PROFILE CONTENTS }} INTRODUCTION 2 LEGAL AND REGULATORY

4

TAXATION

7

BANKING 11

Cyprus*

PAYMENT INSTRUMENTS

12

PAYMENT SYSTEMS

14

EUROPEAN PAYMENTS

16

CASH MANAGEMENT

17

ELECTRONIC BANKING

18

TRADE FINANCE

19

USEFUL CONTACTS

21

* Guides specifically designed for treasury managers offering a detailed picture of the banking and cash management arrangements for an extensive range of locations. Please note the information is of a general nature only and is subject to change. It does not constitute financial, legal, tax or other professional advice.

Country Profile

CYPRUS

INTRODUCTION }} General Capital/Other major city: Area:

Nicosia/Limassol 9,251km2

Population:

1.17m

Languages:

Greek, Turkish, English

Currency: Country telephone code: Weekend: National holidays: Source: www.goodbusinessday.com.

Business hours:

Euro (EUR) 357 Saturday and Sunday 2nd half 2015 — 1, 28 Oct, 25, 26 Dec 2016 — 1, 6 Jan, 14, 25 Mar, 1, 29 Apr, 1–3 May, 20 Jun, 15 Aug, 1, 28 Oct, 25, 26 Dec 07:30–14:30 (Mon,Tues, Wed, Fri), 07:30–14:30 and15:00–18:00 (Thu) 07:30–14:30 (Mon–Fri) July to August Business hours vary according to the sector.

Banking hours: Stock exchange: Leading share index:

08:30–13:00 and 15:15–16:45 (Mon), 08:30–13:00 (Tue–Fri) 08:15–12:30 (Mon–Fri) May to August Cyprus Stock Exchange (CSE) FTSE/CySE 20 Index

Government Legislature }}Presidential republic with a unicameral parliament, the House of Representatives (Vouli Antiprosopon). }}House of Representatives – 56 members elected to serve five-year terms. (An additional 24 seats for Turkish Cypriots have remained vacant since 1963.) }}The president is directly elected every five years. Head of state and political leader }}Nicos Anastasiades, president (head of state and government) since 28 February 2013.

Sectoral distribution of GDP (% of GDP) Agriculture

2.4%

Industry

15.9%

Services

81.7% (2013 estimate)

Please note that the information contained in this document is of a general nature only and is subject to change whether for economic, political, social or other reasons. It is not intended to be comprehensive and does not constitute financial, legal, tax or other professional advice on which you should rely. Accordingly if you are planning any business activity in the country or taking, or refraining from any action on the basis of the information in this document, you must obtain your own independent professional advice. The materials contained in this document were assembled in January 2015 (unless otherwise dated) and were based on the law enforceable and information available at that time. We make no representations, warranties or guarantees (express or implied) that the information in this document is complete, accurate or up to date. We will not be liable for any liabilities arising under or in connection with the use of, or any reliance on, this document or the information contained within it.

2

return to Profile Contents

Country Profile

CYPRUS

Economy

2009

2010

2011

2012

2013

Exchange rate* (EUR/USD**)

0.7198

0.7550

0.7194

0.7783

Interest rate* (For stocks up to 1 yr) (%)

5.47

5.44

6.29

Consumer inflation** (%)

+ 0.4

+ 2.4

5.3

6.2

– 1.9

Unemployment (%) GDP volume growth** (%)

2014

2015

Q2

Q3

Q4

Year

Q1

0.7532

0.7293

0.7549

0.8006

0.7537

0.8881

6.66

5.80

6.78

6.62

6.60

6.77

NA

+ 3.3

+ 2.4

– 0.4

– 1.4

– 0.7

– 0.7

– 1.4

– 1.5

7.9

11.9

15.9

15.4

16.0

NA

NA

NA

+ 1.3

+ 0.4

– 2.4

– 5.4

NA

NA

NA

NA

NA

GDP (EUR m***)

16,853

17,406

19,487

19,411

18,119







17,507



GDP (USD m)

23,414

23,054

27,088

24,940

24,056







23,228



GDP per capita (USD)

21,481

20,958

24,186

22,071

21,102







20,375



– 9.4

– 9.3

– 2.0

– 5.2

– 1.2







– 2.9



BoP (goods/services/income) as % GDP

* Period average. ** Year on year. *** EUR per USD from 1 Janury 2008 at CYP 0.585274 per EUR 1. Sources: IMF, International Financial Statistics, May 2015 and 2014 Yearbook.

Country credit rating Fitch Ratings rates Cyprus for issuer default as: Term

Local currency rating

Foreign currency rating

Short



B

Long

B–

Long-term rating outlook

B– Positive Source: www.fitchratings.com, June 2015.

