Obtain a payment licence in Cyprus

Obtaining a payment licence in Cyprus is a tactical step for fintech structures aiming at cross-border development. The Cyprus jurisdiction is integrated into the European Union legal system. It makes seamless access to the EU single payment space without the need to re-license in each specific country.

Reasons for growing interest in obtaining a payment licence in Cyprus

Entering the payment solutions market in Europe requires choosing a jurisdiction that can provide both regulatory stability and business flexibility. The decision to obtain a payment licence in Cyprus is not only due to its geographical location, but above all to the island's reputation as a recognised EU fintech hub. This country has a common law system based on the Anglo-Saxon model and adapted to the requirements of the European Union regulations. This legal framework is of key importance for market participants working in the field of electronic finance, as well as in the segments of implementation of payment interfaces and software integration solutions.

The licence issued in Cyprus provides an opportunity to legally provide an extensive list of specialised services within the framework of regulated payment activities. These include processing transfers, accepting payments, administering customer accounts, and issuing settlement instruments such as payment cards and e-wallets. However, the key advantage is the possibility of applying a ‘passportisation’ mechanism. This means that a licence issued in Cyprus is recognised as valid in all European Union countries.

The decision to use Cyprus as a legal base for setting up a fintech company is also due to its simplified registration procedure and lack of opaque tax obligations. Cypriot law provides clear requirements for capital, management team, and internal policies, without excessive bureaucracy.

Although payment systems in Cyprus are regulated by the Central Bank, the very process of interaction with the regulator is built on dialogue. Businesses can receive pre-consultation, as well as agree on a business model in advance to assess its compliance with EU standards.

The process of registering a payment company in Cyprus takes an average of four to six months. Compared to other EU countries, this is a moderate timeframe. It is not so much speed as predictability of results that plays a role here: a company that meets the requirements is almost guaranteed to receive a licence.

Interest in launching a payment business in Cyprus is also growing among start-ups. Due to the legal flexibility and the possibility to limit themselves to a minimal structure at the first stage, many fintech projects choose Cyprus for validation of their business model and subsequent scaling up.

The licensing of payment services in Cyprus covers both traditional payment service providers and operators implementing transaction initiation functions, implementing open banking mechanisms, and using software interfaces (APIs) to access payment accounts. This makes the jurisdiction relevant for companies specialising in digital technologies and aiming for a sustainable presence in the European Union market.

What a payment institution licence in Cyprus provides: a list of rights and restrictions

A PSP permit issued by the regulator of the Republic of Cyprus provides access to the pan-European payment infrastructure. In this case, the company is exempt from the need to undergo the licensing procedure in each EU country. In other words, the licensed entity may provide payment services in the territory of Germany, the French Republic, the Netherlands, as well as in any other state that is part of the European Union, while acting within the framework of unified legal regulation. The possibility of operating outside the domestic legal order is of particular importance for high-tech companies aiming to develop and implement scalable financial instruments. An authorisation in the Republic of Cyprus provides access to a wide range of services, from money transfers and card payment processing to the issuance of electronic payment instruments, including digital wallets and cards.

Registration in the legal system of Cyprus does not limit the company's activities exclusively within the European space. The obtained licence is perceived as an indicator of business stability and can be used in other jurisdictions. In particular, it facilitates connection to international payment infrastructures and simplifies interaction with foreign financial institutions.

The authorisation requires strict compliance with regulatory requirements. The list of prerequisites includes: full payment of the stipulated authorised capital, formation of a competent management team, and approval of internal regulations defining operational and digital security standards. At the same time, a licence does not relieve the organisation of its obligations to provide regular reporting, comply with anti-money laundering and customer identification regulations, and undergo periodic inspections by the regulator.

To provide an overview of the powers and limitations imposed, a list of the main functions provided under a payment licence issued in the jurisdiction of Cyprus is set out below:

The regulator considers the licensing of payment service providers in Cyprus as a tool not only for admission to the market, but also for maintaining the reliability of the entire system. For this reason, each licence is accompanied by obligations to comply with security regulations, including protection of personal data, control of transactions and restriction of access to sensitive information.

Entities planning to obtain a payment licence in Cyprus are required to take into account the established standards for the technological framework. The information technology system must have a high degree of reliability and be equipped with facilities for automatic recovery, action logging, and rapid troubleshooting. The availability of such components is not considered an optional extra. It is an essential requirement for admission to the licensing procedure.

