Private Client Services in Cyprus: An Overview

The Private Client Services in Cyprus have been designed by experts at Enterslice in a manner which assists internationally mobile families and entrepreneurs to structure their cash and assets, which not only allows them to grow their wealth but also preserve it for their future generations.

The structure of Cyprus International Trusts (CITs) is very popular among high-net-worth individuals and professionals. Forced heirship and other laws that are applicable in foreign jurisdictions do not affect the validity of CITs or the transfer of property to the CIT. The settlors and beneficiaries should not be tax residents in Cyprus, but at least one of the trustees must be a permanent resident in Cyprus for the duration of the trust. The Cyprus Securities and Exchange Commission (CySEC) has authorised the establishment of Sovereign Trust (Cyprus) as an Administrative Service Provider (ASP).

With a view to increase foreign investment in Cyprus, the Cyprus government has recently expanded the types of qualifying investments for non-EU nationals to obtain a Permanent Resident Permit in Cyprus, which is also known as a ‘Golden Visa’. The non-EU nationals have to make investments in residential real estate, commercial real estate, Cyprus funds and Cyprus Company shares. The applicants are required to invest a minimum of €300,000 from the funds whose source has been outside Cyprus in any one of the four options mentioned above.

Enterslice will assist you with the residency, citizenship application and immigration in Cyprus. We also offer assistance in maximising opportunities and achieving long-term sustainability. This is not limited to asset management, foreign property ownership, accountancy, insurance, retirement planning, aircraft and yacht registration and management but also includes tax compliance and management. Enterslice can also assist you in setting up a company in Cyprus.   

Types of Private Client Services in Cyprus        

With the ever-evolving regulatory landscape, corporate compliance management has become an increasingly complicated and risky area. To deal with these difficulties, it is necessary to comply with the rules and regulations that have been imposed by various authorities. However, this places an extra burden on the various authorities due to the paucity of resources.

Enterslice provides high-quality and value-adding services which help businesses to respond to these challenges allowing them to focus on their business. Following are the private client services that are offered by Enterslice to its clients:

• Trust Formation and Trustee services in Cyprus

A trust has a number of applications and brings along a number of advantages, including the protection and preservation of their assets, tax management, or just avoiding the expenses and delays in obtaining probate under a will. Additionally, they also offer a higher degree of confidentiality.

The Regulation of Fiduciaries, Administration Businesses and Company Directors Law in 2012 mandates all the companies and individuals offering trustee, administration, or related services to be authorised as ‘fit and proper’ and obtain a license from the Cyprus Securities and Exchange Commission.

Regulations of Trusts in Cyprus are made in accordance with a combination of English Common Law, the Trustee Law of Cyprus and the Internal Trusts Law of Cyprus. The Regulations require trustees to know the identity of the settlor and ultimate beneficiaries of a trust. This information on ultimate beneficiaries is kept confidential. Disclosure of the same is done only in very particular circumstances, and it must be accompanied by a court order.

It must be noted that there is no public register of trusts in Cyprus, and the ownership of the trust assets can remain confidential in most circumstances. Although some of the tax benefits that were earlier available to the trusts have been taken away, they still enjoy several advantages, particularly for those individuals who are changing or planning to change their residential, domicile or citizenship status; those people who have their families abroad; those seeking asset protection and those who wish to dispose of their estate freely without a lengthy and expensive probate proceeding.

The Cyprian jurisdiction offers the following four types of CITs:

1. Express Private trusts
2. Fixed trusts
3. Charitable trusts
4. Discretionary trusts

The procedure of setting up a trust in Cyprus is a straightforward process and can be done in a short period of time. To set up a trust in Cyprus, the beneficiaries and settlor must not be a tax resident in Cyprus during the preceding year of setting up a CIT. Further, at least one of the trustees should be a permanent resident of Cyprus.

Any succession or heirship law applicable in a foreign jurisdiction or court judgment and arbitral award or decision given by foreign competent authorities does not affect the validity of a CIT or transfer of property to the trustee of a CIT. A CIT can last for an indefinite period of time, and the income of a CIT can be accumulated without any limitations. Further, the law regulating a CIT may be changed to another foreign law.