3

return to Profile Contents

Country Profile

CYPRUS

LEGAL AND REGULATORY }} Central bank }}Established in 1963, the Central Bank of Cyprus is an autonomous institution operating in accordance with the Central Bank of Cyprus Laws of 2002–2007. }}The Central Bank of Cyprus is a member of the European System of Central Banks (ESCB).

Bank supervision }}On 4 November 2014, the European Central Bank (ECB), via the Single Supervisory Mechanism (SSM), assumed the responsibility of supervising the financial stability of banks operating within the eurozone. However, while the ECB has final supervisory authority over all banks operating within the eurozone, it will only directly supervise those banks classified as ‘significant’ under the terms of the SSM (at present 120 significant banking groups have been recognised). All other ‘less significant’ banks will continue to be supervised by the national supervisory authority. }}The Central Bank of Cyprus supervises the banking sector within Cyprus.

Resident/non-resident status }}A company is considered resident in Cyprus if it has been incorporated or registered in Cyprus.

Bank accounts }}Foreign exchange accounts and domestic currency (EUR) accounts can be held by residents both domestically and abroad. Resident domestic currency accounts are convertible into foreign currency. }}Non-resident bank accounts are permitted in both foreign and domestic (EUR) currency. Non-resident domestic currency accounts can be held abroad and are convertible into foreign currency. }}Interest can be offered on current accounts and savings accounts. }}Overdraft facilities are available to residents and non-residents.

Reporting }}All transactions between residents and non-residents that exceed EUR 50,000 must be reported to the Central Bank for balance of payments (BoP) purposes. }}Banks are responsible for electronically submitting transactions data to the Central Bank on behalf of their clients. Transactions data is submitted on a continuous basis or at least twice a month. }}Financial institutions must indicate, for each credit or debit transaction, the country involved, currency and type of operation (in addition to the resident’s institutional sector with regard to financial account transactions). }}All transactions effected during the month must be reported within five working days of the end of that particular month. }}Residents are responsible for providing details of individual transactions to their banks. }}Residents report their financial account items and investment income directly to the Central Bank. }}Residents in certain categories are expected to report all their BoP statistical information directly to the Central Bank. }}The accuracy of all reported information is the resident’s responsibility.

4

return to Profile Contents

Country Profile

CYPRUS

Exchange controls }}Cyprus joined the European Union (EU) in May 2004. }}The euro (EUR) is Cyprus’s official currency. }}As part of an EUR 10 billion EU-IMF bail-out in March 2013, the Cypriot government has imposed temporary capital controls: }}Transfers overseas exceeding EUR 1 million require Central Bank approval. }}Travellers are prohibited from taking more than EUR 3000 abroad. }}Banks require Central Bank approval before investing abroad. }}Non-resident investment from outside the EU in education, construction, shipping, the media and broadcasting is subject to restrictions. }}Central Bank approval is required for the purchase of over 10% of a resident bank’s total capital. }}Deposits in domestic and foreign currency are subject to 1% reserve requirements.

Anti-money laundering/counter-terrorist financing Supplied by BCL Burton Copeland (www.bcl.com). Data as at March 2015.

}}Cyprus has enacted anti-money laundering legislation, including legislation implementing the three EU anti-money laundering directives (the International Convention for Combating Terrorist Financing (Ratification and Other Provisions) Law No 18 of 2005 and the Prevention and Suppression of Money Laundering Activities Law No188 of 2007, as amended 2010, 2012 and 2013). In accordance with the 2007 Law, the Central Bank also issued a directive to banks in April 2008 on the Prevention of Money Laundering and Terrorist Financing. }}The supervisory authorities have issued Anti-Money Laundering Guidelines to five sectors, namely banks, money transfer businesses, international financial and trustee services companies, investment brokers and insurers. }}Cyprus is both a member of the Council of Europe MONEYVAL Select Committee, which is a member of the Financial Action Task Force (FATF), and a member of the Offshore Group of Banking Supervisors (OGBS). }}Cyprus has established a financial intelligence unit, the Unit for Combating Money Laundering (MOKAS), which is a member of the Egmont Group. }}Account opening procedures require formal identification of the account holder. }}Financial institutions are required to establish the identity of individuals on whose behalf a transaction is conducted. }}Individuals making an occasional transaction or a series of linked transactions amounting to EUR 15,000 must be identified. }}Non-account holders involved in a single or series of wire transactions of EUR 1000 or more must be identified. }}Financial institutions in the broadest sense are required to report suspicious transactions to the MOKAS. }}All banks are required to file monthly reports with the Central Bank indicating the total number of suspicious activity reports submitted to the compliance officer and the number forwarded by the compliance officer to MOKAS. }}Banks may not accept cash deposits of foreign currency in excess of EUR 100,000 in a single transaction or in multiple linked transactions per calendar year unless they have prior written approval from the Money Laundering Compliance Officer of the bank. }}Banks must report to the Central Bank on a monthly basis all cash deposits exceeding EUR 10,000 and outgoing wire transfers exceeding EUR 500,000.

