3What we are good at…Eurofast Taxand• International Tax Tax efficient real estate structures includinginvestment funds Tax advice surrounding transactions,disposals and spin offs Designing acquisition and holdingstructures Minimizing tax obstacles in real estatetransactions Transfer Pricing VAT planning & compliance Tax controversy and litigation Tax Litigation Real EstateEurofast GlobalAccounting & PayrollMergers & AcquisitionsCross border transactionsTransaction advisoryIntellectual propertyCompliance reportingCross border structuringShippingBringing value to clientswith our serviceWhat we aregood at…
4Single point of Contact, Many Points of ViewWhere can you find us Lefkosia Athens Thessaloniki Sofia Bucharest Belgrade Tirana Skopje Pristina Banja Luka/ Sarajevo Zagreb Cairo/ Alexandria Podgorica Kiev Moscow Tbilisi
6Cyprus BailoutOverview Bank of Cyprus and Laiki Bank - Losses of more than €4 billion due to theirhigh exposure to Greek government bonds. Bailout deal with the Eurogroup for €10 billion on 25 March 2013.• Laiki- Separated into a good bank and a bad bank.• A good bank to be merged with Bank of Cyrus (BoC).• Laiki - Transfer of all good loans, insured deposits, deposits of up to€100,000. to BoC.• Over €100,000. uninsured deposits or balances to take part inrecapitalisation.• BoC haircut on deposits 37.5% and additional 22.5% frozen for the next fewmonths incase of future recapitalisation needed. (All insured deposits of€100,000 or less not affected).
7Cyprus BailoutOverview• Savers affected are to be compensated with the Class A shares of the bank.• BoC to take over the Emergency Liquidity Assistance balance alreadyprovided to Laiki by the European Central Bank estimated at € 9.4 billion. Deposits in other financial institutions will remain unaffected. Temporary capital movement restrictions put in force by the Central Bank ofCyprus and are updated on a regular basis to control a possible capital outflow. Themeasures include:•Transfer of deposits/funds to accounts held in other credit institutions is limited.•Limit on the amount of cash withdrawals and when travelling outside CY per naturalperson/per day/per account.•Strict controls on the termination of fixed deposits prior to their maturity.
8 Severe impact on Cyprus banking. Laiki Bank mostly affected (known longago!). Other banks not so much. Continue to be “transaction” banks. Very good liquidity in other banks. Principle behind decision may affect otherjurisdictions too.Cyprus Bailout - Impact
9Statement of “Jeroen Dijsselbloem” that itmay be treated as a “model” for othercountries in the Eurozone. The decisions of the Eurogroup haveshaken the confidence of the investorsworldwide in the banking system - lifetimesavings are not necessarily safe in Europeanbanks and clients moving funds to Singaporeetc....Especially countries where their bankingsector exceeds their real GDP at least 4 timesunder scrutiny. Model must change!Cyprus Bailout - Impact
10 Corporate structuring not affected. No actual link with banking. Concern is more psychological than actual. No change in main principal behind Cyprus’sattractiveness. Minor changes being made to the tax andlegal regime.Cyprus Bailout – Impact onCorporate Structuring
3BVI/Belize CoRus CoCyp CoRoyaltiesRoyaltiesRoyaltiesPractical examples on structuresto do - not to doIP rights on Cyprus CompanysharesRus CoCyp CoNO YESProfits distributedin the form ofDividendsCIT: Corporate income taxWHT: Withholding taxZero WHT2,5% CIT
Non-resident UBONon-resident UBOCyprusFinancing CompanyCyprusFinancing CompanyRussian CompanyRussian CompanyInterest 0%Interest 0%CyRUSLoanLoanPractical examples on structuresto do - not to doGroup Financing StructureNO YESCommercial BankCommercial BankRussian CompanyRussian CompanyInterest 0%Interest 0%CyRUSLoanLoanCyprusFinancing CompanyCyprusFinancing Company
3Forex/Binary companies in Cyprus Simplicity on the regulatory framework – In compliance with EUdirections Cyprus license as a passport to other EU jurisdictions Low operational costs Tax treatment similar to Cyprus CompaniesYES
14VAT As of 14th January 2013, the standard VAT rate was increased from17% to 18%. From 13th January 2014 to 19%. The reduced VAT rate shall be increased from 8% to 9% from 13thJanuary 2014.Carrying Forward of Tax LossesLimited to five (5) years.Recent Changes in the TaxLaws
15Annual Levy of 350 EurosNew amendment to Companies Law Cap 113.As of 2013, it is compulsory for all companies registered with theCompany Registrar to pay the annual fee of €350.Dormant companies included.Corporate Tax Increase CIT increased from 10% to 12.5%Recent Changes in the TaxLaws
16Current and FutureOverviewDomestic ProvisionsInternationalRegulations – The FutureThe Russian Connection
17Current and FutureOverviewDomestic Tax Provisions of Cyprus compared to: Luxembourg Malta Ireland Switzerland
18Domestic Tax ProvisionsComparedCyprus / LuxembourgCyprus LuxembourgCorporate Tax 12.5% 28.8%Dividends 0%15%0% for qualifying Eu/Swiss Companies andCountries with which Luxembourg has a TaxtreatyInterest 0% 0%15% for profit-sharing bondsRoyalties 5% (film royalties)10% (other royalties)0% (use of rights outside Cyprus)0%Capital Gains Generally not taxable.20% on the disposal of immovable propertylocated in Cyprus and on shares in Companieswhich own immovable property located in CyPart of Business IncomeCapital gains from disposal of shares may beexempted, if certain conditions are met.