An interesting aspect of the taxation of CITs is that CITs are liable to taxes such as VAT and stamp duty only on their activities in Cyprus. Assessment is not made on the income earned or gains of the trust, and the trustee is responsible for discharging the tax liabilities of the beneficiaries on their behalf. The beneficiaries who are not tax residents in Cyprus are subject to tax only on the income and profits sourced in Cyprus. Cyprus trusts also fall within the ambit of double tax avoidance treaties provided the other contracting state recognises the trust structure and the trust needs to meet the eligibility criteria set out in the relevant treaty.  

• Residency in Cyprus

Obtaining citizenship or residency in Cyprus comprises a series of crucial steps which need to be executed at the right time to get the desired result. Enterslice boasts of a wealth of international and domestic expertise and an equally high success rate of delivering citizenships and residencies to our clients within the least possible time frame.

Enterlice will assist you in choosing the most suitable investor programmer according to your circumstances and requirements and also advise you on the most effective way of meeting the investment criteria. Enterslice will then manage each step of the application and structure the investment to ensure that all the submissions are executed correctly and at the right time.

There are three types of Residency programmes in Cyprus, which are as follows:

• Tax Residency Programme

Cyprus is an attractive destination for both individuals and their families, especially for those who choose to become tax resident in Cyprus because they are able to minimise and, to some extent, even eliminate tax on certain sources of income. Additionally, various tax benefits also accrue to non-domiciled tax residents in Cyprus.  

In order to be considered a tax resident in Cyprus, an individual has to be physically present in Cyprus for more than 183 days in a calendar year.

Additionally, the individual has to follow the ’60-day rule’ which makes it mandatory for the individual to comply with the following requirements within the tax year:

1. Reside in Cyprus for a minimum period of 60 days per annum
2. Should not reside in any other single state for more than 183 days

• The Individual should not be a tax resident in any other country

1. Maintain either by owning or renting a permanent home in Cyprus.
2. Either run a business and/or be employed in Cyprus and/or hold an office with a Cyprus tax resident company at any time during the tax year.

• Cyprus Permanent Residency Permit (PRP)

With the objective of increasing foreign direct investment in Cyprus, the government of Cyprus came up with a Permanent Residency programme for non-EU citizens through the mode of investment in Cyprus. Such permanent residency will be valid for life and will be passed on to their dependents.

Permanent residency applicants are required to make a minimum investment of €300,000 (plus VAT, if real estate is the investment option) from funds that have been sourced from outside Cyprus in one of the four options:

1. New residential real estate up to two units of residential property that are being sold by a developer for the first time or the purchase of dwellings took place before 7^th May 2013
2. Non-residential real estate such as hotels, shops, offices or a combination of these

• Shares of a Cypriot company having operations in Cyprus and one that employs at least five employees

1. Qualifying Cypriot Investment Funds – Alternate Investment Funds (AIFs), Registered Alternative Investment Funds and AIFs with Limited Number of Persons (AIFLNPs).

The Permanent Residency Applicant has to meet the following qualification requirements:

1. Demonstrate that the main permanent resident has made an investment in one of the investment options.
2. Demonstrate that the main PR applicant has an annual income of €30,000 from overseas sources if the investment is being made via a residential real estate investment option. In other cases, income can be generated in Cyprus.

• Demonstrate additional funds for dependents that are included on the PR application – which is €5,000 per year for a dependent spouse/ partner or child and €8,000 per year for a parent or a parent-in-law

1. The main PR applicant and his/her spouse have to certify in writing that they do not intend to work in Cyprus and also submit a clean criminal record certificate issued by the police authority of their existing country of existence
2. PR card holders are bound to visit Cyprus at least once every two years to maintain their PR status.

Enterslice's team of consultants works closely with you throughout your entire PR application process so that you meet all the qualification requirements, including the preparation of your PR application and supporting Paper works, liaising with the Civil Registry and Migration Department throughout the PR application review.

The applicants also have the adoption of a fast-track PR application process which is as follows:

1. Make an investment into a Cyprus-based qualifying investment option.
2. After you provide Enterslice with a power of attorney, Enterslice will prepare and submit your PR application to the Civil Registry and Migration Department.

