Ad­min ser­vices over­take growth rate

Suc­cess sto­ries of the cit­i­zen­ship and res­i­dency schemes, that have so far raised EUR 2.5 bln in state rev­enues, need some im­prove­ment to dis­pel con­cerns of a sell-off, while to con­clude it all, Cyprus must def­i­nitely spend more to pro­mote the image as a

Financial Mirror (Cyprus) - - FRONT PAGE -

In terms of what it has to of­fer, not only does it not have any­thing to be jeal­ous of other ju­ris­dic­tions but it can proudly claim that it is per­haps one of the few ju­ris­dic­tions which cur­rently of­fer a com­plete pack­age, in terms of be­ing at­trac­tive for in­vest­ing, set­ting up or re­lo­cat­ing a busi­ness and hav­ing peo­ple move in the coun­try. Not only that, but this pack­age, fol­low­ing the var­i­ous leg­isla­tive in­tro­duc­tions and/or amend­ments over the last year, is fully up to date and com­pli­ant with in­ter­na­tional le­gal, reg­u­la­tory, tax and other de­vel­op­ments.

Although all in­ter­na­tional de­vel­op­ments are lead­ing to­wards sub­stance, it is go­ing to take some time un­til we can say that this is the norm. Cyprus forms an ideal lo­ca­tion for cre­ation of sub­stance in struc­tures, not only be­cause of the var­i­ous fis­cal and cor­po­rate in­cen­tives avail­able but for a plethora of other rea­sons, in­clud­ing its ge­o­graph­i­cal po­si­tion, the abun­dance of highly ed­u­cated and ex­pe­ri­enced staff, the high qual­ity of pro­fes­sional ser­vices, the qual­ity of life, the weather, etc.

It is hard to say at this stage be­cause this case is still on­go­ing. Dur­ing the ini­tial pe­riod, I think that there will be a gen­eral numb­ness as peo­ple will be re­luc­tant not only to move ex­ist­ing struc­tures, but even to set up new ones. Yet, in the long term and in con­junc­tion with all other in­ter­na­tional de­vel­op­ments, such as BEPS, FATCA and the CRS, for sure the fu­ture lies with fully com­pli­ant ju­ris­dic­tions, which fol­low and pro­mote prin­ci­ples such as trans­parency, sub­stance and good cor­po­rate gov­er­nance, like Cyprus does.

Although no dili­gent ad­min­is­tra­tive ser­vice provider or other pro­fes­sional en­gaged in the sec­tor should be aid­ing or even en­cour­ag­ing clients in tax eva­sion or even ag­gres­sive tax avoid­ance, er­haps the whole is­sue has now reached a stage where even le­git­i­mate tax plan­ning is con­demned. In­deed, as there are no le­gal grounds against such plan­ning (ei­ther by leg­is­la­tion or case law), the only tool var­i­ous govern­ments are adopt­ing is ag­gres­sive neg­a­tive pub­lic­ity, tak­ing ad­van­tage of the fact that many peo­ple around the world are strug­gling fi­nan­cially be­cause of the ef­fects of the global eco­nomic cri­sis.

To what ex­tent the pro­fes­sion­als en­gaged in the sec­tor will be af­fected and this frenzy will de­pend on how far it will go.

This is per­haps one of the few parts of the sec­tor where num­bers can speak by them­selves and they are very im­pres­sive.

As per the lat­est re­ports from the Min­istry of Fi­nance, the amount in­vested in the coun­try through the Cit­i­zen­ship Scheme alone over the last few years has ex­ceeded EUR 2.5 bln.

I think that the schemes can be stream­lined in or­der to pro­mote sub­stance as well, in the sense that they can be aid­ing to­wards hav­ing peo­ple ac­tu­ally spend some time in Cyprus, spend money in the lo­cal econ­omy and per­haps even mak­ing fur­ther in­vest­ments.

I know that not re­quir­ing any min­i­mum stay in Cyprus has been one of the strong cards of the schemes, but at the same time it has been the main ar­gu­ment for op­po­nents of Cyprus in this field, so by con­sid­er­ing this we could ac­tu­ally help in safe­guard­ing the schemes and mak­ing them more sus­tain­able. In­deed the changes con­sid­ered by the gov­ern­ment, which are ex­pected to be put in to force pretty soon, seem to be tak­ing this point into ac­count as well as other fac­tors, which aim to­wards sub­stance. There are cer­tain other points to con­sider, such as mak­ing rental of prop­er­ties also an op­tion in­stead of re­strict­ing ac­cess to the schemes through pur­chase of real es­tate, es­pe­cially for the Res­i­dency Scheme.

I be­lieve we are, through prac­tice and be­cause of the var­i­ous de­vel­op­ments in or re­lated to the sec­tor both in Cyprus and in­ter­na­tion­ally. This is ac­tu­ally what we have been claim­ing since the very be­gin­ning at the Cyprus Fidu­ciary As­so­ci­a­tion, a body es­tab­lished in 2011 of which I was the Pres­i­dent up un­til re­cently that came about from es­teemed firms join­ing forces.

Per­haps we were at a very early stage at that time and our voice was not strong enough to be heard.

Le­gal and reg­u­la­tory re­quire­ments are grad­u­ally aligned between the three regimes both on pa­per but, more im­por­tantly, in prac­tice and the pres­ence of the Troika of in­ter­na­tional lenders (es­pe­cially the quar­terly mon­i­tor­ing re­views) – com­ing out of the fi­nan­cial as­sis­tance scheme which Cyprus has very suc­cess­fully com­pleted ear­lier this year – has played a very sig­nif­i­cant role to­wards that.

I can­not stress the word pro­mo­tion enough in an­swer­ing the ques­tion. If there is one thing we are lag­ging be­hind other ju­ris­dic­tions is image and rep­u­ta­tion. We have to re­alise that we didn’t have the best of im­ages when en­ter­ing the EU be­cause of our off­shore regime be­fore ac­ces­sion. Ex­ten­sive work was done in the years which fol­lowed, mainly as a re­sult of the pri­vate sec­tor and es­pe­cially the pro­fes­sion­als who in­vested time and money and travel around the world to pass the mes­sage that things have changed in Cyprus. Then the fi­nan­cial col­lapse of March 2013 served a huge blow to the whole ef­fort and we had to start from scratch.

The sec­tor has proven its re­silience once more, but I be­lieve we are at a crit­i­cal stage, where we mainly need two things: a plan and a con­certed pro­mo­tional cam­paign.

We have tried, in the Cyprus Fidu­ciary As­so­ci­a­tion, to come up with a plan through our an­nual fo­rum and we pre­sented a draft to the Un­der­sec­re­tary to the Pres­i­dent. Although it can be a good start, we need some­thing more com­pre­hen­sive than that which will be the re­sult of the con­tri­bu­tion of all stake­hold­ers so that it can re­ceive uni­ver­sal ap­proval and back­ing. Then we need a ve­hi­cle through which the plan will be ex­e­cuted and which will be re­port­ing the progress to the stake­hold­ers and through a process of as­sess­ment, re­align­ment and re­sponse to de­vel­op­ments, will be reach­ing out stronger and more de­ci­sive.

The mes­sage we have to send should not be de­fen­sive (as the ini­tial re­sponse to the Panama Papers case was) or apolo­getic, but in­stead we should shout out loud that Cyprus to­day is one of the most at­trac­tive, ef­fi­cient, com­pli­ant and dili­gent places to in­vest, set up and op­er­ate a busi­ness and live.

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