The Cyprus payment licence is suitable for both young companies and mature structures wishing to consolidate their activities in Europe. But it must be understood that the licence is not a ‘tick box’ for the investor, but an instrument of long-term legal responsibility. The key to stable operations and expansion into international markets are correct interpretation of the restrictions, understanding of the functional framework, and precise compliance with PSD2 standards.

Requirements for obtaining a permit for payment activities in Cyprus

The mechanism for granting a licence for payment transactions in the Republic of Cyprus is administered by the national Central Bank and is implemented in accordance with the rules of the Second Payment Services Directive of the European Union (PSD2). The applicant is required to demonstrate functional readiness, legal transparency, and technical capacity to provide the relevant services. Only a legal entity registered in the jurisdiction itself may apply.

One of the fundamental conditions is considered to be compliance with the established organisational structure requirements. In order to apply, the company must comply with the standards applicable to payment institutions in Cyprus. In particular, the appointment of at least two persons to act as executive directors is required, with one of them being permanently located within the state. This condition ensures continuous liaison with the regulator and oversight of day-to-day management.

The key criteria for registration of a company with a payment operator's licence in Cyprus include a sound financial model, an effective internal control system, an established risk management framework, as well as compliance with anti-money laundering and customer identification procedures. At the same time, the formal existence of relevant policies is not enough. Confirmation of their actual implementation is required. The supervisory authority requests documentary evidence, including internal audit procedures and a description of the circulation of authority among team members.

Particular attention is paid to issues related to the formation of the authorised capital. The procedure for its deposit and amount directly depend on the type of the proposed payment activity.

Funds intended to form the capital of a payment institution in Cyprus must be deposited in the current account of a legal entity opened with a banking organisation registered within the jurisdiction. This transaction must be carried out prior to the submission of a formal application. The Supervisory Authority considers the existence of a deposit as an indicator of good financial discipline. In addition, these assets are subject to blocking until authorisation is granted. The blocked funds act as a guarantee to fulfil future regulatory obligations.

The procedure for licensing a payment service provider in Cyprus

Organisations planning to start providing payment services within the European Union are often interested in the stages of obtaining a PSP licence in the jurisdiction of Cyprus. Despite the high requirements set by the regulator, the procedure is transparent and allows you to determine in advance the amount of effort and resources required. The Central Bank of Cyprus has a number of requirements, but with a clear strategy, obtaining payment provider status is an achievable goal.

First, you must register as a PSP in Cyprus, which means incorporating a local company. Licences are not issued to foreign legal entities, so the applicant must establish a Cypriot structure. After that, a package of documents is put together, including a business plan, compliance policy, proof of capital, and corporate governance scheme.

The procedure is strictly step-by-step. To avoid rejection or delays, it's important to follow the steps in order. Below is the logic of actions describing the process of obtaining a payment licence in Cyprus from registration to final approval.

In order to visualise the key aspects of regulation and the sequence of interaction with the authorised body, a summary table reflecting the main regulatory parameters is provided below.

List of documents required for licensing payment activities in Cyprus

Organisations initiating the process of registering as a financial solutions provider should note that the procedure for obtaining a payment institution licence in the Cypriot legal system requires more than just formal compliance with legislative requirements. It is also necessary to submit comprehensive documentation confirming actual readiness to commence operations in accordance with established regulatory standards. The Central Bank evaluates not only formal applications, but also the completeness of the dossier, its legal correctness and the logical coherence of all sections. The preparation of materials is a key stage on which the entire procedure depends.

First of all, it is necessary to collect documents for a payment licence in Cyprus relating to the founding part. This includes the articles of association, certificate of incorporation, ownership structure, information about shareholders, and copies of internal corporate decisions. All information must be up to date, certified, and submitted in English or with a notarised translation.

The next section concerns the business model. Companies must demonstrate how they will operate after accreditation. The regulatory authority, represented by the Central Bank, has certain requirements for the package of materials necessary to obtain a payment activity licence in Cyprus. The list of mandatory documents includes:

• a detailed business development plan covering a three-year period;
• a detailed description of the proposed payment transactions;
• a financial forecast containing information on projected income and expenses;
• a risk map;
• a customer service scheme;
• a structure for interaction with counterparties;
• an IT infrastructure development plan.

