In recent years, Cyprus has become an increasingly attractive destination for Indian investors and businesses. It does so for two primary reasons – its secrecy laws and the perception of a conducive tax environment.
Cyprus has a long-standing tradition of banking secrecy, tracing back to its days as a British colony. The country’s laws protect the confidentiality of bank account holders, prohibiting the disclosure of any information without the client’s explicit consent. This secrecy has been particularly appealing for high net-worth individuals in India who prefer discretion when managing their wealth.
The other significant contributing factor is Cyprus’s generous tax regime. Home to one of the lowest corporate tax rates in the EU, Cyprus has successfully positioned itself as a tax haven. The country not only offers low corporate tax but also a network of Double Taxation Avoidance Agreements (DTAAs) with over 60 countries, including India. These DTAAs eliminate the risk of an investor being taxed twice on the same income in two different jurisdictions. Therefore, profits made in Cyprus can be repatriated to India with minimal tax leakage.
Furthermore, substandard regulations on money laundering and offshore businesses have made Cyprus even more attractive to Indian investors. The ease with which businesses can be set up, along with lax oversight, fuels a perception of Cyprus as a place where fortunes can be made – or concealed – with minimal legal consequence.
However, this perception of Cyprus as a haven for secrecy and low taxes is not without controversy. Financial watchdogs have repeatedly expressed concerns about the island’s oversight and its susceptibility to financial malfeasance. India has also raised issues about money laundering and tax evasion, leading to revisions in tax treaties between the two countries.
In conclusion, Cyprus’s attractive tax regime and secrecy laws have drawn Indian businesses and investors, fueling a boom in investments. However, the lack of financial oversight and concerns about money laundering raise important questions about the sustainability of this trend. As regulations tighten, and scrutiny increases, whether Cyprus can maintain its allure is something that remains to be seen.