Like Russian ones, many Ukrainian companies do business through offshore special purpose vehicles or holding companies registered in Cyprus. By some estimates, billions of dollars with Ukrainian roots flow through Cyprus into offshore tax havens each year. And large portions of this – some $17bn since independence in 1991 – have made their way back into Ukraine through the Cyprus conduit, which is, in fact, the largest contributor of foreign direct investment in the Ukrainian economy.
But this does not mean that most Ukrainian companies exploiting the Cyprus tax loophole actually stash their cash there. And if they don’t, exposure will be limited, analysts say.
“Even though many ‘Ukrainian’ companies are incorporated in Cyprus, that does not necessarily mean they keep all their funds in Cypriot banks,” says Andrew Mac, a partner at Egorov Puginsky Afanasiev & Partners, a leading CIS law firm with offices in Moscow, Kyiv and Minsk.
