1. Why establish a payment services firm in Cyprus?

 In an era of rapid technological advancement, Cyprus has managed to stay ahead in the evolving financial landscape. As a well-established EU jurisdiction, Cyprus attracts businesses and entrepreneurs across the globe to grasp the opportunity and establish a Payment or Electronic Money Institution to also benefit from: 

• Cyprus’ attractive tax regime with net profits being subject to one of the lowest corporate taxes in Europe and sales of titles and dividends being tax exempted. Furthermore, non-residents enjoy no withholding tax in dividends, interest and royalties and may take advantage of more than 60 double tax treaties that the republic has secured.
• A broad network of professionals offering high-quality legal, compliance, accounting and banking services, allocating financial resources in a cost-efficient manner.
• The opportunity to provide services across the EU, through the EU passporting framework, without seeking additional authorisation or establishing a branch in another member state.

2. PSP or EMI, what is the difference?

A Payment Service Provider can be licensed to provide several services and activities as these are prescribed in the EU Payment Services Directive 2015/2366 (PSD2). Different combinations of services and activities lead to different business models.

The following list consists of the services and activities that a PSP can be licensed to offer:

1. Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account.
2. Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account.
3. Execution of payment transactions, including transfers of funds on a payment account with the user’s payment service provider or with another payment service provider:
   • execution of direct debits, including one-off direct debits;
   • execution of payment transactions through a payment card or similar device;
   • execution of credit transfers, including standing orders.
4. Execution of payment transactions, when the funds are covered by a credit line for a payment service user:
   • execution of direct debits, including one-off direct debits;
   • execution of payment transactions through a payment card or a similar device;
   • execution of credit transfers, including standing orders.
5. Issuing of payment instruments and/or acquiring of payment transactions.
6. Money remittance.
7. Payment initiation services.
8. Account information services.

In this regard, the difference between an EMI from a PSP is that an EMI can be licensed to provide all the payment services and activities stated above and in addition, issue and offer electronic money. Electronic money is defined as a monetary value represented by a claim on the issuer which is:

• stored electronically, including magnetically;
• issued on receipt of funds to make payment transactions;
• accepted by a natural or legal person other than the electronic money issuer.

In this context, technology plays a critical role in the licensing and operation of an EMI through an online platform, catering to clients’ transactions and issuing debit cards.

3. What are the licensing requirements?

Applying either for a PSP or an EMI license to the CBC, an applicant must consider the following requirements:

1. incorporation of the legal entity in Cyprus.
2. registered office, as well as head offices situated in Cyprus.
3. The minimum initial capital of:
   • €20,000, for Money remittance service only
   • €50,000, for Money initiation services
   • €125,000, for any of the services stated in points 1 to 5 above
   • €350,000, if issuing and offering electronic money.
4. Submit to the CBC the following information along with the application:
   • a programme of operations indicating the particular type of payment services,
   • a business plan including a forecast budget calculation for the first three financial years,
   • evidence of holding the required initial capital,
   • a description of the governance arrangements and internal control mechanisms,
   • the organisational structure disclosing as applicable, the intended use of agents and branches,
   • the identity of directors and persons responsible for the management of the institution and of the payment services activities.

4. How SALVUS can support you

The industry-leading SALVUS Payment Services Licensing team is is committed to assist you in every step of your PSP or EMI licensing application. Our team employs a project management approach providing an effective selection of payment services that suit your business plan and handles the preparation and submission of the application documents by mediating between you and the regulator.

We further support you in the recruitment process and establishing the appropriate outsourcing arrangements. Once your institution has been successfully authorised, our Regulatory Compliance team is ready to guide you in meeting all your regulatory and reporting obligations.

Please contact us at info@salvusfunds.com or call us at +357 7000 7898 if you would like more information on acquiring a Payment Service Provider or an Electronic Money Institution license in Cyprus; our Licensing team is ready to help you.

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The information provided in this article is for general information purposes only. You should always seek professional advice suitable to your needs.