Why Brokers Settle in Cyprus?
In Cyprus, the capital markets are regulated by the Cyprus securities commissions, commonly known as CySEC. They are the competent national authority of Cyprus. Their responsibility is to supervise financial service institutions which are based in the country, this includes all Cypriot forex brokers.
CySEC enforces international, European and local laws on local forex brokers in Cyprus. Currently, more than 250 regulated Cypriot investment firms are listed on the CySEC website. About 200 of them are Forex brokers in Cyprus. So many Forex and CFD brokers have chosen Cyprus as their home, but why?
Until recently, Cyprus was a very popular jurisdiction for brokers to settle. The main reason was the ease of access to obtaining a license from the regulator compared to other European states. Once brokers obtained their Cypriot settlement, they were able to provide services across Europe through passport agreements between member states.
In our opinion, we believe that Cyprus has two main reasons to thrive in the retail Forex brokerage industry. These are the financial benefits and the culture of the island.
Financial Benefits for Forex Companies in Cyprus
Because of MiFID II, capital adequacy requirements are equal in all European member states. Any aspiring broker-dealer will need to prove they have €730,000 of capital. However, there are many other financial benefits for Forex brokers in Cyprus.
- Lower Fees – The fees for processing an application are lower in comparison to those of other regulators in Europe, as are the recurring annual fees. This gives Cyprus a competitive edge.
- Fast Tracking – Periodically CySEC has offered a fast track service where they offer priority application processing. The moment a broker applies, costs begin to mount up as the office needs to be operational with key members of staff in place while CySEC reviews the application. The sooner the broker can get to market the better.
- Low Corporate Income Tax – Cyprus offers the lowest rate of corporate income tax in all of Europe, currently set at 12.5%.
- Zero Tax on Dividends – When shareholders of a company in Cyprus want to pay dividends, there is no tax on this income they receive.
- Low Cost of Living – Going back at least 5 years, the cost of living in Cyprus was considered very low. This meant that salaries for skilled personnel were much lower than other places such as the UK. Since then the cost of living has increased significantly as have wages.
Based on the above, there are a number of logical and reasonable financial advantages to set up a brokerage in Cyprus.
Culture of Cyprus
Cyprus as a popular tourist destination has attracted a lot of ex-pats from across Europe and the rest of the world. Cyprus until 1960 was a British colony. During British rule, Cyprus adopted a lot of traits from the Brits. In particular, the common law legal system and English became a de facto second language for Cypriots. The language is taught in schools from a very young age. This makes the environment very comfortable for ex-pats to invest and do business in Cyprus. And finally, because Cyprus is a sunny Mediterranean island it’s not a hard sell when trying to attract talent from abroad.
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