UK businesses operating under the Temporary Permission Regime: A CySEC Policy Statement
The 187-04 Directive amendment
On the 14th of December 2021, the Cyprus Securities and Exchange Commission (‘’CySEC’’) has issued a policy statement concerning UK companies operating under the Temporary Permissions Regime (‘’TPR’’). The statement relates to the amendment of the Directive 187-04 regarding the provision of services by third country firms in the Republic of Cyprus to eligible counterparties and professional clients in those cases that do not fall within the scope of the EU regulation no. 600/2014 on Financial Markets (‘’CySEC Directive’’). This was done in an effort to ensure the smooth transition of UK groups operating under TPR until physical presence is established in Cyprus.
Following Brexit, in December 2020 CySEC introduced the TPR to enable UK businesses to continue the provision of investment services without being physically present in Cyprus, allowing them sufficient time to restructure their course of operation in Cyprus as third-country financial institutions. This was subject to the condition that services are only offered to eligible counterparties and/or professional clients who are based in the Republic of Cyprus. Within this framework, ninety-six companies applied for the TPR with eight of those being unsuccessful or withdrawing their application whilst the rest, secured a temporary permit in the Republic to carry on the provision of their services without any physical presence up until the 31st of December 2021.
Given that several entities that are currently operating under TPR sought to continue their operations in Cyprus, the relevant applications have been submitted to CySEC. For that reason, CySEC’s Directive has been amended, enabling such entities to continue their activities under TPR until the review of their application. It the event that such an application is approved, an additional period of six months is granted to such entities to ensure the compliant onboarding of clients as well as the establishment of physical presence in the Republic. The successful entities will be able to carry on their activities after the 31st of December 2021 whilst the rest will have to cease their activities as off the 1st of January 2022.
Cyprus as an option for UK businesses post-Brexit
Cyprus is a European Union jurisdiction whose judicial system, reporting and assurance standards and companies’ legislation was founded on those of the United Kingdom. As such, Cyprus has a deep historical affinity with Britain which has helped foster a legal and commercial framework which is extremely similar to the UK.
The similar mindset and familiarity which Cyprus offers is in fact, only one of many pull factors for UK businesses to migrate their business or part of their business to Cyprus given the myriad of tax and commercial incentives the Island has to offer. Cyprus boasts one of the lowest corporation tax rates in Europe standing at 12.5%, compared to the UK corporation tax rate which currently is 20% and offers a variety of tax incentive schemes enabling companies to achieve an overall lower effective tax burden; there is a huge availability of a highly skilled and highly educated labour force employable at low wages and fluent in English; and the cost of living and doing business is relatively low when compared with other EU jurisdictions which have a post Brexit appeal such as Dublin, Paris, Luxembourg and Frankfurt. Given these, Cyprus is a viable EU jurisdiction considering also the easy setting up process of a legal entity (i.e. subsidiary, financial services company) as well as the low maintenance costs.
How can MPC help?
For firms looking for post-Brexit solutions and specifically the ability to passport their services in Europe, our experienced lawyers can assist with new headquartering solutions under the Fast-Track Business Activation (see article) licensing firms to operate in Europe under MifiD II under the supervision of the CySEC and/ or setting up a foot print in Cyprus, from which they can operate in Europe. We provide clients with a holistic approach in that we can advise on the type of structure that would best fit their current commercial requirements and budget to matters such as relocation of the work force, assisting with migration issues to reviewing of supply contracts and support on the ground to establish their Cyprus businesses.
For further information, please contact us.