5

return to Profile Contents

Country Profile

CYPRUS

}}Financial institutions must also report cumulative electronic funds transfers exceeding USD 50,000 per month or USD 2 million per year for a single customer. }}All persons entering or leaving Cyprus from outside the EU must declare cash of EUR 10,000 or more. }}All records must be kept for five years from the termination of the relationship or the completion of the last transaction.

6

return to Profile Contents

Country Profile

CYPRUS

TAXATION }} All tax information supplied by Deloitte Touche Tohmatsu (www.deloitte.com) and Deloitte Highlight, 2015.

Resident/non-resident }}A company is considered resident if its management and control are located in Cyprus. Registration in Cyprus is not decisive.

Tax authority }}Department of Inland Revenue.

Tax year/filing }}The tax year is the calendar year. The accounts of a company may be closed on a date other than 31 December, in which case taxable profits are apportioned on a time basis to the relevant tax years. }} Electronic filing is mandatory for companies. The deadline for the electronic submission of the tax return is 31 March of the subsequent year following the tax year. }}Companies must make two provisional payments of tax on 31 July and 31 December. If the income declared for the payment of the provisional tax is lower than 75% of the income as finally determined, an additional amount equal to 10% of the difference between the final and provisional tax is payable. }}All Cypriot companies must submit tax returns. }}Taxation on a consolidated basis is not permitted and each company must submit a separate return. A setoff of group losses is possible provided there is a 75% parent-subsidiary relationship, including subsidiaries under the 75% control of a common parent company. Group loss relief is available only between resident companies.

Corporate taxation }}Resident companies are subject to corporation tax on worldwide income and foreign-source income derived by resident companies is subject to corporation tax in the same way as Cyprus-source income. Non-resident companies are taxable only on income from Cypriot sources. Branches are taxed in the same way as tax resident companies. }}The rate for resident companies is 12.5%. }}Certain types of income are subject to Special Contribution for Defence (SCD) at a rate of 17% (dividends), 30% (interest) and 3% (rents). }}There is no alternative minimum tax or surtax. }}Tax losses may be carried forward indefinitely. The carryback of losses is not permitted. }}Some 80% of the net profits from the exploitation of intellectual property (IP) is exempt from taxation. The net profit is calculated after deducting from the IP income all direct expenses associated with the production of the income, as well as capital allowances at 20%. }}Special taxation regimes exist for ship-owning, chartering and ship management companies that own, charter or manage a qualifying ship in a qualifying shipping activity. Financial instruments }}There are no specific tax rules for financial instruments. However, profits from the disposal of securities are tax exempt.

7

return to Profile Contents

Country Profile

CYPRUS

Interest and financing costs }}As a general tax principle, only interest incurred wholly and exclusively for the purpose of the trade is deductible. Interest paid on the acquisition of ‘non‑trading’ fixed assets is not. }}The statute specifically prohibits the deduction of interest that applies to, or is deemed to apply to, the cost of purchase of a saloon car (whether business‑related or not) or the cost of any other asset not used in the business. The restriction applies for a period of seven years. }}The Commissioner of Income Tax considers the following fixed assets as non‑trading: }}Investments in shares; }}Saloon cars; }}Any asset held as an investment (unless this represents stock). Foreign exchange }}For income tax purposes, exchange differences are separated into those of a revenue nature and those of a capital nature. }}The taxpayer has the option to adjust taxable profits for unrealised exchange differences of a revenue nature or to make no adjustments at all. However, the tax treatment of exchange differences must be applied consistently on a year‑by-year basis. }}The tax treatment of exchange differences of a capital nature depends on whether or not they relate to fixed assets qualifying for capital allowances: }}Exchange differences related to fixed assets qualifying for capital allowances follow the tax treatment of exchange differences of a revenue nature; and }}Exchange differences related to fixed assets not qualifying for capital allowances are adjusted for in the tax computation to ensure that they do not impact on taxable income. }}Exchange differences are exempt from tax if they arise directly from the purchase/sale of securities; directly from the (re-)valuation of securities denominated in a foreign currency; or indirectly from the (re-)valuation of loans or other liabilities denominated in a foreign currency that were taken out to finance the acquisition of securities.

Advance tax ruling availability }}On request, the Commissioner of Income Tax provides written interpretations of Cyprus tax law provisions. The practice is not incorporated in Cyprus tax law and is not part of an official ruling regime as used in other EU member states. The interpretations are not binding on the taxpayer, but should be binding on the tax authorities if the full facts correspond to those disclosed in the ruling request.

Capital gains tax }}Gains derived from the sale of shares are tax-exempt. }}Capital gains tax at 20% is imposed on gains derived from the disposal of immovable property situated in Cyprus and on gains from the disposal of shares in an unlisted company that owns immovable property situated in Cyprus.

