Although recent developments to Russian legislation are expected to have an operational effect on Cyprus, the island remains a favourable jurisdiction in terms of its services sector, according to Igor Makarov, Partner at Baker & McKenzie.
In his analysis of the island’s offering in view of both Russian and international developments at the 2nd Cyprus Fiduciary Association Forum, Makarov detailed major international developments which have, and will continue, to impact the local business scene.
These, he said, include EU sanctions on Russian firms, EU dominance over national laws, the international review of banks’ strategies, the long-term reputational effects of Cyprus’ 2013 haircut on deposits and European competition.
In addition to these, the island must now also work to counter several seemingly adverse alterations to Russian legislation – most significant of which are the CFC Rules and the much discussed deoffshorisation legislation.
Challenges also comprise certain CFC criteria, reporting rules, calculation of tax base with audited statements to increase admin costs and more.
Benefits
However, despite these developments, Cyprus maintains many competitive advantages which are duly noted by foreign countries, including Russia.
The most prominent of these, Makarov imparted, are its friendly cultural and business environment, its positive international reputation and wide network of international treaties, including a favorable Russia-Cyprus DTT.
Additionally, despite the recent turbulence of the island’s banking sector, it is recognized internationally that the banking system is greatly established, he added.
Cyprus’ evaluation as a common law jurisdiction is also greatly advantageous, as is its ability to match international corporate and tax solutions.
Finally, the island’s service providers offer reputable “turn-key” private solutions, including the Cyprus passport programme and permanent residency scheme, its efficiency and operational benefits are also of significance.
Challenges
Despite this, challenges for Cyprus remain. These, Makarov explained, include the island’s ability to override EU laws, increasing competition from other countries, the practical implementation of disclosure and exchange of information and finally the external positioning and marketing of the island.