Foreign banks can leave Cyprys

28.11.2011 During the parliamentary debates Cyprus Minister of Finance declared the necessity of tax burden increase for foreign banks on the island. There was a proposal of the draft to establish stabilization fund in support of national banks and where the representative offices of foreign banks will be obliged to make fixed payments. Also discussions touched upon the increase of sales tax: in fact such a tax will not affect foreign companies, but due to the specifics of activities, according to the Minister’s opinion, representative offices of foreign banks should also be obliged to pay the tax.
The Chairman of the Association of Foreign Banks warned of the possibility of foreign banks representative offices leaving the banking sector of Cyprus, because the possible increase of the tax burden would be unacceptably high and can cause irreparable damage for foreign banks, creating an inherent obstacle to the implementation of the various types of transactions. In 2010 foreign banks supplemented the budget of Cyprus to EUR 300 million.

Expert’s opinion

“Because of the confidence of Cyprus government to make reforms in tax sphere including obligatory tax burden increase for foreign banks representative offices, it is real to watch leaving the banking sector of Cyprus by these credit institutions in the near future. Especially taking into consideration the large contribution of such institutions into Cyprus budget. This may badly influences the economics of Cyprus”.

On the basis: www.tax-news.com

Vorontsova Maria ( the lawyer of international consulting department of Honest&Bright)