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Financial Leasing Law

Financial Leasing Law Alert

The Law regulating Financial Leasing and the activities of Financial Leasing Companies of 2016 (the “Law”) was published in the Official Gazette and came into force on 28th April 2016.


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KPMG in Cyprus


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The Law regulating Financial Leasing and the activities of Financial Leasing
Companies of 2016 (the “Law”) was published in the Official Gazette and came into force on 28th April 2016. 

The Central Bank of Cyprus shall be the regulatory authority of financial leasing companies for the purposes of ensuring the smooth operation of the financial
leasing market and protecting the parties to such transactions. 

Financial leasing is a method of medium to long-term financing, constituting an alternative to traditional credit financing (such as use of own funds or
banking loans), available to the public for the purposes of acquiring assets. A
leasing company (as “Lessor”) acquires, at the request of a client (the
“Lessee”), an asset which it then makes available to the Lessee for a certain
period of time, in exchange for frequent payments. While the Lessor has legal
ownership over the asset for the duration of the arrangement, the Lessee has
the right to use the lease object and avail of all benefits arising from it as
well as bear all risks and costs arising from the ownership. 

Application of the Law

In accordance with the provisions of the Law, financial leasing activities and
transactions may be provided to the public, by the following:

  1. Financial leasing companies registered in Cyprus that have obtained a license from the Central Bank to provide financial leasing services, or
  2. Licenced credit institution (provided that their license includes the provision of financial leasing services), or
  3. Credit institutions established in another member state being licensed from the relevant supervising authority (provided that their license includes the provision of financial leasing services), offering such services in the Republic through a branch or on a cross-border basis, or
  4. Financial (a)   leasing companies, being the subsidiaries of credit institutions of a member state, and subject to fulfilling certain criteria, offering financial leasing services in Cyprus through a branch or on a cross-border basis.

A financial leasing company established in Cyprus may set up or operate a branch or representative officer or offer services outside Cyprus, with the prior approval of the Central Bank.

Excluded entities

The Law does not apply to the following:

  • Financial leasing services not addressed to the public, such as (among others) from a legal person exclusively to its holding or a subsidiary company, or a subsidiary company of its holding company,
  • Natural or legal persons whose business activity is the sale of movable property and offer financial leasing services for the sale of movable property for an amount of up to EUR 5,000 per asset and only to the extent needed for the exercise of their main activity,
  • In the case where the leasing period is less than 3 months.


Permitted services and share capital

A financial leasing company may provide both financial leasing services and ancillary services as these are defined in the Law, and any other relevant service which may be determined by the Central Bank. Its minimum issued and paid share capital must amount to at least EUR 200,000.


How are existing companies affected?

A legal person who offers financial leasing services to the public within the territory of Cyprus (except those excluded by the Law) may continue to do so, provided that within 2 months from the Law coming into force, it shall comply with the provisions of the Law and further submit to the Central Bank the documentation required under the Law. If an application for the relevant license is not made within 2 months, the person in question must cease to provide such services.

How can KPMG help?

KPMG can assist you in this regard by providing the following services:

  • Assist in the regulatory and tax structuring of a financial leasing company;
  • Assist in the preparation of a complete application for authorization of a financial leasing entity and liaise with the regulatory authorities for the obtainment of a license 

KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative ("KPMG International") a Swiss entity. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International Cooperative ("KPMG International") or KPMG member firms.

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