banking-cyprus

Banking in Cyprus

A successful recapitalised banking sector in Cyprus passed External Commercial Borrowing (ECB) stress tests and found a stable footing after the turmoil of the 2013 bail-in. Liquidity and solvency in the banking system have improved significantly, with exchange controls fully lifted in May 2015.

Foreign investors who want to open a company in Cyprus will have to open a bank account for the company to deposit the necessary minimum share capital. Individuals who work and live in Cyprus can also open a bank account for personal use. Cyprus joined the Eurozone in January 2008 and the official currency is the euro. This means that foreign company owners can benefit from transferring money from other euro accounts to Cyprus without being concerned about the foreign exchange rate.

Parparinos Milonas Corporate & Legal Consultants Ltd aims to provide a full package of services including the opening of bank accounts for companies and individuals. We aim to assist our clients in taking their decision on selecting the most suitable jurisdiction, bank and banking services.

Services

All major Banks offer a full set of banking services for individuals and businesses.

• Current and savings accounts

• Debit and credit cards

• Foreign currency exchange

• Long term savings and investment accounts

• Phone and online banking

There is a wide network of Banks across the country – foreign, Greek and Cypriot – and many of those in the major towns have English and some Russian speaking staff.

No appointment is necessary to open an account; the following documents are needed:

For Individual Accounts

• Passport or proof of identity, certified by an International Bank, Notary Public or Embassy, or Professional Firm;

• Proof of address in the English language, dated within the last three months, certified by an International Bank, Notary Public or Embassy, or Professional Firm;

• Bank reference letter, in the English language, from current or previous banker (required by some banks)

• Detailed Curriculum Vitae, in the English language

For Corporate Directors or Shareholders

• Full set of corporate documents, in the English language, legalized by the relevant authorities in the country of incorporation. The Documents must include:

  1. Certificate of Incorporation;
  2. Certificate of Registered Address;
  3. Certificate of Directors & Secretary;
  4. Certificate of Shareholders;
  5. Certificate of Good standing (if the company is more than 1 year old);
  6. Certificate of Incumbency, or extract from the Registry, or other official document, with a current date, clearly stating the Directors and shareholders, or certified true copies of the registrar of members and directors;
  7. Appointment of First Directors;
  8. Copy of Trust Deed;
  9. Copy of the most recent financial statements
  10. Business and operational profile;

Opening of Bank Accounts

• Detailed description of the main activities;

• Anticipated turnover of the company per annum;

• The expected origin of funds to be credited/debited;

• Group Structure with all companies/counterparties involved;

• Currencies

All of the above must comply with the rules and regulations of the Central Bank of Cyprus

Adopted Currency

Cyprus currency is the Euro.

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hungary-advertising-tax

EU Launches Investigation into Hungarian Advertising Tax

An investigation into whether Hungary’s advertising tax complies with EU state aid rules has been launched by the European Commission (EC).

The tax, which was introduced in June 2014, is presently based on turnover as opposed to profits and is applied at progressive rates ranging from 0 to 50%.

While the European Commission does not question Hungary’s right to impose the tax, or the level at which it is set, it is however concerned that progressive rates could “selectively favour certain companies and give them an unfair competitive advantage.” The EC therefore has further prohibited Hungary from applying such rates until the conclusion of its investigation.

The EC stated “A progressive tax based on turnover places larger players at a disadvantage, unlike a progressive tax based on profits, which can be justified by the higher burden-bearing capacity of very profitable companies,”

Earlier, cabinet chief János Lázár, had told commercial channel ATV that he expected the tax to be cut to as little as five percent in response to increasing pressure from Brussels. Nevertheless, he still favoured a progressive rate “to protect small businesses.”

Commissioner Margrethe Vestager, in charge of competition policy, said she welcomed signals from the Hungarian Government that they intend to make changes. She added that the state aid investigation would “look in detail both at how the advertisement tax applies currently as well as how it is amended, to make sure there is no unfair discrimination against certain media companies.”

Any interested parties will now have the opportunity to make “without prejudice” comments on the investigation.

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cyprus-exits-bailout

Cyprus Exits Bailout Program

Eurozone finance ministers celebrated in Brussels as Cyprus exited its bailout programme – the fourth EU country to do so, while Greece’s creditors continued to stall over its latest rescue package. Cyprus signed up to a rescue package of as much as €10 billion ($11 billion) in March 2013, when its banks collapsed and the country had to impose capital controls to prevent financial meltdown.

The bailout was launched in March 2013, when Cypriot banks collapsed and the country imposed capital controls to prevent complete financial meltdown. While the economy slumped by 5.9 per cent in 2013 and shrank by another 2.5 per cent in 2014, provisional figures show that it rose by 1.4 per cent in 2015, and it is forecast to grow by 1.5 per cent this year.

Eurozone finance ministers, who met in Brussels for their monthly gathering, praised the island for its efforts to bring its economy back on track and confirmed that Cyprus would exit its three-year, €10bn (£7.7bn) programme on 23 March. The IMF’s president, Christine Lagarde, congratulated Cyprus on its “accomplishments under the economic adjustment programme, which has delivered an impressive turnaround”.

