In Ukraine, more than 6000 legal entities have Cypriot companies or even citizens among their founders or beneficiaries. YouControl analysts came to these conclusions in the study of business relations between Ukraine and Cyprus.
For many years, Cyprus was considered an offshore state that hid the real owners of businesses registered there. But after joining the European Union, the registers of Cypriot companies have become much more transparent. For this reason, it has become much easier to establish who really owns a Ukrainian company through an island intermediary, analysts write.
In Ukraine, more than 6000 legal entities have Cypriot companies or even citizens among their founders or beneficiaries. In addition, Cypriot firms are present in 30% of legal entities with foreign founders and are a popular place among other jurisdictions.
Almost one percent of limited liability companies of various forms of participation have Cypriot companies as founders or beneficiaries. In private joint-stock companies, this figure is much higher - the Cypriot "trace" is visible in every fifteen private joint-stock companies.
Basically, we are talking about companies in the fields of heavy industry, insurance, real estate and communications. Lawyers explain the presence of Cypriots in joint-stock companies by the fact that these are echoes of privatization from the 90s, and Ukrainian oligarchs are mainly responsible for these Cypriot companies.
The role of Cypriot companies has changed a lot since the 1990s, when they first began to appear in the structure of Ukrainian enterprises. If at that time the real owners of enterprises were hiding in offshore jurisdictions, now Cyprus is rather a tax paradise and a "window to Europe" thanks to the English law system that is applied there.
— Cypriot jurisdiction for business has several advantages. First of all, this is a historically low tax rate - it was recently raised to 12,5%, but it still remains the lowest in Europe, thanks to which it is convenient to withdraw capital specifically to Cyprus. Secondly, English law is used in Cyprus, it is very convenient and understandable for business to structure assets. Thirdly, a certain regime of secrecy for companies and their owners, as well as the opportunity to distribute companies according to the industry principle: one Cypriot company is one industry, said the deputy executive director of the Anti-Corruption Center Elena Shcherban.
All these factors provide a high level of investment protection. And they provide the opportunity to withdraw funds further, in other jurisdictions.
- Separately, it is possible to note the long-standing habit of Ukrainian oligarchs to register their business in Cyprus, but not for anonymity, but to protect it from possible arrests in criminal proceedings or raids, - Shcherban added.
Most companies that have Cypriot beneficiaries working in the service sector. Thus, analysts have calculated that in 1986 companies with island registration of their founders working in real estate, 1116 in wholesale and retail trade, and 326 provide various financial services.
Associated with Cypriot legal entities and individuals are 226 electricity producers and 209 grain growing firms.
Most of these companies belong to small businesses with a turnover of less than 2 million euros. Analysts counted 2388 such companies. There were significantly fewer representatives of medium and large businesses on the list — 554 and 459, respectively.
Analysts note that Cyprus still remains one of the most important financial partners for Ukraine. According to the National Bank, in 2019 the main source country of foreign direct investment in the capital of Ukraine was Cyprus with more than 16 billion dollars, which is almost 3 billion dollars more than in 2018 and makes up about a third of all income.