Capital duty }}Capital duty is payable on authorised share capital and the issuance of shares at a rate of 0.6%.

8

return to Profile Contents

Country Profile

CYPRUS

Withholding tax (subject to tax treaties) Payments to:

Interest

Dividends

Royalties3

Fees

Resident companies

30%

0%

None

None

Non-resident companies

None

None

0%/5%/10%

10%

1

2

1. Interest paid to a resident is subject to SCD deducted at source at a rate of 30%. 2. Dividends received by a Cyprus resident company are exempt from the Special Contribution for Defence (SCD), unless the dividends are paid out of profits that are more than four years old. Dividends received from a non-resident company are also generally exempt from SCD. However, the exemption does not apply if more than 50% of the non-resident payer company’s activities, directly or indirectly, lead to investment income and the foreign tax burden on the income of the non-resident payer is substantially lower than the tax burden of the company in Cyprus (i.e. less than 6.25%). If not exempt, dividends are liable to SCD at 17%. 3. Royalties paid to a non-resident for the use of rights in Cyprus are subject to a withholding tax of 5% on film royalties, and 10% on all other royalties. These rates may be reduced under a tax treaty or the EU Interest and Royalties Directive. Royalties paid to a non-resident for the use of rights outside Cyprus are exempt from withholding tax. There is no withholding tax on the payments of royalties by one resident company to another.

Tax treaties/tax information exchange agreements (TIEAs) }}Cyprus has exchange of information relationships with 50 jurisdictions through 51 DTCs double tax treaties and no TIEAs.

Thin capitalisation }}There are no thin capitalisation rules.

Transfer pricing }}Transactions between related parties must be carried out at market value and on normal commercial terms. }}A general anti-avoidance provision allows the Commissioner of Income Tax to disregard artificial/fictitious transactions and to assess tax on the person concerned.

Stamp duty }}Stamp duty is payable on a document if it relates to any property situated in Cyprus or to any matter or thing to be performed in Cyprus. }}Stamp duty on commercial contracts is charged at rates that vary according to the contract amount.

Cash pooling }}Cyprus has no specific tax rules for cash pooling arrangements.

Real property tax }}Tax is imposed annually on the market value of immovable property on 1 January 1980 at rates of 0.6–1.9%. }}The transfer of immovable property is subject to a transfer fee ranging from 3% to 8% calculated on the market value of the property as estimated by the land registry department.

Sales taxes/VAT }}The standard rate of 19% is levied on the majority of goods and services delivered or rendered in Cyprus. }}VAT is paid on goods imported from outside the EU only. However, under the reverse charge mechanism, VAT should still be accounted for on all goods imported from the EU. }}There are reduced rates of 0%, 5% and 9%. }}The registration threshold for VAT purposes is EUR 15,600 (EUR 10,251 for intracommunity acquisitions of goods).

9

return to Profile Contents

Country Profile

CYPRUS

Financial transactions/banking services tax }}There are no specific financial transactions/banking services taxes in Cyprus. }}A basic levy of 0.15% (paid in four instalments of 0.0375%) of specified liabilities is payable by all credit institutions incorporated in Cyprus and by their foreign branches.

Payroll and social security taxes }}There is no payroll tax payable by employers. }}An employer must make social insurance contributions amounting to 9.5% of gross salary of an employee. The maximum amount of annual earnings on which the contributions are payable is EUR 54.396. An employer also is required to contribute 2% of all earnings of its employees to the social cohesion fund. }}A special contribution is imposed on an employee’s salary or pension at rates ranging from 0% to 3.5%, shared equally by the employer and the employee.

Other taxes }}An annual company levy of EUR 350 is imposed on companies, capped at a total of EUR 20,000 for companies in a group. The levy does not apply to dormant companies, companies that do not own any assets or companies that own property in areas of Cyprus not controlled by the Republic of Cyprus. The levy is payable by 30 June of each year; penalties apply for late payment.

10

return to Profile Contents

Country Profile

CYPRUS

BANKING }} Major banks

Total assets (USD millions) 31 December 2013

Bank Bank of Cyprus

41,702

RCB Bank

11,237

Hellenic Bank

8,774

Alpha Bank Cyprus

5,229

Eurobank Cyprus

5,061 Source: www.accuity.com, December 2014.



