Cyprus: Offshore Business Sectors
Offshore Banking Units
An Offshore Banking Unit (also known as an International Banking Unit - IBU) is a Cypriot limited liability company or branch of a foreign bank which has obtained a banking licence from the Central Bank. In Cyprus, non-Cypriot banks offered the status of IBU are restricted to banking operations with non-residents in foreign currencies or Cyprus-registered non-resident companies and their expatriate staff. The Central Bank issues IBU licences and normally needs to be fully staffed. If the IBU is controlled from abroad and there is no local permanent establishment, there will be no-profits tax.
The following forms are permitted:
Branches of foreign banks
The Central Bank favours this arrangement as there are no liquidity or risk ratio requirements, and there is no reserve requirement.
Subsidiaries of foreign banks
These are supervised more closely: liquidity and risk ratios may be imposed.
Representative Offices may be formed under the Companies Law. They may not conduct any banking activities except with clients of their parent bank.
Administrative Banking Units (ABUs)
These units carry out their banking activities through local Cypriot banks but are otherwise similar to branches or subsidiaries.
Commercial banking arrangements and practices follow the British model. On April 14, 2011, legislation was enacted to introduce a special bank levy on financial institutions operating in Cyprus. They will be required to pay 0.095% on the total amount of deposits held at the end of each calendar year. See Cyprus Domestic Corporate Taxation for more details.