Corporate Banking in Cyprus for EU Companies: Unlock Your Business Potential

Sitting at the crossroads of Europe, Asia, and Africa is Cyprus, a small island country in the Mediterranean Sea. It joined the European Union (EU) in 2004 and the Eurozone in 2008. You might have heard of Cyprus already. Famous for its irresistible mild climate, Cyprus is also a business-friendly jurisdiction, offering various benefits for EU companies that want to expand their operations internationally.

Cyprus corporate accounts for EU companies: positives

So, what brings company owners willing to bank abroad to the island? One of the main advantages of opening a corporate account in Cyprus is its low and competitive corporate tax rate of 12.5%, which is one of the lowest in the EU and the world. Adding to its allure is the fact that Cyprus has a wide network of double taxation treaties with over 60 countries, including major trading partners like China, India, the UK, and the US. These treaties reduce or eliminate withholding taxes on dividends, interest, and royalties paid to or from Cyprus. They also provide relief from double taxation on income and capital gains.

Another undeniable benefit of Cyprus corporate accounts is the access to the EU single market and the free movement of capital, goods, services, and people within the EU that you get with them. This means that EU companies enjoy the freedom to operate in Cyprus without any restrictions or barriers, with the same rights and privileges as local companies. Moreover, Cyprus follows the EU directives on taxation, with the Parent-Subsidiary Directive, the Interest and Royalties Directive, and the Merger Directive among them. The latter aim to eliminate or reduce tax obstacles for cross-border transactions within the EU.

A third plus factor that we can’t but mention here is the modern and efficient banking system in Cyprus, which offers a range of services and products to corporate clients. Cyprus has several local and international banks, e.g., the Bank of Cyprus, Alpha Bank, Hellenic Bank, and Eurobank, as well as branches and subsidiaries of foreign banks (HSBC, Barclays, and Societe Generale, to name just a few). These banking institutions come with online banking, multi-currency accounts, debit and credit cards, payment solutions, trade finance, lending, and investment services. Are you aware that as of 2024, Cyprus complies with the EU regulations and standards on banking supervision, anti-money laundering, and consumer protection, ensuring the safety and security of your deposits and transactions? Just checking.

Cyprus corporate accounts for EU companies: things to be careful of

Despite their obvious advantages, opening and maintaining a corporate account in Cyprus also involves certain limitations and risks for EU companies, which they need to be aware of and address accordingly.

Among such disadvantages are the compliance requirements as far as the local and international regulations and standards are concerned. These can be complex and time-consuming. For example, Cyprus companies need to file annual returns and financial statements with the Department of Registrar of Companies and Intellectual Property and pay the annual levy of EUR 350. They are also required to comply with tax obligations, such as submitting tax returns, paying corporate tax, value-added tax (VAT), and social security contributions, and keeping proper accounting records. Additionally, Cyprus legal entities need to follow the EU rules and directives on taxation (the Anti-Tax Avoidance Directive, the Common Reporting Standard, and the Automatic Exchange of Information), which require the disclosure and exchange of financial information with tax authorities of other EU member states and third countries.

Another limitation of Cyprus corporate accounts for EU companies is their exposure to currency risk, which arises from the fluctuations in the exchange rates between the Euro and other currencies. Since Cyprus is a member of the Eurozone, its currency is the Euro, which is the official monetary unit of 19 EU member states. However, EU companies that operate in other states or regions may have to deal with different currencies, with the US dollar, the British pound, the Swiss franc, or the Chinese yuan among them. The latter may appreciate or depreciate against the Euro, affecting the value of the assets, liabilities, income, and expenses of the corresponding companies. To mitigate this risk, EU businesses adopt hedging, diversification, and invoicing in the local currency as effective strategies to manage their funds.

A third downside to be mentioned here is the political and economic uncertainty, which stems from the unresolved conflict between the Greek Cypriot and the Turkish Cypriot communities, as well as external factors. e.g., the COVID-19 pandemic, Brexit, and regional tensions. These implications may affect the stability and security of the country, as well as the business environment and investor confidence. This way, in 2013, Cyprus faced a severe financial crisis, which resulted in a bailout from the EU and the International Monetary Fund, as well as a haircut on bank deposits. Although Cyprus has recovered from the crisis and returned to growth, it faces certain challenges to this day. Company owners interested in banking in the jurisdiction need to be aware of its high level of public debt, non-performing loans, and current account deficit. In this regard, EU companies are advised to monitor political and economic developments in Cyprus and the region to be prepared for any potential shocks or disruptions.

It is hardly a secret for people in the industry that opening bank accounts can be a lengthy and complicated process with a lot of paperwork involved. It may be easier if you use the right intermediary, choose an appropriate bank, and give them the necessary information. Whether you need corporate banking services, a company bank account setup, or an overseas bank account, the International Wealth team is here to help you. Our seasoned industry experts boast the experience and expertise to pick and offer the right commercial banking services for Cyprus companies, international business entities from anywhere else in the world, and individuals. We can help you seamlessly open a Cyprus bank account for your company in Cyprus and abroad. No need for a long wait, as your brand-new corporate bank account in Cyprus will be set up in a matter of weeks. Contact International Wealth to apply for it and enjoy a smooth corporate banking experience in the blink of an eye!