Overview }}There are 11 banks operating in Cyprus, including three local banks – Bank of Cyprus, Hellenic Bank and the Co-operative Central Bank (the central institution for the country’s 18 cooperative credit institutions), and two specialised credit institutions – the Cyprus Development Bank and the Housing Finance Corporation. In addition, there are 25 foreign bank branches and two representative offices of foreign banks (Atlasmont Banka and Bank Zenit). }}Ancoria Bank, a subsidiary of Cyprus’ Ancoria Insurance, is expected to commence operations in the second half of 2015. }}In March 2013, the country’s largest bank, Bank of Cyprus, absorbed the insured deposits and most assets and loans of Cyprus Popular Bank, as well as its domestic branch network and customers. In the same month, Bank of Cyprus was recapitalised as part of a EUR 10 billion bailout of Cyprus by the EU and IMF. As part of the same deal, the Greek operations of Bank of Cyprus, Cyprus Popular Bank and Hellenic Bank (itself recapitalised in November 2013) were sold to Piraeus Bank. }}There are eight subsidiaries of foreign banks operating in Cyprus – Alpha Bank Cyprus, Société Générale Bank-Cyprus, National Bank of Greece (Cyprus), Emporiki Bank-Cyprus, Piraeus Bank (Cyprus), Eurobank Cyprus, RCB Bank (a subsidiary of Russia’s VTB Bank), and USB Bank (a subsidiary of Lebanon’s BLC Bank).

11

return to Profile Contents

Country Profile

CYPRUS

PAYMENT INSTRUMENTS }} Millions of transactions

Traffic (EUR billions)

2012

2013

% change 2013/2012

Cheques

20.34

15.05

– 26.0

50.15

28.18

– 43.8

Credit transfers

31.15

28.65

– 8.0

485.88

287.16

– 40.9

7.13

5.87

– 17.7

3.82

2.10

– 45.0

Debit card payments

22.19

23.18

4.5

1.75

1.69

– 3.4

Credit card payments

19.31

17.92

– 7.2

1.76

1.51

– 14.2

Card-based e-money

0.98

1.19

21.4

0.057

0.064

12.3

101.09

91.86

– 9.1

543.42

320.71

– 41.0

Payment statistics

Direct debits

Total

2012

2013

% change 2013/2012

Source: ECB Payment Statistics, August 2014.

Credit transfers }}All credit transfers are automated. }}Credit transfers are used for both high-value corporate and low-value retail payment transactions. }}Credit transfers can be initiated by ATMs, PCs (via direct links or online) and mobile phones. }}Credit transfers are used by the government and companies for salary, supplier and benefit payments. }}High-value and urgent credit transfers are cleared and settled via TARGET2-CY in real time. }}On 1 February 2014, SEPA credit transfers replaced all legacy credit transfer schemes in Cyprus. Low-value (equal to or below EUR 50,000) and non-urgent SEPA credit transfers are processed via the JCC Transfer system. }}Approximately 16 banks in Cyprus, including the Central Bank, currently participate in the SEPA Credit Transfer Scheme. (For more information on SEPA credit transfers, see European Payments.) }}Credit transfers accounted for 90% of the value of all cashless payments in 2013, but just 31% of the volume.

Direct debits }}Direct debits are available in Cyprus and used for low-value recurring payments such as utility bills. }}On 1 August 2014, SEPA direct debits replaced all legacy direct debit schemes in Cyprus. SEPA direct debits are processed via the JCC Transfer system. (For more information on SEPA direct debits, see European Payments.)

Cheques }}The cheque remains an important cashless payment instrument in Cyprus, accounting for 16% of the volume of all cashless payments in 2013, and is used for both retail and commercial payments. However, its use is in decline due to the increasing preference for electronic payments for both high-value and low‑value transactions. }}Cheque truncation was introduced in 2010; however, not all cheque clearing banks have migrated to cheque truncation. }}Cheques are processed via the CCH.

12

return to Profile Contents

Country Profile

CYPRUS

Card payments }}The use of payment cards in Cyprus has increased steadily in recent years. }}There were approximately 405,000 credit cards and 715,000 debit cards in circulation in Cyprus at the end of 2013. }}Payment cards accounted for 44.7% of all cashless payments in 2013; the value of payment card transactions over the same period was negligible. }}All debit and credit cards are issued by banks in conjunction with Visa or MasterCard. American Express and Diners Club credit cards are also available. }}Most debit card and credit card (Visa and MasterCard) payments are processed by the JCC Payment Cards System, which has 20 direct participants. }}Domestic card payments are typically cleared by JCC within one working day (although it can take as long as five working days for payments submitted physically in paper voucher format), with settlement taking place two days later. Settlement takes place on a deferred net basis across current accounts held by JCC at the participant banks. }}American Express and Diners Club payment transactions are cleared by their respective international card schemes. }}All payment cards issued in Cyprus are SEPA-compliant EMV chip cards. (For more information on SEPA-compliant payment cards, see European Payments.) }}There were 664 ATMs and 21,493 POS terminals in Cyprus at the end of 2013. All ATMs and POS terminals are EMV compliant. }}All ATM arrangements are agreed bilaterally between the banks involved. All proprietary ATM networks and JCC Payment’s own ATM network are connected via the JCC ATM sharing network. The country’s sole POS network is owned and operated by JCC. }}Electronic money schemes are available in Cyprus. }}Over 953,000 cards in Cyprus had an e-purse function at the end of 2013.

