Cyprus Keeps Punching
Cyprus has put five new double tax agreements into effect, including, importantly, one with the Ukraine, which includes beneficial treatment for real estate owned through a Cyprus holding company. The country’s DTA with Russia used to include such treatment, but the Protocol signed a year ago imposed limits on real estate holding companies, albeit only coming into effect in 2017. Although Cyprus has come in for a great deal of negative publicity since the “bail-in” imposed on bank depositors by the Troika earlier in 2013, it maintains an extremely tax-friendly environment for international holding companies, and double tax treaties are a key element of this regime, along with its 12.5 percent corporation tax rate and favorable rules on dividends and royalties. As a tax-friendly hub for investment into the European Union, Cyprus ranks alongside Ireland and Malta. Although the Government is, perhaps understandably, obsessed with its macro-economic problems (like it owes zillions of euros to the ECB and has no obvious means of paying them back) the Finance Ministry persists with its business-friendly policies, and is in no doubt about the importance of Russia and the Ukraine (and other ex-Soviet countries) to its future. China is also a looming presence. You don’t hear so much about the UK, however, which as the ex-colonial power would be expected to play a large role in the economy, except that much of Cyprus’s “boom” early in the century was fuelled by over-eager Brits who parlayed the gains they made on owning UK houses into desirable 2-bedroom apartments in Larnaca and Paphos. The UK property bust and changes in exchange rates have sent many of those newcomers scuttling back to the UK, leaving the Cyprus banks with bad housing loans and not much else. Russian and Ukrainian money (and Czech, Polish and Slovakian, etc etc) seems much more secure, by comparison. Slavic tourism and investment is increasing by leaps and bounds; nowadays a walk along the seafront in Larnaca will yield you more Russian-speakers than English-speakers, something unthinkable ten years ago. Russian language colleges are packed with would-be Cypriot waiters, competing against their Romanian and Bulgarian rivals! Well, I exaggerate; but not by much.