Cyprus: E-Commerce

On this Page:

- Cyprus Introduction
- Cyprus Facilities
- Cyprus Offshore Activities
- Cyprus Case Studies

Cyprus Introduction

Cyprus passed a number of laws in 2004 relating to e-commerce, including the Regulation of Electronic Communications and Posts Law (112(I)/2004), and the Legal Framework for Electronic Signatures and for Relevant Matters Law (N.188(I)/2004). The 2002 Law on Radiocommunications was also amended.

These laws included the transposition of the EU's regulatory framework into national law, although Cyprus was slow off the mark introducing the necessary secondary legislation for the Law on Electronic Communications.

The Cyprus government says the island is a communications hub and an international business centre in the Eastern Mediterranean region due to the forward-looking policies of the Cyprus Telecommunications Authority (CYTA).

Despite its fine words, however, the government has lamentably failed to move forward with liberalisation of the telecommunications sector, which in most respects remains firmly under the monopoly control of CYTA. This organisation's profits are so high that the government year after year uses it as a mine for contributions towards the national budget, and in 2003 CYTA was shamed into refunding CYP20m to its subscribers.

Competitors to CYTA in the mobile sector have struggled to make headway. Only in the Internet sector has any significant degree of competition been allowed, where there are a number of ISPs in addition to CYTA itself.

Under liberalisation legislation originally introduced in December 2000, a telecommunications regulator has been appointed, although until 2003 he was without the resources that would allow him to be effective. There is no doubt that this was largely due to reactionary forces within the government and the industry which wish to preserve CYTA's monopoly for as long as possible.

The regulator has amongst his responsibilities the granting of new telecoms and postal licences and the authorisation of telecommunications networks & services. He was appointed for a six-year term and will determine the procedures for granting licences for telecommunications and postal services and the creation of telecommunication and postal networks.

As part of the government's plan to liberalise the telecommunications sector, plans were announced in March 2001 to table legislation which would privatise the state-owned CYTA, with 94% of the shares intended for the private sector and 6% for the company's employees. Needless to say, this plan came to nothing.

The first real sign of progress was the decision to issue two mobile phone licenses, for which bidding began late in 2002, with the first license being awarded as of right to CYTA. But in June, 2004, the bidding process for a second license was threatened after Atlantic Crest was disqualified from participating in the auction for the licence for failing to meet the minimum tender requirements in a decision also backed by the Attorney General. Eventually the second license was awarded to Scancom, which trades under the name of areeba.

A price war began in 2005 between Vodaphone-CYTA and competitor areeba; in mid-2005 CYTA refused to accept a Commission ruling that it should re-instate higher prices pending an appeal to the Supreme Court. The Court ruled in July that CYTA must obey the ruling.

In February 2002 Cyprus Electricity Authority (EAC) vice-president Andreas Louroudjiatis told a parliamentary committee that the EAC planned to enter the telecommunications sector once it is liberalised. Speaking before the House Finance Committee, which was discussing the annual budget for the EAC and the Telecommunications Authority, EAC said his department would soon be in a position to offer a wide range of services, including telephone, data and cable television facilities, using optical fibres.

"We are looking for a strategic investor or a collaborator to assist us with the technical side. Five foreign companies have already expressed an interest to undertake the task," he added.

Communications Minister Averoff Neophytou however said that public companies should not compete against each other, saying: "There cannot be real competition between two companies which have the same owner. We are only trying to ensure consumers' best interests." But he conceded that he could not stop the EAC from expanding into the area of telecommunications: "They are welcome to join the club if that's what they want," he said, stressing at the same time that, "private companies should also be encouraged to do so in order to increase competition in the field."

A handful of private telecommunications companies have entered the Cypriot market under a creeping programme of liberalisation, including MTN, Cablenet, TelePassport, OTEnet Telecom and PrimeTel.

ne of the priority growth sectors of the Cyprus government's Strategic Development Plan (2007-2013), is ICT. Specifically, Cyprus welcomes foreign direct investment to expand and/or develop projects on e-Government, e-Business, e-Learning, e-Inclusion, e-Health and overall ICT services.

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Cyprus Facilities

ISP and Hosting Services

Cyprus ISPs have included planitis.net, thunderworx.com, logos.net, avacom.net, CYTAnet, teledev.net and Spidernet.