Other payments }}Banker’s drafts and postal drafts are used in Cyprus. }}The government uses postal drafts to pay numerous state benefits.

13

return to Profile Contents

Country Profile

CYPRUS

PAYMENT SYSTEMS }} Type }}TARGET2-CY is Cyprus’s national component of the pan-European TARGET2 real-time gross settlement (RTGS) system. Three Eurosystem central banks – the Banca d’Italia, the Banque de France and the Deutsche Bundesbank – jointly provide the single technical infrastructure, the Single Shared Platform (SSP), of TARGET2 and operate it on behalf of the Eurosystem. }}CCH (Cyprus Clearing House) is a net settlement system used to clear cheque payments. The CCH is operated by the Central Bank. }}JCC Transfer is an electronic multilateral net settlement system operated by JCC Payments, the interbank organisation that is also responsible for the clearing and settlement of payment card transactions. }}Cross-border payments in EUR can be made through the Euro Banking Association’s EURO1, STEP1 or STEP2 payments systems. Cyprus has no direct participation in these systems. (For more information, see European Payments.) }}Cross-border payments can also be routed via SWIFT and settled through accounts held with correspondent banks abroad.

Participants }}There are 16 direct participant banks, including the Central Bank, and four indirect participants in TARGET2-CY. }}There are 19 direct participants, including the Central Bank, in the CCH. The Co-operative Central Bank, a direct participant, also clears the cheques of the country’s cooperative credit institutions, including those received from third‑party banks. }}There are 14 participants (12 commercial banks, the House Finance Corporation and the Central Bank) in JCC Transfer.

Transaction types processed }}TARGET2-CY processes high-value and urgent EUR-denominated domestic and cross-border credit transfers. In addition, TARGET2-CY effects the final settlement of participants’ net balances originating from the CCH and JCC Transfer systems. }}The CCH processes cheque payments in EUR. There is no value threshold. }}JCC Transfer processes low-value (equal to or below EUR 50,000), non-urgent and bulk EUR-denominated retail payments.

Operating hours }}TARGET2-CY operates from 08:00 to 19:00 EET (Eastern European Time), Monday to Friday. }}The CCH operates 24 hours a day, Monday to Friday. }}JCC Transfer operates 24 hours a day, seven days a week.

14

return to Profile Contents

Country Profile

CYPRUS

Clearing cycle details TARGET2-CY }}TARGET2-CY settles transactions individually in real time and with immediate finality. }}17:00 CET: cut-off time for customer payments. }}18:00 CET: cut-off time for interbank payments. }}All transactions are processed electronically via SWIFT. }}Final settlement takes place across participant banks’ correspondent accounts held at the TARGET2 SSP. CCH }}Participant banks submit cheque payment instructions and image files by 22:30 EET. }}09:30 EET: cheques are exchanged manually and transaction information is processed electronically. }}10:30 EET: each participant’s net balance is forwarded to the Central Bank for final settlement via TARGET2-CY. }}Cheque clearing for banks can take up to 24 hours, while cheque clearing for cooperative credit institutions can take up to 48 hours. JCC Transfer }}Transactions are electronically presented to participant banks online, via ATMs, or in person at bank branches. }}Payment orders are accepted by participants until 11:00 EET. }}Banks prepare files and forward them in batches to JCC Transfer by 12:00 EET. }}Transfers are processed electronically on a next-day basis. }}13:30–14:00 EET: final settlement takes place across participants’ accounts held at the Central Bank via TARGET2-CY.

Currency centre holidays* 2nd half 2015 2016

25, 26 Dec 1 Jan, 25, 28 Mar, 1 May, 25, 26 Dec * Source: www.goodbusinessday.com.

15

return to Profile Contents

Country Profile

CYPRUS

EUROPEAN PAYMENTS }} SEPA initiative The Single Euro Payments Area (SEPA) is an initiative of the European Payments Council, with the support of the European Commission (EC) and European Central Bank, to create an integrated payment infrastructure across Europe, which is part of the wider objective of creating a true single European market. SEPA involves the creation of a zone in which all electronic, EUR-denominated retail payments are to be treated as domestic payments. Common payments instruments, infrastructures, procedures and technical standards are therefore requisite. The SEPA initiative covers all 28 European Union (EU) member states, including the 19 official eurozone members (Lithuania officially joined the eurozone on 1 January 2015), the four European Free Trade Association (EFTA) member states and Monaco.

