An island nation in the Mediterranean Sea, Cyprus belongs to the European Union (EU) and the Eurozone. With its modern infrastructure, skilled workforce, strategic location, and favorable tax regime, the jurisdiction efficiently supports small and medium enterprises (SMEs) with various incentives and initiatives.
One of the perks of doing business in Cyprus is that you can set up a business account in the country with ease. No doubt, you know that a business account is different from your personal one and allows you to access corporate banking services, make and receive payments, and manage your business finances.
However, mind that certain challenges and risks are involved in setting up a business account in Cyprus. Below, International Wealth experts will explain the benefits and drawbacks of opening a business account in Cyprus in 2023 and make it all clear to you so that you can make your decision with as little effort as possible.
Business account in Cyprus: here’s why you should open one
A business account in Cyprus may be a mixed blessing, offering excellent options and carrying material risks all rolled into one:
- Tax benefits: Cyprus comes with one of the lowest corporate tax rates in the EU, at 12.5%. It also has more than 60 double-tax treaties with other countries, which means that you can reduce or avoid withholding taxes on dividends, interest, and royalties. Cyprus does not tax capital gains from the sale of shares or securities unless they are related to immovable property in Cyprus. Moreover, Cyprus does not have any rules that limit tax benefits from your foreign subsidiaries.
- Banking services: Cyprus has a variety of banks that offer a range of banking services, including deposits, loans, trade finance, foreign exchange, remittance, card services, and online banking. You can compare different banks based on their services and facilities offered, fees and charges, reputation and reliability, and availability of online banking.
- Currency options: Cyprus uses the euro as its official currency, which means that you will enjoy the convenience and stability of the common currency. However, you are free to open a business account in other currencies, such as British pounds, US dollars, Swiss francs, or Japanese yen. This gives you more options and flexibility in managing your currency and interest rate risks.
- Ease of opening: Opening a business account in Cyprus is not very complicated or time-consuming. You can open a business account online in Cyprus with a unique IBAN. The corresponding requirements depend on the type of business entity, the type of bank, and the type of account. However, some of the common ones include:
- completed application form from the bank
- letter of introduction and recommendation from the bank’s existing customer (some banks do not require this)
- photocopies of company directors’ and authorized signatories’ IDs
- photocopies of company registration documents
- proof of business address
- proof of business activity
- proof of initial deposit
- in-person interview with the bank.
- Access to other markets: Cyprus boasts a strategic location at the intersection of Europe, Asia, and Africa. This means that you can use your business account in Cyprus to access other markets and opportunities in the region. For example, it is a great instrument that you can use to trade with other EU countries without any customs duties or restrictions. Besides, it is entirely possible to use your business account in Cyprus to invest in emerging markets such as Turkey or Egypt.
On second thoughts
With all their undoubtedly appealing features, business accounts in Cyprus are not free from certain vulnerabilities that you need to be aware of before making that final decision:
- Banking crisis: Cyprus experienced a severe banking crisis in 2013 that led to the closure of 2 major banks and the imposition of capital controls and bail-ins on depositors. Although the situation has improved since then and the capital controls have been lifted, some depositors still have not recovered their losses and certain local banks still face liquidity and solvency issues. Therefore, you should be careful about keeping large amounts of money or long-term deposits in Cypriot banks.
- Reputation risk: Due to its low tax rates and lax regulations, Cyprus has been linked to money laundering, tax evasion, and offshore activities. Although the jurisdiction has taken steps to improve its transparency and compliance with international standards, it still faces scrutiny and criticism from some countries and organizations. Suffice it to say, Cyprus is on the EU’s gray list of non-cooperative jurisdictions for tax purposes and is under pressure to reform its tax system and exchange of information practices. Therefore, it makes sense to be aware of the potential reputation risk and negative perception that may arise from having a business account in Cyprus.
- Due diligence procedures: Although opening a business account in Cyprus is relatively easy, it still requires thorough due diligence on the part of your bank. The bank will conduct customer due diligence (CDD) or enhanced customer due diligence (ECDD) on potential customers before opening a new business account. The process may take several weeks or months depending on the complexity and risk level of your business. Therefore, be prepared to provide all the required documents and information and to answer any questions or requests from the bank.
Although it is a potentially great option for your business, it may be tough to open a corporate bank account in Cyprus on your own in 2023. You may encounter delays, rejections, or requests for additional documents or information from the bank. Besides, it may appear necessary to visit the bank branch several times or communicate with multiple bank officers. With this in mind, benefit from expert advice on corporate banking in Cyprus to make things easier for you and speed up the related procedures. International Wealth experts with a wealth of experience in opening corporate accounts both in Cyprus and other appealing jurisdictions are ready to support you offering their recommendations and practical assistance during a free initial consultation. If you feel like you can’t handle things independently, we will take care of everything instead of you!