In recent years, Cyprus has emerged as a favourable jurisdiction for the establishment of family offices. The island, strategically located at the crossroads of Europe, Asia, and Africa, offers a robust legal framework, favourable tax regime and a host of other benefits that make it an attractive destination for high-net-worth individuals (HNWIs) and families seeking to manage their wealth effectively. In this article, we dive into the complexities of establishing family offices in Cyprus, exploring the legal and regulatory considerations, as well as the advantages it presents.
Family Offices
Family offices serve as dedicated entities responsible for managing the wealth and affairs of affluent families. They offer a range of services, including investment management, financial planning, tax optimisation, estate planning and philanthropic activities. The primary objective of a family office is to preserve and grow the family's wealth across generations while addressing the unique needs and goals of its members.
Legal Framework
Cyprus boasts a robust legal framework that facilitates the establishment and operation of family offices. The country's legal system is based on English common law principles, providing a familiar and reliable foundation for investors and families. Additionally, Cyprus is a member of the European Union (EU) and adheres to EU directives and regulations, ensuring compliance with international standards.
The legal structure most commonly used for family offices in Cyprus is the private limited liability company. This form offers flexibility, limited liability protection and ease of management, making it ideal for wealth management purposes. Family offices can also opt for other legal structures, such as trusts or foundations, depending on their specific requirements and preferences.
Tax Advantages
One of the key attractions of Cyprus for family offices is its favourable tax regime. The country currently offers a competitive corporate tax rate of 12.5%, one of the lowest in the European Union. Furthermore, Cyprus has an extensive network of double taxation treaties, which mitigate the risk of double taxation on income earned domestically and internationally.
In addition to corporate tax benefits, Cyprus provides various incentives for high-net-worth individuals and investors, including:
Non-Domiciled Status: Individuals who are not domiciled in Cyprus are exempt from taxation on dividends, interest and capital gains outside Cyprus.
Residency Program: Cyprus offers a residency program for non-EU individuals and their families, providing a straightforward path to obtaining residency and enjoying tax benefits.
Intellectual Property (IP) Regime: Cyprus offers an attractive IP regime, providing significant tax advantages for companies holding and exploiting intellectual property rights.
Regulatory Environment
Family offices in Cyprus are subject to regulation by the relevant competent authorities overseeing the operation of entities managing the assets of family offices. Compliance with regulatory requirements is essential to ensure transparency, integrity and investor protection.
Compliance with anti-money laundering (AML) and know your customer (KYC) regulations is paramount to prevent financial crime and maintain the integrity of the financial system.
To sum up, the establishment of family offices in Cyprus offers a wealth of opportunities for affluent families seeking to manage their wealth efficiently and effectively. With its favourable legal framework, tax regime and regulatory environment, Cyprus provides an attractive destination for family offices looking to establish a presence in Europe and beyond. However, navigating the complexities of setting up and operating a family office requires careful planning, expert legal advice and ongoing compliance with regulatory requirements. By using the benefits of Cyprus as a jurisdiction, families can achieve their wealth management objectives while safeguarding their financial legacy for future generations.
Disclaimer: This article is intended for informational purposes only and should not be construed as legal advice. For specific legal guidance on Cyprus legal matters, it is advisable to consult with a qualified legal professional. If you have any questions or require any legal advice or assistance, please do not hesitate to contact us at contact@kourtellos.com.