SEPA payment instruments Common payment instruments for retail transactions have gradually been introduced across the SEPA area since 2008. There is no maximum value threshold in place for SEPA retail payment instruments. The SEPA initiative does not apply to urgent, high-priority payments or to cheques. SEPA credit transfers (SCTs) for EUR-denominated retail payments have been available since 28 January 2008. SCTs are open message format, XML-based transfers that comply with international standards (ISO20022). When executing an SCT, the payee’s bank identifier code (BIC) and international bank account number (IBAN) must be supplied to the executing bank by the initiator. SEPA direct debits (SDDs) for EUR-denominated retail payments were introduced on 2 November 2009. Since 1 November 2010, it has been compulsory for banks within the eurozone to provide core (customer) SDD services. B2B (business-to-business) SDD services remain optional. On 1 November 2014, banks outside the eurozone were required to accept SEPA direct debits. Migration to SCTs and SDDs was completed within the eurozone on 1 August 2014. National niche payment instruments are to be phased out by 1 February 2016. Full SEPA migration for EUR-denominated payments outside the eurozone is to be finalised by 31 October 2016. All payment cards issued within the SEPA area are required to be SEPA‑compliant EMV chip cards. All ATMs and POS terminals in the SEPA area are also now EMV enabled.

Systems for euro-denominated payments The Euro Banking Association’s (EBA’s) STEP1 or STEP2 systems can be used to effect individual and bulk retail payments in EUR respectively. STEP1’s cut-off time for same-day settlement is 14:30 CET. STEP2 is the only pan-European ACH for SEPA payments (SCTs and SDDs), reaching all 34 SEPA countries (including Monaco and San Marino). The cut-off times for same-day settlement, overnight settlement and next-day settlement of SCTs in STEP2 are 16:00 CET, 21:00 CET and 01:00 CET respectively. The cut‑off times for the same-day settlement of Core SDDs and B2B SDDs are 11:00 CET and 12:00 CET respectively. Alternatively, bilateral arrangements are in place between a number of SEPA-compliant Clearing and Settlement Mechanisms (CSMs) enabling cross-border retail payments in EUR. The European Commission’s Payment Services Directive (2007/64/EC) was implemented into the national legislation of all European Economic Area (EEA) member states in 2010, in order to regulate payment services and their providers throughout the EEA. As a result, all cross-border credit transfers, direct debits and card payments below EUR 50,000 within the EEA now have the same charges as their domestic equivalents. High-value/urgent cross-border payments in EUR can be made through TARGET2’s Single Shared Platform, which is used by 23 participant countries and operated by the Banca d’Italia, the Banque de France and the Deutsche Bundesbank on behalf of the European System of Central Banks. The cut-off times for same-day settlement in TARGET2 are 17:00 CET for customer payments and 18:00 CET for interbank payments. High-value/urgent payments in EUR can also be effected through the EBA’s EURO1 system. EURO1’s cut‑off time for same-day settlement is 16:00 CET. TARGET2, EURO1 and STEP1 are all based on SWIFT payment messages. International payments can also be routed via SWIFT through correspondent banking arrangements.

16

return to Profile Contents

Country Profile

CYPRUS

CASH MANAGEMENT }} }}There is no information available on notional pooling or cash concentration in Cyprus, as banks do not typically offer cash management services among their standard products.

Short-term investments }}Interest can be earned on current accounts and savings accounts. }}Time deposits are available in EUR and major foreign currencies, with maturities ranging from one day to five years. }}The government operates a EUR-denominated commercial paper programme. Paper can be issued in EUR, USD, GBP and CHF in denominations of EUR 500,000, USD 500,000, GBP 100,000 and CHF 500,000 respectively. }}Certificates of deposit are offered by commercial banks. }}Treasury bills (T-bills) are issued via auction by the Central Bank, with maturities of three, six, nine or 12 months. T-bills with maturities of one year can be traded on the Cyprus Stock Exchange. }}Repurchase agreements (repos) are available. Banks purchase repo (and reverse‑repo) transactions, with maturities of up to 15 days on government securities. }}Money market funds are available.

Custody and securities settlement Information provided by www.globalcustody.net and www.cse.com.cy, 2015.

Depository }}Cyprus Stock Exchange (CSE): Central Securities Depository and Central Registry. }}The CSE acts as the central securities depository (CSD) for equities, government bonds, corporate bonds, T-bills, investment funds and rights and warrants. }}The CSE replaced the individual shareholder’s registries of all issuers that have listed securities at the CSE with its CSD. The CSE has gradually dematerialised all securities. With the official operation of the CSD, the CSE assumed responsibility for maintaining and recording all changes in the registries such as transfers, pledges, corporate actions, etc. regardless of whether the transaction takes place within the CSE (through the trading system) or off the Exchange. BIS Model }}Model 2: exchange transactions. Settlement cycle }}T+2.

17

return to Profile Contents

Country Profile

CYPRUS

ELECTRONIC BANKING }} }}Electronic banking is available in Cyprus and offered by the country’s leading banks. }}There is no bank-independent electronic banking standard in Cyprus; each bank offers its own proprietary system for corporate banking purposes. }}Services available include balance and transaction reporting and payment initiation. }}Internet banking is offered by many of the country’s banks and is popular among retail users and small businesses. }}Cyprus had an internet penetration rate of 65.5% at the end of 2013. }}Mobile banking is offered by many of the country’s banks. }}Cyprus has an estimated mobile penetration rate of 140%.