• Once the investment criteria have been met by the applicant, the applicant shall receive their respective PR designation within a period of two months.

1. On receiving their PR status, the holder is obligated to visit Cyprus within a period of one year to provide his/her biometric information to the Cypriot authorities and obtain his/her PR card.
2. PR card holders are obligated to visit Cyprus at least once every two years to maintain their status.

The total cost of applying for the permanent residency programme will depend on several factors, such as your chosen investment option, the number of family members included in the application etc. Connect with the consultants at Enterslice to know the exact amount to be paid.

• Cyprus Permanent Residency Permit (PRP)

With the objective of increasing foreign direct investment in Cyprus, the government of Cyprus came up with a Permanent Residency programme for non-EU citizens through the mode of investment in Cyprus. The permanent residency will be valid for life and will be passed on to their dependents.

Permanent residency applicants are required to make a minimum investment of €300,000 (plus VAT, if real estate investment option) from funds that have been sourced from outside Cyprus in one of the four options:

1. New residential real estate up to two units of residential property that are being sold by a developer for the first time or the purchase of dwellings took place before 7^th May 2013
2. Non-residential real estate such as hotels, shops, offices or a combination of these

• Shares of a Cypriot company having operations in Cyprus and one that employs at least five employees

1. Qualifying Cypriot Investment Funds – Alternate Investment Funds (AIFs), Registered Alternative Investment Funds and AIFs with Limited Number of Persons (AIFLNPs).

The Permanent Residency Applicant has to meet the following qualification requirements:

1. Demonstrate that the main permanent resident has made the investment in one of the investment options.
2. Demonstrate that the main PR applicant has an annual income of €30,000 from overseas sources if the investment is being made via a residential real estate investment option. In other cases, income can be generated in Cyprus.

• Demonstrate availability of additional funds for dependents which are included on the PR application – which is €5,000 per year for a dependent spouse/ partner or child and €8,000 per year for a parent or a parent-in-law.

1. Main PR applicant and his/her spouse have to certify in writing that they do not intend to work in Cyprus and also submit a clean criminal record certificate issued by the police authority of their existing country of existence.
2. PR card holders are bound to visit Cyprus at least once every two years to maintain their PR status.

Enterslice team of consultants works closely with you throughout your entire PR application process so that you meet all the qualification requirements, including the preparation of your PR application and supporting Paper works, liaising with the Civil Registry and Migration Department throughout the PR application review.

The applicants also have the option of choosing a fast-track PR application process which is as follows:

1. Make an investment into Cyprus based qualifying investment option
2. After you provide Enterslice with a power of attorney, Enterslice will prepare and submit your PR application to the Civil Registry and Migration Department

• Once the investment criteria have been met by the applicant, the applicant shall receive his/her respective PR designation within a period of two months

1. On receiving their PR status, the holder is obligated to visit Cyprus within a period of one year to provide his/her biometric information to the Cypriot authorities and obtain his/her PR card.
2. PR card holders are obligated to visit Cyprus at least once every two years to maintain their status.

The total cost of applying for the permanent residency programme will depend on several factors, such as your chosen investment option, the number of family members included in the application etc. Connect with the consultants at Enterslice to know the exact quotation.  

• Cyprus Individual Tax Residency – the ’60-Day Rule’

The most commonly used criterion for taxing individuals across the world is the resident status of the individual. Up Until 2017, the rule followed by the Cyprus government was an individual would be considered a tax resident in Cyprus if such a person was physically present in Cyprus for more than 183 days in a year of assessment. This was called the ‘183- day rule’.

However, the Cyprian government came up with a law that allows an individual who is physically present in Cyprus for more than 60 days in a year of assessment to have the option to elect himself/herself to be a tax resident in Cyprus in that tax year if the following conditions are met:

• The individual should not stay for more than 183 days in any other country in the same tax year
• The individual should not be a tax resident in any other country for the same tax year
• The individual maintains a permanent home in Cyprus either by ownership or rental
• The individual is engaged in any kind of business in Cyprus and/or is employed in Cyprus and/or holds an office with a tax resident person at any time during the tax year.