The legal basis for operations is equally important. It is impossible to obtain a licence to provide payment services in Cyprus without internal regulations. Organisations must submit localised documents, including policies on anti-money laundering and customer identification, regulations on the processing of personal data, instructions on responding to incidents, and procedures for assessing and managing operational risks. All of these provisions must be tailored to the specific nature of the intended business activity rather than being universal.

As part of the preparation for licensing a payment institution, it is also necessary to confirm the ability to maintain proper financial records. To confirm this, information is provided on the appointed auditor, the existing internal control system, and the employees responsible for preparing and submitting reporting data. The supervisory authority has the right to request preliminary financial documents to assess the compliance of accounting with established standards.

Legal entities often focus on developing strategies and economic calculations, overlooking the importance of human resources. However, without the proven professional competencies of all key team members, it is impossible to obtain a payment activity licence in Cyprus. In particular, directors, leading specialists, compliance department employees, and technical managers are required to provide:

• Resume including a track record of relevant experience
• copies of diplomas and certificates;
• certificates of no criminal record;
• confirmation of no disciplinary penalties;
• letters of recommendation (optional, but desirable).

Below is a list illustrating what is included in the preparation of documents for a payment licence in Cyprus:

• constitutive documents and ownership structure;
• information about the members of the board of directors and beneficial owners;
• strategic development plan with calculations of projected financial indicators;
• internal regulations on anti-money laundering and customer identification, as well as a structured map of potential risks;
• documents certifying the formation of the declared capital;
• regulated measures to ensure internal security and technical specifications of the platform;
• evidence of the professional competence of responsible employees;
• a contract confirming the availability of leased premises and confirmation of physical presence in the country;
• a description of the architecture of the information technology infrastructure and backup system;
• a draft agreement with a banking partner (if applicable).

It should be emphasised that PSP licensing in Cyprus does not allow incomplete or preliminary applications. The regulator only considers complete dossiers. All sections must be agreed upon, and each document must be legally verified. Any inaccuracies or formal discrepancies may result in the package being returned for revision or rejected without consideration.

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How supervision is carried out after a payment licence is issued in Cyprus

The procedure for obtaining a licence to operate in the field of payment services in the Republic of Cyprus does not end with the approval of the application. Immediately after the licence is registered, the regulatory control phase begins, accompanied by ongoing assessment of the organisation's operational activities. Applicants should take this into account, as obtaining a payment institution licence in Cyprus involves not only a preliminary compliance check, but also systematic monitoring by the Central Bank.

Holding a licence to carry out payment transactions in Cyprus entails an obligation to maintain a high level of procedural transparency and compliance with established regulatory requirements. Already at the stage of obtaining provider status, the company undertakes to provide reports, disclose key performance indicators and immediately inform the supervisory authority of any significant changes. Monitoring covers not only economic performance indicators, but also changes in the organisational model, software updates and management personnel rotation.

The regulatory oversight mechanism provides for both scheduled and unscheduled inspections. Legal entities that have obtained a licence to conduct payment activities in Cyprus are required to submit reports on a regular basis, quarterly and, in certain cases, monthly. The Central Bank analyses customer and company account transactions, assesses compliance with anti-money laundering and customer identification rules, and checks the level of preparedness for dealing with possible technological failures.

Obtaining the status of a payment institution requires the applicant to strictly adhere to European standards, including specific requirements established for PSP licence holders in Cyprus. In particular, it is necessary to ensure that customer assets are held in segregated bank accounts, to implement strong customer authentication (SCA) procedures, to continuously monitor internal operations, and to ensure the protection of personal information in accordance with the provisions of the GDPR.

Supervisory oversight covers the following key areas:

• compliance with PSD2 standards and obligations;
• fulfilment of obligations to customers;
• technical stability of information platforms;
• regular professional development of employees;
• transparency and structure of corporate governance.

Organisations that have undergone the payment service licensing procedure in Cyprus are required to be prepared for unscheduled inspections. The supervisory authority has the right to initiate an audit without prior notice. Especially, it is possible in cases of a significant increase in the volume of operations, expansion of the list of services provided, or reports of possible violations of applicable rules.

The process of obtaining a licence to provide payment services in the Republic of Cyprus includes a mandatory annual review of the professional reputation of the management team members. In addition, any changes to the structure of the executive bodies are subject to prior approval by the regulatory authority. This rule applies to both executive directors and beneficial owners.