18

return to Profile Contents

Country Profile

CYPRUS

TRADE FINANCE }} Trading partners* Import

Greece 21.6%, Israel 11.9%, Italy 8.3%, UK 7.3%, Germany 7.1%, Netherlands 6.7%, France 6.0%, China 4.5%.

Export

Greece 23.0%, UK 10.1%. * The World Factbook 2013-14. Washington, DC: Central Intelligence Agency, 2013 (www.cia.gov/library/publications/the-world-factbook/index.html).

Imports Documents }}No documentation is required for imports from another EU country, although it is good practice to send a commercial invoice. }}In order to import goods into Cyprus from outside the EU, a customs declaration, commercial invoice, bill of lading, packing list and, in certain cases, certificate of origin are required. Licences }}Licences are required for importing a small number of goods from outside the EU specified by the Ministry of Commerce, Industry and Tourism. Taxes/tariffs and other fees }}Cyprus applies the EU customs code and all associated regulations and commercial policies on all items entering Cyprus from outside the EU. }}Imports into Cyprus are subject to a variety of tariffs. Tariffs are higher for agricultural imports than for non-agricultural imports. Prohibited imports }}A negative list (of products that may not be imported) is in operation. }}In accordance with EU regulations and UN Security Council resolutions, it is prohibited to import certain items into Cyprus, in order to protect fauna and flora, and for national security and moral reasons. }}Prohibitions apply to imports of tobacco, gold and certain precious metals.

19

return to Profile Contents

Country Profile

CYPRUS

Exports Documents }}No documentation is required for exporting items to another EU country, although it is good practice to send a commercial invoice. }}In order to export goods from Cyprus outside the EU, a customs declaration, commercial invoice, bill of lading, packing list and, in certain cases, certificate of origin are required. Licences }}Licences are required for exporting items that could potentially be used for biological or chemical weapons, in addition to military equipment and nuclear‑related materials and products. Taxes/tariffs and other fees }}No taxes are charged on exports from Cyprus. Prohibited exports }}A negative list (of products that may not be exported) is in operation. }}Exporting certain items is prohibited in accordance with EU regulations and UN Security Council resolutions.

Financing imports and exports Imports }}There are no financing requirements for imports. Exports }}There are no financing requirements for exports.

20

return to Profile Contents

Country Profile

CYPRUS

USEFUL CONTACTS }} Central Bank of Cyprus

www.centralbank.gov.cy

Leading banks:

Alpha Bank

www.alphabank.com.cy



Bank of Cyprus

www.bankofcyprus.com



Eurobank Cyprus

www.eurobank.com.cy



Hellenic Bank

www.hellenicbank.com



RCB Bank

www.rcbcy.com

Cyprus Banking Association

www.acb.com.cy

Ministry of Finance

www.mof.gov.cy

Ministry of Energy, Commerce, Industry and Tourism

www.mcit.gov.cy

Cyprus Chamber of Commerce and Industry

www.ccci.org.cy

Cyprus Investment Promotion Agency

www.investcyprus.org.cy

Cyprus Stock Exchange

www.cse.com.cy

JCC Payment Systems Ltd

www.jcc.com.cy

This document is produced by HSBC Bank plc and members of the HSBC Group, together with their third-party contributor. It is not intended as an offer or solicitation for business to anyone in any jurisdiction. The information contained in this document is of a general nature only. It is not meant to be comprehensive and does not constitute financial, legal, tax or other professional advice. You should not act upon the information contained in this document without obtaining your own independent professional advice. The views and opinions expressed by the third-party contributor are their own and not necessarily those of HSBC. The information contained in this document has not been independently verified by HSBC. This document contains information relating to third parties. The information does not constitute any form of endorsement by these third parties of the products and/or services provided by HSBC or any form of cooperation between HSBC and the respective third parties. Under no circumstances will HSBC or the third-party contributor be liable for (i) the accuracy or sufficiency of this document or of any information, statement, assumption or projection contained in this document or any other written or oral information provided in connection with the same, or (ii) any loss or damage (whether direct, indirect, consequential or other) arising out of reliance upon this document or any opinion or statement made in this document. All efforts have been made to ensure that the information contained is current at the first date of publication. HSBC and the third-party contributor does not undertake, and is under no obligation, to provide any additional information, to update this document, to correct any inaccuracies or to remedy any errors or omissions. No part of this document may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of HSBC and the third-party contributor. Any products or services to be provided by HSBC in connection with the information contained in this document shall be subject to the terms of separate legally binding documentation.

21

return to Profile Contents