Stamp duty on letters of credit (L/Cs) is one of several burdens making it difficult for Cypriot businesses adjusting to life within the European Union according to local business leaders.

They are calling for reforms in this area to boost the prospects for international commercial activity that, according to the Central Bank of Cyprus, accounts for more than 6 per cent of the island's GDP and employs over 3,100 Cypriots.

Losing out

Cyprus, which was one of ten new members admitted to the EU last year, could be losing out to foreign competitors because of cumbersome rules on stamp duty, according the Cyprus International Business Association (CIBA).

"Large international business contracts are not being concluded through Cyprus companies, precisely because of the high amounts of stamp duties involved," according to Intercom, CIBA's regular report for members.

Significant costs

Stamp duty is applied to several documents in Cyprus, including L/Cs, bills of exchange and cheques. Although the amounts on these are small, CIBA maintains that in a big deal the sum of these transaction costs is significant. Cyprus also imposes stamp duty on contracts and on the issue of share capital.

CIBA is therefore calling for the abolition of stamp duty in these areas.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.