19Domestic Tax ProvisionsComparedCyprus / MaltaCyprus MaltaCorporate Tax Rate 12.5% 35% (reduced significantly following refunds)15% final tax available for certain defined categories of"investment income"Dividends 0% 0%Interest 0% 0% if the interest paid is not effectively connected with apermanent establishment of the non-resident in MaltaRoyalties 5% (film royalties)10% (other royalties)0% (use of rights outside Cyprus)No if royalties not effectively connected with a permanentestablishment of the non-resident in MaltaCapital Gains Generally not taxable.20% on the disposal of immovableproperty located in Cyprus and onshares in Companies which ownimmovable property located in Cy12%exemptions are available, e.g. on participating holding, listedsecurities other than units, intra group transfers, and certaintransfers on mergers & divisions
20Domestic Tax ProvisionsComparedCyprus / IrelandCyprus IrelandCorporate Tax Rate 12.5%12.5% for trading income25% for non-trading incomeVarious other rates apply for specificactivities/industriesDividends 0% 20% (some exemptions apply)Interest 0% 20% (several exemptions, e.g. Eurobonds)Royalties 5% (film royalties)10% (other royalties)0% (use of rights outside Cyprus)20% (on patents only)Capital Gains Generally not taxable.20% on the disposal of immovable property located inCyprus and on shares in Companies which ownimmovable property located in Cy30% participation exemption available
21Domestic Tax ProvisionsComparedCyprus / SwitzerlandCyprus SwitzerlandCorporate Tax Rate 12.5% 8,5%Dividends 0% 35%Interest 0% 35% on bonds issued by Swiss debtors and on bank deposits;3% on loans secured by immovable property0% for qualifying interest under Savings AgreementRoyalties 5% (film royalties)10% (other royalties)0% (use of rights outside Cyprus)0%Capital Gains Generally not taxable.20% on the disposal of immovableproperty located in Cyprus and onshares in Companies which ownimmovable property located inCyprusYes, part of Business incomepart of business income;participation relief if minimum 10% capital holding
Cyprus Luxembourg Malta Ireland SwissCIT 12.5% 28.80%35%exempt. may apply 12,5% 8,5%Divid 0%15%, exempt. mayapply 0%20%exempt. mayapply 35%Inter 0% 0%0%Subject toconditions.20%exempt. mayapply35% on bonds3% on loansRoyal0%If exercised outof CY 0%0%Subject toconditions. 0% 0%CGT0%Subject to cond.Part of BusinessIncome12%exempt. may apply30% exempt. mayapply Part of Business IncomeDomestic Tax Provisions Compared: All
23International RegulationTrends & FutureTrends• Increased scrutiny by tax authorities/courts• Transfer Pricing• Substance• Genuine economic/strategic/financing reasons• Documentary support – crucial importance• Concept of “beneficial ownership”• Introduction of detailed LoBs provisions• Exchange of InformationLeading to more…• TRANSPARENCY + ARM’S LENGTH• SOPHISTICATION IN TAX PLANNING
24International RegulationTrends & Future Attention on Luxembourg by OECD, EU and Other jurisdictions on EoI:As a result, Lux. will apply FATCA agreement- automatic EoI with USA andalso with effect from 1 January 2015 under the Savings Directive (2003/48),Lux. agreed to automatically exchange information. Attention on Switzerland: Various court cases against Swiss banks andindividuals conspiring to hide offshore accounts. Also FATCA agreementsigned with USA for automatic EoI. UK Chancellor of the Exchequer requested European finance ministers toagree to automatic exchange of tax information between countries. US, Australia, and UK announce plan to share data to combat offshore taxevasion.
