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Setting Up A Cyprus Investment Firm (CIF)


CAPITAL REQUIREMENTS - TIME FRAME - TAXES - FEES


 A. INTRODUCTION

Investment firms are regulated by the Cyprus Securities and Exchange Commission (CySEC), under the CIFs and Investments Firms Law. ( www.cysec.gov.cy )

The investment firms that offer the services that are listed in Appendix 1 must obtain a license from CySEC. The term “investment firm” includes, amongst others, portfolio managers, broker companies, investment advisers, forex trading companies and binary options trading companies, which all fall under the definition of CIFs are regulated by CySEC.


B. LICENSE REQUIREMENTS

For CySEC to grant CIF authorisation, a formal application procedure needs to be followed, and certain requirements must be met, the most important of which are stated below.

 

1. Capital Requirements

The minimum capital requirement for a CIF depends on the type of services offered:

a. A CIF that holds clients’ money, and/or clients’ financial instruments, and provides one or more of the following investment services:


i. The reception and transmission of orders in relation to financial instruments;
ii. The execution of orders on behalf of clients;
iii. Portfolio management;
iv. Provision of investment advice;
must have an initial capital of at least €200.000.


b. A CIF that provides the investment services stated in subsection (i) and (iv) above, and does not hold clients’ money and/or clients’ financial instruments, and as a result may not at any time place themselves in debt to their clients, may have an initial capital of €80.000, or
at least €40.000, and professional indemnity insurance covering all E.U member states, or some other comparable guarantee against liability arising from professional negligence, providing at least €1.000.000, for a single claim, and on aggregate, at least €1.500.000 per annum for all claims.


c. A CIF that provides one or more of the following investment services and/or performs the following investment activities:


i. Dealing on own account;
ii. Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis;
iii. Placing of financial instruments without a firm commitment basis;
shall have an initial capital of at least €1.000.000


2. Other Requirements

a) When applying for a license, a firm must provide, amongst other documents, a business plan, an operations manual (which should include the Anti-Money Laundering Procedures,) completed questionnaires from the members of the board, managers and shareholders.

b) The Board of Directors of the CIF shall consist of at least two executive members and two independent non-executive members. The majority of the members shall be Cyprus residents.


C. TIME FRAME

Our firm has experience of setting up a Cyprus Investment Firm. We appoint a local law firm to assist us with the preparation of the special memorandum and articles of the company. We apply to the Registrar of Companies, firstly for approval of the company’s name, then for registration of the company, and then the CySEC application is prepared after collecting all necessary information from the shareholders. After examination and resolution of any issues, CySEC authorises the CIF and grants it a licence. The above procedure, from commencement to final approval by CySEC can be completed in about 5-6 months.


D. TAXES IN CYPRUS

a. Profits from CIF’s activities

Corporation tax on net profit is 12,5%. However, gains from the sale of titles, and, in most cases, dividends received are exempt from tax.

There is no withholding tax on dividend, interest and royalties paid to non-residents.


b. Capital Gains

Capital gains are not taxable in Cyprus except for the 20% tax on gains on immoveable property that is located in Cyprus, and on any gain from the sale of shares in companies that own immoveable property in Cyprus. All other gains of a capital nature are not taxable.


c. VAT

Value Added Tax issues can be very complex for a CIF, due to the fact that some of the services offered by the CIF could be taxable, and others exempt. We will be happy to provide advice on all VAT issues.


E. FEES AND CHARGES

1. Costs of setup and obtaining CIF authorisation:

Our fee for obtaining a CIF licence depends on the number of licenced services the CIF will offer. Additional costs to be invoiced as out of pocket expenses relate to the incorporation and set up of a Cyprus limited liability company and CySEC fees which can range from €4.000 to €10.000.


2. Cost of Administration and other services

We are able to provide all of the services a CIF and/or its shareholders require. We provide a full administration, tax, VAT, anti-money laundering compliance, accounting, and internal and statutory audit service.

The cost will depend mainly on the type and size of the CIF and the level of activity. Our fee is quoted on a case by case basis.


3. CIF costs to be included in the financial planning

A CIF will need to maintain a minimal physical presence in Cyprus, in order to maintain its license. Outsourcing is allowed to a degree, but some personnel are still required to be located in Cyprus.

Therefore, a reasonable annual budget for the CIF’s operational expenses, including the salaries of employees as well as other operational expenses, (e.g. information technology, telephony, electricity, office rent, external and internal auditors, compliance, other professional fees, consumables, etc.,) but not including the salaries of their chief executive and financial officers, will be around €150.000 - €200.000 per annum.


Latest update: 10 June 2013


Appendix 1


I. Investment Services (Part Ι of the Third Appendix of the Law 144(Ι)/2007)
I(1) Reception and transmission of orders in relation to one or more financial instruments
I(2) Execution of orders on behalf of clients
I(3) Dealing on own account
I(4) Portfolio management
I(5) Investment advice
I(6) Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis
I(7) Placing of financial instruments without a firm commitment basis
I(8) Operation of Multilateral Trading Facility


ΙΙ. Ancillary Services (Part IΙ of the Third Appendix of the Law 144(Ι)/2007)
ΙΙ(1) Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management
ΙΙ(2) Granting 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
ΙΙ(3) Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings
ΙΙ(4) Foreign exchange services where these are connected to the provision of investment services
ΙΙ(5) Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments
ΙΙ(6) Services related to underwriting
ΙΙ(7) Investment services and activities as well as ancillary services of the type included under points I and II above related to the underlying of the derivatives included under point III (5), (6), (7) and (10) where these are connected to the provision of investment or ancillary services.


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