Forex World: Cyprus, a European Eldorado for traders?

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When investing in Forex, an experienced trader considers several criteria, including the geographical location of his broker. Several types of regulation can be chosen when investing in the Forex sphere: the trader can move towards a pronounced regulation as in the United Kingdom, either between an extremely flexible regulation, as in Panama, with the dangers that this implies, or finally between a standard regulation that is being strengthened as in Cyprus.

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Why would a French trader choose to deal with a Cypriot broker when he finds successful brokers in Switzerland or France at European level? Are there any real risks for a trader to choose a broker from this island?

Everything can now be explained very simply by choosing a French or Swiss broker because of the recent signature by the countries of the European Convention on the Taxation of Savings, the income must be declared to the French tax authorities. Otherwise, the risk of tax collection is high.

On the other hand, Cyprus is known for its strong tolerance in the area of taxation. Cyprus has often been elevated to the rank of tax havens that allow money laundering without too much constraint, alongside countries such as Costa Rica.
Recently, KPMG interviewed 400 European tax experts who ranked Cyprus as the most attractive tax regime (with an attractiveness rate of 90%), ahead of Malta and Switzerland.

In previous years, Cyprus was at the heart of the global Forex market for its lax regulatory framework and tax advantages.

However, since its integration into the EU in 2004, the island’s status has been revised to adopt existing European regulations, particularly on money laundering. Although improvements are needed in order to incorporate Community law into Cypriot domestic law.

As a first step in monitoring this approach, Cyprus established the CySEC (Cyprus Securities and Exchange Commission) as a first step from 2003. Today, Cyprus’ integration into the EU is a clear advantage, a sign of confidence. As a member of the EU, Cyprus participates in the European internal market. This status allows it macroeconomic stability and ensures a commitment to low inflation, low interest rates and high growth.

Cyprus has complied with EU law and, above all, with European Parliament directives, although improvements still need to be made in order to incorporate Community law into Cypriot domestic law. In order to be excluded from the black list of tax havens and to regulate its market, Cyprus has, as a first step, established the CySEC (Cyprus Securities and Exchange Commission) since 2003.

CySEC has strengthened its regulation towards brokers by imposing new strict rules that have led to the disappearance of brokers, little known to French traders such as FXOpen. From now on, brokers established on the island, such as FxPro, benefit from an authorisation issued by the CIF (Cyprus Investment Firm).

Of course, the regulations in Cyprus are not as strict as those in the United Kingdom, which is a true model of its kind. In fact, for brokers, Cyprus remains a good opportunity as well as for traders.

In conclusion, since the island became a member of the EU, the risks incurred by a trader investing in Cyprus are no higher than a company domiciled in Switzerland or Luxembourg.

On the income tax side, the rates are very low, wealth and inheritance tax does not exist. In addition, banking secrecy remains better preserved than in Switzerland. This argument remains strong for some investors.

Christelle SEGURA

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