Will Cyprus' Financial Travails Send Companies Fleeing?

Cyprus has historically been a shelter for investors seeking to take advantage of the favorable corporate tax system of the Mediterranean nation. However, the measures imposed by the Eurogroup, IMF, Cypriot Central Bank and Cypriot government in response to the Cypriot banking crisis in early 2013, investors may be tempted to look elsewhere.

A Spear's article authored by Faegre Baker Daniels attorneys Robert Campbell and James Wagner points out that although attempts have been made to gradually ease restrictions on investors, prohibition on certain payments and transfers to accounts outside of Cyprus are expected to continue. Campbell and Wagner argue that this may lead to an exodus of international companies from Cyprus to other tax-friendly countries where international transfers can be performed more seamlessly.

They conclude that Cyprus' future as a tax haven ultimately hinges on the confidence investors have in the Cypriot banking system. Provided that Cyprus can stabilize their economy, the country should remain a desired location for holding companies in the coming years.