereas prior to the change, interest income could be taxed at 15%. The amendment was approved by parliament on October 22, 2009 and came into immediate force.



One of the web's largest and most authoritative business and investment information sources. Alongside topical, daily news on worldwide tax developments, you can receive weekly newswires or access up-to-date intelligence reports on a range of legal, tax and investment subjects.


Our 16 constantly updated intelligence reports cover every important aspect of 'offshore' and international tax-planning in depth, including banking secrecy, the EU's savings tax directive, offshore funds, e-commerce, offshore gaming and transfer pricing. Reports are available for immediate downloading or as subscription services with news pages.

Advertising & Marketing

With over 50,000 qualified readers every month our web-sites offer a number of cost effective, targeted advertising, sponsorship and marketing opportunities:

Display advertising - from 'skyscrapers' to 'buttons'
Content/article submission and sponsorship
Opt-in email marketing
On-line Services Directory listings

Click here to learn more or contact Charles Bell on +44 (0)1424 205 425 or at and he will put you in touch with your regional rep.

News & Content Solutions

Could your corporate web-site or newsletter benefit from incorporating regularly updated news and content tailored to serve your clients' interests? We can provide a variety of maintenance-free news and content solutions that can be seamlessly integrated and dynamically delivered:

Customised, personalised 'own-brand' news services
Newsletter content and management
News Headlines Tickers

Click here to learn more or contact Charles Bell on +44 (0)1424 205 425 or at and he will put you in touch with your regional rep.

Important Notice: Wolters Kluwer TAA Limited has taken reasonable care in sourcing and presenting the information contained on this site, but accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, users of the site are advised to take appropriate professional advice before committing themselves to involvement in offshore jurisdictions, offshore trusts or offshore investments.

All rights reserved. © 2017 Wolters Kluwer TAA Limited

All content on this site has been provided by BSIRN.