25International RegulationTrends & FutureEU Commission to negotiate amendments to EU agreements withSwitzerland, Liechtenstein, Monaco, Andorra and San Marino toamend the Savings Directive (2003/48): To be adopted by the end of2013 to include all types of savings income and provide a look-through approach for the identification of beneficial owners. On 29 May 2013, 9 countries (including Austria, Luxembourg,Singapore) signed the OECDs Multilateral Convention on MutualAdministrative Assistance in Tax Matters to end tax secrecy. Maltaand The Netherlands including its Caribbean islands ratified it. In thepast 2 years more than 60 countries have signed the Convention. International Consortium of Investigative Journalist (ICIJ) report.
27The Russian Connection Protocol to the DTTis in force since Jan2013. Cyprus has beenremoved from theRussian Blacklist.
28The Russian ConnectionProtocols of RussiaCyprus Luxembourg SwitzerlandDividend WHT 5% If direct investment of EUR100.0005% if 10% holdingrequirement AND directinvestment of EUR 80.0005% if 20% holdingrequirement AND directinvestment of CHF 200.000Interest 0% 0% 0%Royalty 0% 0% 0%Capital Gains Sale of shares “Property-rich”companies taxed in both StatesBUT 4 year period exemptionSale of shares “Property-rich” companies taxed inboth States BUT withimmediate effectSale of shares “Property-rich”companies taxed in bothStates with immediate effect(excludes business assets)Limitation ofbenefitsApplicable ONLY in cases wherecompanies are not incorporatedin CyprusApplicable in ALL cases Applicable in ALL cases
29The Russian ConnectionRussian Community in Cyprus Transparent Legal System Excellent communications World class professional services Member of the European Union (EU) Tax system fully compliant with EUand OECD requirements Low corporate tax Not in any black/grey lists – onlywhite lists 300 days sunshine.WHY CYPRUS?
30The Russian ConnectionRussian Community in Cyprus According to the 2011 census 10,520 Russian citizens live inCyprus (according to the press reports the number is100,000.). 50% of the Russian population live in Limassol. Russian schools and Orthodox Churches have been built. Russian-language television and radio service has been setup.There is a Russian Center for Science and Culture inNicosia. The Limassol Municipality organizes the Cyprus – RussianFestival since 2005 where every year more than 15,000 peoplegather to celebrate. Most businesses have Russian speaking personal workingfor them.
31Statements frominternationals currently inCyprusRecent statements from CEO’s of international companieswho are based in Cyprus:Kardex Systems Ltd - SwitzerlandNCR Middle East/Africa Region - USAUniteam Marine Limited - GermanyVTTI B.V. VTT Vasiliko Ltd - Netherlands Alpari Forex - Russia
32Statements frominternationals currently inCyprusKardex Systems Ltd - Country of Origin:Switzerland/Demetris Kouloundis - Sales Director MEA“After over 30 years in Cyprus, we will definitely stay on theisland as time has proved that we made the right decision tohave Cyprus as our base. We still maintain the sameadvantages of operating in an efficient business environmentwith experienced professionals, an attractive tax framework andoverseas market proximity to Africa, Europe and Asia.”
33Statements frominternationals currently inCyprusNCR Middle East/Africa Region - Country of Origin:United States/George Flouros-Vice President, NCR MiddleEast/Africa Region“The favourable business climate, the excellenttelecommunications infrastructure, the well-educated and skilledhuman resources, favourable tax rates and the island’sproximity to the Middle East and Africa markets were among thekey factors that motivated NCR Corporation to establish itsregional offices in Cyprus. Cyprus provides us with the idealbase to achieve our goals.”
34Statements frominternationals currently inCyprusUniteam Marine Limited - Country of Origin: Germany /Gerhard Ruether, Chairman“Having the right team at the right location is a prerequisite tothe successful pursuit of my vision and ideas. The combinationof advantages sustains our success and has kept us in Cyprussince 1978 – and continues to help us further pursue the growthof our organisation.”
35Statements frominternationals currently inCyprusVTTI B.V. VTT Vasiliko Ltd - Country of Origin: TheNetherlands / Rob Nijst, CEO“Our commitment and confidence in Cyprus remains as strongas ever. We expect to invest around €300 million and our oilstorage terminal project is proceeding according to plan. Wesee Cyprus as a future energy hub of the EasternMediterranean, and an attractive place in which to invest.Cyprus continues to be a solid business centre for its favourablegeographical location, EU membership and the high quality ofhuman capital, services and infrastructure”.
36Statements frominternationals currently inCyprusAlpari Forex- Country of Origin: Russia/Andrey Dashin,Chairman“Russians are much more accustomed to such circumstances,weve had so many crisis in Russia...I dont have the feeling that(Russians) are ready to pull out their business or money out oftheir country.”
37Statements frominternationals currently inCyprus Slava Mishin, 42, financial services employee lives inLimassol – Country of Origin: Russia“We are here because of the climate, because of the samereligion, the language, we can use English, because we arenot far from home, and we want our kids to grow up in a safeenvironment and have a European education.”