On-Line Banking

Laiki eBank, launched by Laiki Bank in September 2000, was the first electronic bank in Cyprus to allow banking and stock market transactions via the Internet. Laiki eBank customers were able to trade securities on the CSE, track developments on the CSE and have a live update of their portfolio.

The Bank of Cyprus Internet Banking Service offers the following services:

Money Transfers (Between accounts, To 3rd party accounts held in Bank of Cyprus, To Other Banks and Co Operative Companies in Cyprus, Abroad)
Account Balances
Past Transactions
Chequebook Ordering
Statement Ordering
Stop Payment of Cheque
Utility Payments (CYTA,EAC)
On-Line Securities Dealing

The cosy existence of traditional sources of information on the CSE has been threatened by newcomers to the field such as Stockwatch.com.cy, Cypria.com and Moneynet.com.cy, who offered equity prices and live ticker prices to all users.

And as if that wasn't enough, banks tried to get in on the act there as well, with the Bank of Cyprus announcing that it would offer CSE closing prices via its WAP services, and the Laiki Bank stating that it planned to offer CSE prices through the launch of the Laiki eBank

Another established force offering information on CSE prices was the giant multinational, Reuters. As a rival to AG Financial Network, Reuters was among the first to offer an extended service on the local stock market. Reuters offers its service either through its own satellite dishes or leased lines but also allows access through the Internet.

On-line Gambling

Online gambling in Cyprus has been permitted since the Betting Law of 2007, but the Cyprus government now plans to ban it, except on horse racing and sports in Cyprus. However SAKOP, a social organization, has pointed out that EU directives demand a public consultation and an impact study on possible repercussions, neither of which has been carried out.

The consultation process will now take place and opposition to the ban is already coming to light. President Demetris Christofias and his government party AKEL have insisted on an outright ban to combat social problems, but others argue that a ban could not be implemented effectively and it is better to regulate gaming activity in order to collect the tax revenues it could generate.

House Legal Affairs Committee chairman, Ionas Nicolaou, has disclosed government estimates that turnover in the Cyprus online gambling market turnover was EUR2.5bn (USD3bn) in 2008, yielding a gross profit of EUR400m. The government says that by 2012 turnover could be as high a EUR5bn and gross profit nearly EUR1bn.

Techlink Entertainment Ltd President John Xidos was quoted by the Sunday Mail as saying: “The biggest problem we see is ... where there is no legal gambling, there is a ton of illegal gambling. The two big issues are that government needs to have full control in order to eliminate corruption, and the players need to have full control in order to control their gambling expenditure”.

Techlink is a supplier of responsible gaming technology which facilitates full control and regulation of electronic games of chance.

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Cyprus Offshore Activities

The natural bonding of the Internet and Offshore stems from the fact that both, of their nature, manage to avoid tax. Businesses which can operate on the Internet without, so to speak, touching ground in a high-tax jurisdiction will naturally migrate to offshore jurisdictions; while business that already have offshore existence will find it highly convenient to be able to use the Internet to trade with their high-tax customers without having to make a landing in their countries.

As a major offshore jurisdiction with tens of thousands of offshore enterprises already installed, including many trading companies, it is only a matter of time before Cyprus becomes a centre of e-commerce activity. The island's geographical location, its good telecommunications links and its sophisticated business infrastructure add to the likelihood of a strong e-future for Cyprus.

However, the effective abolition of Cyprus's offshore regime as a consequence of its entry to the EU, and the introduction of a uniform 10% rate of corporation tax have likely also had an impact on the attractions of Cyprus as an e-commerce base as compared with truly offshore jurisdictions.

For information about the impact of e-commerce on a number of the main offshore activities which take place in Cyprus, click on a link below to go to our specialist E-commerce site Offshore-e-com.com

Sales and Distribution of Physical Products
Sales and Distribution of Digital Products
Banking and Financial Services (including Investment Funds)
Corporate Support Functions

To see an analysis of the current state of legal and tax issues surrounding offshore e-commerce, click here.

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Cyprus Case Studies

This section will contain case studies of e-commerce solutions applied to offshore business activities carried out from Cyprus. The case studies will be developed in association with lowtax.net partners. Contact us to learn more.

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