Cyprus’s future as an offshore financial centre once looked to be in serious jeopardy when the island adopted full EU membership. However, thanks to cleverly adjusted taxation policies for the likes of corporations and foreign retirees, Cyprus remained an offshore tax haven of some note.
One of the island’s leading nations with which it conducted high volumes of business was Russia, and Russia’s commitment to Cyprus was paramount to its developing success as an international financial centre.
However, in early 2008 Russia suddenly blacklisted the island for being uncooperative on information exchange grounds, and this looked very troubling for the island’s ongoing financial security. The good news is that there has been a fast turn around in the two nation’s political feelings however, and as a result we can report on positive developments for Cyprus as an offshore financial centre.
Once Cyprus joined the European Union, instead of becoming defunct as an offshore financial centre it actually managed to become a positive haven for international businesses that wanted EU access with low taxation combined. As a result, Cyprus’s volumes of international business rose, the amount its banks held on deposit for foreign clients rose, and the economy of the entire nation benefited as a result.
As stated, one of the leading nations with which the island had a strategic alliance was Russia. Russians flooded the island with their money, their business and even their presence in the property market, and the nation became one of Cyprus’s biggest trading partners. However, the Cypriot authority’s famed reluctance to openly disclose information when required put the island’s position with Russia in an untenable situation; the Mediterranean nation was reluctant to share relevant taxation information with Russia, and so Russia black listed it as an uncooperative tax haven early last year.
This threatened the estimated EUR 20 billion that Russians are believed to have on deposit on the island, and led to an immediate change of policy direction in Cyprus. Now, thankfully for the future fiscal status of the island, the two nations have signed a new tax treaty, and everything is back on track between Russia and Cyprus.
Now that business is once again flowing, the likes of the Sovereign Group have expanded their presence on the island believing that even higher volumes of international business can be expected as Cyprus has proven itself to not only be a full member of the EU, but to be willing to work with trading partners to ensure both nations benefit. These facts coupled with its 10% corporation tax rate and its excellent standards of living and business environment make it a key jurisdiction for many international companies.
