As talks go on with the UK and EU, negotiating on their new relationship and the terms based on which UK companies will be able to continue their business in the EU after the transition period, UK Investment Firms should start considering their next EU destination. As things currently stand, the future relationship of the two parties remains uncertain and no deal Brexit is becoming a fast reality as talks continue to flounder. Britain’s government urged businesses to prepare for the end of transition period, while Prime Minister confirmed that Britain will not extend the transition period.
According to Financial Times, the UK financial regulator’s head of Brexit preparations has warned that banks and investment firms still face three “cliff-edge” risks when the transition period for leaving the EU expires. Speaking at City & Financial summit on post-transition regulation, Nausicaa Delfas, international executive director of the Financial Conduct Authority, said “issues with derivatives trading, the transfer of personal data and offering services to customers in the EU remained a real possibility after January 1”. Essentially if arrangements are not in place by 1 January 2021, MiFID II will no longer be applicable and subsequently UK Investment Firms will suffer from those “cliff-edge” risks, including the restriction on EU passporting rights. Acknowledging that EU passporting remains a real issue many UK firms already planned and are now setting up their EU operations.
Even in the case of equivalency rights being granted, relevant arrangements and agreements that allow UK firms to offer their services to EU clientele will be needed, as this requirement “cannot be resolved through mutual equivalence” Ms. Delfas said.
In the absence of “EU passport” UK Investment Firms may need to establish a base within the EU in order to seek continuance of their services to their client base in the EU. This will involve relocation to another EU jurisdiction from which to passport financial services.
Cyprus has always been a preferred destination especially for CFD providers. Cyprus Securities & Exchange Commission, the regulatory authority for financial service providers in Cyprus, established a robust regulatory framework by setting high supervisory standards developed during the years.
Cyprus has been an attractive destination for various reasons, some of which are:
- Low business costs compared to other EU countries
- Licensing application process can be accelerated with a fast-track application
- Attractive tax regime, one of the lowest corporation tax rates within the EU at 12.5%
- Extensive network of double tax treaties allowing for tax efficient structuring
- English language is widely spoken and commercial documentation takes place entirely in English
- Flexible legal framework based on English common law
Cyprus could be the alternative domicile for UK Investment Firms, Fund Managers and Payments Institutions reassessing their business models in light of Brexit. It is of no surprise that many UK firms, including some of the largest organizations in the country, already set up their operations in Cyprus, seeking CySEC and CBC license.
For advice with regards to your UK Investment Firm post Brexit contact us