After obtaining the status of a payment institution (PSP) in Cyprus, the company not only receives the relevant powers, but also assumes serious obligations. The control infrastructure operating in this jurisdiction is recognised as one of the most technologically advanced in the region. The use of digital channels for reporting, a unified operational risk analysis system, and a direct line of communication with representatives of the Central Bank contribute to the reliability of supervision and the stability of the financial sector.

Tax incentives for obtaining a payment services licence in Cyprus

For investors looking to expand their financial projects, the tax policy applied to payment institutions in Cyprus is not only a regulatory obligation but also an effective mechanism for creating a sustainable fiscal model for the long term. The country's financial system is designed with the international business environment in mind. This allows operators to reduce costs while remaining fully compliant with European law.

After obtaining payment operator status in Cyprus, the company becomes a tax resident of the jurisdiction. The main corporate tax rate here is 12.5% — one of the lowest in the EU. However, it only applies to profits earned from activities within Cyprus. Income earned outside the country may be exempt from taxation under certain conditions.

Corporate tax in Cyprus is combined with a flexible system of double taxation agreements. The Republic has signed more than 60 such treaties, including agreements with the United Kingdom, Germany, China, the UAE and other key jurisdictions. This greatly simplifies the cross-border movement of capital, eliminating the need to pay taxes twice — at the place of business and in the country of registration.

In addition, the licensing of payment service providers in Cyprus provides significant tax incentives for intellectual property. This refers to the IP Box regime, which allows income from software solutions, technologies, API modules and other IP objects to be taxed at a reduced rate.

The rate on distributed profits for foreign beneficiaries in the Republic of Cyprus is a significant aspect of tax planning. If a participant in an enterprise licensed to carry out payment activities is not a tax resident of that jurisdiction, payments made to them are exempt from taxation, provided that certain criteria are met. This provision creates an additional financial advantage for owners of multinational companies.

The key fiscal parameters you can find in the table below:

According to local legislation, legal entities are entitled to include research and development costs and technological improvements in the calculation of their taxable base. This is relevant for companies implementing innovative solutions in the field of financial technology. An additional benefit of obtaining a payment services licence in the Republic of Cyprus is the absence of an obligation to pay tax on income derived from the increase in the value of assets, excluding real estate.

The IP Box programme operating in the Cypriot jurisdiction is considered one of the most competitive within the European Union. Under this model, income from the sale of rights to software, patents, digital algorithms and other forms of intellectual property may be taxed at an effective rate of 2.5%. However, the application of this tax regime requires documentary evidence of research and development work carried out directly within the national jurisdiction. Companies planning to obtain a licence to provide payment services in Cyprus are entitled to additional tax incentives. In particular, there is no levy on the net value of assets, and there is also an exemption from taxation on income in the form of dividends from foreign subsidiaries, subject to compliance with the requirements for the level of participation. In addition, profits from the sale of shares belonging to international corporate structures are also not subject to tax.

Professional support in obtaining a payment licence in Cyprus

Companies planning to launch a payment business with a Cyprus licence face not only the EU regulatory framework but also the specifics of Cypriot regulation. Despite the transparency of the procedures, interaction with the Central Bank requires legal precision, attention to detail, and practical experience. Errors at the application stage, unprepared document,s or outdated internal policies can result not only in delays, but also in rejection.

High-quality support in obtaining a payment licence in Cyprus reduces the administrative burden on the applicant and ensures the completeness of the dossier. Consultants familiar with the regulator's requirements prepare not only corporate documents, but also internal regulations, IT documentation, financial models, and reporting templates. This is especially important for start-ups and non-residents who do not have a local team.

Conclusion

Obtaining a licence to operate in the field of payment services in Cyprus is a strategically sound move for innovative companies focused on European Union legal regulation. A licence issued in this jurisdiction provides direct access to international financial markets through the European passporting procedure. However, obtaining the necessary permits is only the starting point. The legal entity must comply with the requirements of the Second Payment Services Directive (PSD2), ensure a comprehensive reporting system, and establish stable channels of communication with regulatory authorities. Engaging qualified specialists to support the licensing process in Cyprus reduces legal costs and contributes to the creation of a reliable regulatory framework for sustainable business development.