It must be noted that an individual who cumulatively meets all the above-mentioned conditions under this 60-day rule shall not be treated as a tax resident in Cyprus in the tax year if during that year of business, employment or office holding situation is terminated.

As per the provisions of the tax laws of Cyprus, an individual who is a tax resident of Cyprus under ‘183-day rule’ or ‘60-day rule’ but is ‘non-domiciled’ in Cyprus will be exempt from payment of Special Defence Contribution (SDC).

Following are the tax benefits of being a tax resident in Cyprus under the above rules:

• There is no tax on gains made from the disposal of investments (such as shares, bonds etc.)
• No withholding tax is imposed on the repatriation of income as dividends, royalties, interest etc.
• Benefits of extensive double tax treaty network
• There are no taxes such as gift tax, wealth tax, inheritance tax or estate duty
• No tax is imposed on retirement gratuity, and a special tax regime on foreign pension income
• Lower social insurance contributions
• No tax is levied on worldwide dividend and interest income for non-domiciled individuals for a period of 17 years

The following 5 step process needs to be followed in order to receive tax residency status in Cyprus:

• Step 1

The applicant must be employed in Cyprus either on his/her own account or by a non-related company. If the former option is chosen, then the applicant has to incorporate a company in Cyprus. Thereafter, both the applicant and the company are required to open a bank account in Cyprus.

• Step 2

The Cyprian company must sign an Employment Agreement with the applicant which will be used further to register with the Social Insurance Authority, where the company is the employer, and the applicant is an employee. The employee must have received a salary for two months before proceeding further.  

• Step 3

The applicant is required to file an application for obtaining a registration certificate in form MEU1 in order to obtain a non-domiciled status in Cyprus. This form MEU1 is also known as the ‘yellow slip’, which is submitted to the Ministry of Interior by an EU citizen. The applicant will also be required to attend an interview.

• Step 4

After obtaining the ‘Yellow Slip’, an application has to be filed with the Tax Department to register the applicant into the Cyprus tax system and obtain the unique individual registration number.

• Step 5

The applicant then applies to the Tax Department with all the Paper works and also applies for receiving the Individual Tax Residency.

The entire process of obtaining the individual tax residency takes a time period of 2-3 months from the date of incorporation of the company in Cyprus.  

• Setting up Alternative Investment Funds (AIFs)

Cyprus law has been aligned with the European Fund-related Directives that are aimed towards enhanced investor protection and transparency. AIFs formed under the Cyprus legislation can be sold on a private placement basis or marketed to professional and Qualified Investors across the EU under the AIF Managers Directive (AIFMD) passport.

 A new legislation was introduced by the Cyprian government in July 2018, which effectively enhances the existing law on AIFs in Cyprus. The legislation brings new opportunities with the introduction of a more flexible fund structure, also known as Registered AIF, while enhancing and clarifying the new operating framework for the Funds industry in Cyprus.

Following are the reasons investors want to set up their Alternative Investment Funds in Cyprus:

• There are no restrictions with respect to the type of investments
• The modern regulatory framework is aligned with the relevant RU Directives
• AIFs in Cyprus are permitted to be self-managed by its Board of Directors, subject to the approval of the regulator
• The application process for setting up AIFs in Cyprus is simple and less time-consuming
• Tax incentives for foreign investors include no withholding tax on dividends distribution
• AIFs without limitations w.r.t to the number of investors can be listed on a Cyprus Stock Exchange and any other EU-recognised stock exchanges, and if marketed to retail investors, they can be traded
• AIFs can also be set up as umbrella funds with multiple investment compartments allowing the management of different asset pools with different investment policies
• There are low maintenance and set-up costs
• There are no onerous reporting requirements for the companies
• AIFs are supervised by a competent, accessible and a business-friendly Regulatory
• Total transparency is maintained through frequent reports to the investors and regulators
• AIFs being investment companies, can take advantage of the wide double tax treaty network of Cyprus

• VAT is not levied on the services rendered by the Fund Administrator and Investment Manager