FAQ: Why Are There so Many Forex Brokers in Cyprus
In Cyprus, the capital markets are regulated by the Cyprus Securities Exchange Commissions, commonly referred to as CySEC. They are the national competent authority of Cyprus. Their job is to oversee the financial services institutions which are based in the country. They enforce international, European and their own local laws. Currently, there are over 250 regulated Cyprus Investment Firms listed on CySECs website. Approximately 200 of them are Forex brokers in Cyprus. So many Forex and CFD brokers have chosen Cyprus as their home, but why?
Until recently, Cyprus was a very popular jurisdiction for brokers to set up shop. The main reason was the ease of access to getting a license from the regulator in comparison to other European states. Once brokers had their Cyprus regulation, they were able to provide services throughout Europe due to passporting agreements between member states.
In our opinion, we believe there are two key reasons for Cyprus boom in the retail Forex broker industry. The financial benefits and culture.
Because of MiFID II, capital adequacy requirements are equal in all European member states. Any aspiring broker-dealer will need to prove they have €730,000 in capital. However, there are many other financial benefits for Forex brokers in Cyprus.
- Lower Fees – The fees for processing an application are lower in comparison to those of other regulators in Europe, as are the recurring annual fees. This gives Cyprus a competitive edge.
- Fast Tracking – Periodically CySEC has offered a fast track service where they offer priority application processing. The moment a broker applies, costs begin to mount up as the office needs to be operational with key members of staff in place while CySEC reviews the application. The sooner the broker can get to market the better.
- Low Corporate Income Tax – Cyprus offers the lowest rate of corporate income tax in all of Europe, currently set at 12.5%.
- Zero Tax on Dividends – When shareholders of a company in Cyprus want to pay dividends, there is no tax on this income they receive.
- Low Cost of Living – Going back at least 5 years, the cost of living in Cyprus was considered very low. This meant that salaries for skilled personnel were much lower than other places such as the UK. Since then the cost of living has increased significantly as have wages.
Based on the above, there are a number of logical and reasonable financial advantages.
Cyprus as a popular tourist destination has attracted a lot of expats from across Europe and the rest of the world. Cyprus until 1960 was a British colony. During the British rule, Cyprus adopted a lot of traits from the Brits. In particular, the common law legal system and the English became a defacto second language for Cypriots and is taught in schools from a young age. This makes the environment very comfortable for expats to invest and do business in Cyprus. And finally, because Cyprus is a sunny Mediterranean island it’s not a hard sell when trying to attract talent from abroad.
One of the most popular forex and CFD brokers that came out of Cyprus and grew into an international leader was FxPro. Check out their review on our site.