They said they “welcomed the fact that economic activity has continued on a positive trend, and the banking system has further healed.”

“We can all rejoice at the success of this program and we can say that the Cypriot economy is reinforced by this program,” said Pierre Moscovici, the EU’s economic affairs chief.

Indeed, Cyprus has outperformed on almost every major economic indicator, as it has refocused its economy on tourism, shipping, construction and business services. Its debt is lower than forecast (106 per cent in 2015 rather than 126 per cent), it has a budget surplus (down from a 5.5 per cent deficit in 2013), and the current account is almost in balance.

“There is still one prior action outstanding, but overall the Cypriot authorities have delivered a very, very good job,” said Jeroen Dijsselbloem, the Dutch finance minister who presides over the discussions with his counterparts in the eurozone.

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cyprus offshore

New ‘type’ of Residence Permits For Third Country Nationals

The Cyprus Government, in its continuous efforts for a complete reform of the old and outdated application and filing procedures for the issuance of a residence permit in Cyprus has announced that starting as of Monday the 08/02/2016 the Migration Department will be issuing a new type of residence permit to third country nationals that fall under the following categories:

  1. Applicants that reside or plan to visit Cyprus for studies
  2. Applicants that reside or plan to visit Cyprus as exchange students
  3. Applicants that reside or plan to visit Cyprus for unpaid professional practise
  4. Applicants that reside or plan to visit Cyprus for voluntary service
  5. Applicants that reside or plan to visit Cyprus for research purposes under a contract with a research organisation, including their family members
  6. Applicants that reside or plan to visit Cyprus as family members of a recognised refugee for the purpose of a family reunification
  7. Applicants that hold or intend to apply for an immigration permit, including their dependants
  8. Applicants that are victims of human trafficking or commercial exploitation
  9. Under any other category that will be created or modified from here onwards.

The new type of ‘uniform’ residence permit will be like an identity card and will bear the permit holder’s biometric details (fingerprints and photograph) as well as his/her signature.

Furthermore, it is important to note that all third country nationals that fall under any of the above categories and who have filed an application for the issuance or renewal of a residence permit, which will not be examined by the 08/02/2016, MUST file by the 08/04/2016 a new additional application form (called ‘M+IP’) at the District Office of the Migration Department and pay the relevant fee of EUR10.00.  In the event that the third country national whose application is still pending and did not file this additional application by the 08/04/2016, his/her pending application will be automatically cancelled as per the relevant law.

It should be noted that the above does not apply to any residence permits that have already been issued. These permits will continue to be valid until their expiry date.

For any additional information, please feel free to contact our firm.

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cyprus-parliament-halt-liberization

Cyprus Parliament: ‘‘We put a halt to the liberalization’’

The Liberalization of the Interest Rate and Related Matters Law No. 160(I) of 1999 which came into force in 2000 gave the right and absolute freedom to any banking institution to charge its customers with any increased percentage rate (also known as default interest rate) on overdue loan installments as a result of a breach of the terms of such facility.

Of course, the phenomenon of this liberalization was very welcomed and exercised by most banks in Cyprus. But it didn’t stop there. The banks also imposed higher interest rates than what was agreed initially in the contract with their clients. Indeed, the standard loan agreement form contained a particular clause which gave the banks the unilateral right to increase the basic interest, the margin or the default interest if at their discretion the market conditions and the value of money were altered. Such an alteration to the increase of the interest rate was considered by the courts legal hence the borrower was bound.

This absolute freedom resulted to a disparity on the default interest rate percentage among banking institutions in Cyprus and to the application of interest rates which were considerably above the initial loan interest rate.

The Cyprus Parliament responded to the voice of criticism and introduced certain changes to the Law which aim to regulate and protect the rights of the debtors by prohibiting the increase of the agreed interest rate and the increase of the default interest rate other than rate specified in the Law.

The new provisions of the law on the increase of interest rates and default interest rates are the following:

  • For all credit facilities provided by a banking institution operating in Cyprus, which had not been terminated prior to 9 September 2014 or were concluded after the said date, any default interest rate above 2% is prohibited.
  • For all credit facilities provided by a banking institution operating in Cyprus, which had been terminated on or prior to 7 May 2015, any default interest rate above 2% creates a rebuttable presumption that the interest does not represent the true loss of the banking institution and it is for the banking institution to prove that any such default interest represents its true loss. If the banking institution cannot prove such loss, then any person who has already paid for default interest rate (in excess of 2%) may claim damages for the amount paid and the banking institution has the obligation for restitution or pay compensation to the person who has suffered damage as a result of such charge.
  • Any contractual term which gives to a banking institution the right of unilateral increase of the interest margin in a credit facility agreement which is valid on 9 September 2014, cannot be enforced after the said date.
  • It is prohibited to a banking institution to include in its standard form agreements any term which confers to the banking institution the unilateral right to increase the interest margin in a credit facility agreement.

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