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Cyprus v Malta: Energy and crypto trends

18 June 2018

Claire Coe Smith

Cyprus continues with Greek shipping tradition and sees expansion in energy markets

Malta and Cyprus have much in common, as two islands in the Mediterranean that are both members of the European Union and were once renowned for their popular citizenship by investment programmes. Both countries continue to attract a steady flow of the world’s wealthiest families to their shores, and claim to offer far more advantages than just visa-free travel throughout the EU to investors.

Elias Neocleous is managing partner of the law firm Elias Neocleous & Co, and says that EU-specific regulatory changes are creating a challenging market for advisers in Cyprus. But while new rules require those moving to Cyprus to demonstrate they are doing so for genuine economic reasons, rather than simply for tax advantages, that drive towards creating substance is delivering opportunities, he says. “We see a niche developing for Cyprus in several areas and sectors,” says Neocleous. “We see growth in companies connected with shipping, for example, because Cyprus has a very active shipping business community. And we see a growth in the number of trading companies that are doing business in our geographic neighbourhood, covering the Middle East, North Africa and the Balkans.”

Other expanding markets for advisers include a movement of wealthy individuals away from higher-tax countries such as Greece, and more businesses moving in to take advantage of energy opportunities in the offshore waters around Cyprus. Neocleous adds: “Cyprus is also coming up nicely in financial services. We are an EU and Eurozone jurisdiction, so our financial services laws are fully in line with EU laws, which makes this place quite attractive to companies from non-EU countries that want to be properly regulated and offer financial services within the EU.”

Stella Kammitsi is head of the international corporate department at Cyprus law firm Chryssafinis & Polyviou, and adds: “A lot of activity in Cyprus comes from the citizenship by investment programme, and we continue to see a lot of wealthy clients from Eastern Europe getting citizenship and buying property, with some of them relocating their families here. We also see people from Russia establishing substance here – there are only a few more months of the tax amnesty there, so those families have to take decisions now about changing their tax residencies or their corporate structures.” With wealth management and succession planning work for Russia clients on the increase, Cyprus is stealing a march on close rival Malta, which does not have the same attractions to Russia clients, who have historic, cultural ties to Cyprus.

Malta becomes a crypto hub

Malta, however, is attracting a new generation of high net worth individuals thanks to its growing reputation as a cryptocurrency hub. Two of the world’s largest cryptocurrency exchanges plan to invest heavily on the island, which has set out to become one of the world’s friendliest jurisdictions for the sector. Geraldine Noel is the managing partner of Maltese law firm Acumum, and says: “We are getting a lot of enquiries at the moment regarding cryptocurrencies, virtual currencies and initial coin offerings. This is obviously a risky first-to-market sector that is very new, so we are seeing a lot of entrepreneurs investigating Malta to set up platforms and exchanges. We are looking at much more nubile, ground-breaking, IP, IT and digital assets, and younger, more adventurous entrepreneurs.”

At the same time, Malta remains attractive to more traditional wealthy families, with property prices increasing dramatically in response to demand driven in part by the hedge fund world. “Malta is a booming jurisdiction,” says Noel. “We see clients from the Middle East, the Nordics, and from both EU and non-EU countries. There is a proportion of persons taking up residency, but there’s probably a higher proportion that structure their investments through Malta without taking up residence.” Both islands offer access to the EU in a more cost-efficient manner than Luxembourg, with the lifestyle attractions of the Mediterranean that are not offer in other competitor jurisdictions like Ireland. Both have made efforts to attract wealthy individuals, their families and their businesses, and those efforts are reaping rewards.

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