2 AMICORP GROUP CYPRUS

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1 COMPANY AND ENTITY ADMINISTRATION SERVICES, TRUST AND FOUNDATION SERVICES, ASSURANCE SERVICES, FINANCIAL SUPPORT SERVICES, OUTSOURCING SERVICES AND FUND ADMINISTRATION AMICORP GROUP CYPRUS

2 2 AMICORP GROUP CYPRUS

3 AMICORP (CYPRUS) LIMITED NICOSIA, CYPRUS AMICORP GROUP CYPRUS 1

4 TABLE OF CONTENTS 03 ABOUT THE COMPANY 04 INTRODUCTION TO THE REPUBLIC OF CYPRUS 07 AMICORP CYPRUS 08 THE CYPRUS LEGAL FRAMEWORK 11 STRUCTURING THROUGH CYPRUS 14 INVESTMENT VEHICLES 16 CYPRUS TAX FACTS 20 TREATY AND NON-TREATY COUNTRY WITHHOLDING TAXES 22 CYPRUS TAX DIARY 24 GLOBAL LOCATIONS & NETWORK 28 BROCHURE: TERMS OF USE 2 AMICORP GROUP CYPRUS

5 ABOUT THE COMPANY Amicorp Group is an independent global service provider of a broad range of assurance, administrative, legal, corporate secretarial and support services. We provide services to a range of mostly corporate, but sometimes also highnet-worth clients around the world. We ensure that the entities managed by us or that are domiciled with Amicorp are fully compliant both in the jurisdiction where they are established, and in the jurisdiction(s) where Ultimate Beneficial Owners (UBO s) are tax residents. We have focused on emerging markets since we were established in 1992, we strive to be the best in these markets as well as other markets where we are active. We aim to provide a safe and stable working environment for our employees, we promote environmental consciousness, and contribute positively to the communities in which we are active; we are also soundly profitable. One of the top ten trust companies in the world We are proud to have built our global team of 900+ specialists who contribute their individual talents to Amicorp s broad range of expertise and experience. Our professionals include attorneys, certified public accountants and bankers many of whom are members of national and international fiscal and legal bar associations. They implement creative, innovative, strategic and compliant corporate solutions to meet the challenges of today s complex international business environment SPECIALISTS , COUNTRIES ENTITIES OFFICES For more information about Amicorp Group please visit AMICORP GROUP CYPRUS 3

6 INTRODUCTION TO THE REPUBLIC OF CYPRUS Cyprus has traditionally played an important role in the business world. Primarily because of its strategic location at the crossroads of Europe, Asia and Africa, the island has been able to reinvent itself and remain in the forefront of matters throughout world history from times of antiquity. It served as major trade hub of the ancient world right through the Renaissance and as a stronghold, outpost and naval base for the Byzantines, the Crusaders, the Venetians the Ottomans and the British. In today s global economy Cyprus has established itself as one of the most attractive jurisdictions in the world for international tax planning, in part due to its common law legal system which is based upon English law. Cyprus has a highly-qualified workforce in professional services with the sector led by UK qualified accountants and lawyers. A member of the Eurozone, and on the OECD s white list, the island has linked its global network of double taxation avoidance treaties applicable to 50 countries with outstanding holding, shipping and intellectual property (IP) regimes. It also has the lowest tax rate in the EU, set at a flat 12.5% rate. Despite the well-publicized Eurozone crisis and the impact this has had on Cyprus as a banking and financial center, the island s financial restructuring has reassured the business community, and in any event, Cyprus strength remains with its sophisticated tax, legal and regulatory environment. This environment provides the following major advantages: Full participation exemption for tax resident companies on dividend income subject to non-stringent conditions; No withholding taxes on payments of dividends, interest or royalties irrespective of recipient; No taxation on profits from the sale of securities (no minimum holding period or percentage); No controlled foreign companies (CFC), thin capitalization, transfer pricing or substance legislation; Unilateral tax credit relief irrespective of the existence of a tax treaty; No taxation on the liquidation of a Cypriot company; No taxation on profits arising from ownership, operation and management of vessels; Operation of IP Rights Box regime with the lowest effective tax rate in the EU peaking at a maximum of only 2.5%; and Full adoption of European Union directives. 4 AMICORP GROUP CYPRUS

7 In addition, Cyprus has enacted legislation in line with EU directives providing for strict supervision of its financial services industry including the services provided by accountants, administrators, advisors, auditors, lawyers, fiduciaries, investment and trust professionals, all of which must be licensed by their corresponding responsible regulator. Cyprus has implemented strict Anti-Money Laundering legislation in line with international conventions and has consistently achieved high rankings between EU Members in terms of compliance with AML guidelines and practices as evaluated by Moneyval, the Council of Europe AML institution. As a result, Cyprus has become the financial center of choice for structuring investments and transactions involving: high growth markets such as Russia, India, China, South Africa and the Middle East, Balkan, Central and Eastern Europe and the Commonwealth of Independent States; and the traditionally established and developed markets of Western Europe, Scandinavia and the US as well as a favored destination for the establishment of shipping and financial servicesrelated global businesses. Evidence of this success is the ever increasing number of Cyprus based issuers with instruments successfully listing and trading on markets such as the LSE Main and Alternative Markets, the New York Stock Exchange and, the Frankfurt, Hong Kong, Irish, Moscow and Warsaw stock exchanges. The global financial crisis has clearly affected Cyprus. The banking sector came under extreme pressure leading to an EU and IMF proposed rescue package being implemented designed to bring about the necessary corrections. Despite the issues faced by the country s banking system, the advantages of its streamlined taxation system, the employment of common law in its legal system, its highly developed infrastructure and specialized workforce, its well respected judicial system, its commitment to EU values and practices as well as the willingness of its people to advance, provide investors with the necessary assurance in relation to the island s offerings in facilitating global business and investment. AMICORP GROUP CYPRUS 5

8 THE OIL AND GAS SECTOR Even though oil and gas exploration on the island dates back to the 1930 s, only recently has technological advancement allowed the unexplored Levantine basin as an economically viable candidate for shale gas extraction operations. Throughout the 2000 s, Cyprus entered into agreements with Egypt, Lebanon and Israel that define their offshore waters into mutually agreed exclusive economic zones. Thereafter, bidding rounds for exploration and extraction operations resulted in international energy giants from the USA, EU and East Asia securing concession rights. With estimated Levantine basin gas reserves of 3.5 trillion cubic meters, Cyprus estimated reserves of 1 trillion cubic meters which translate into hundreds of billions of euros in gas exports create unparalleled prospects for the island s 18 billion economy. Appraisal well drilling is already under way on Cyprus Block 12 offshore field, dubbed Aphrodite after the Greek goddess of love who according to myth was born from the sea off Cyprus southern coast, with an estimated 200 billion cubic meters of reserves standing to be confirmed. Production kicked off in March 2013 at the Tamar field, Israel s smallest confirmed reserve gas field, following which production partners significantly upped confirmed reserves for all three Israeli fields currently under development. Despite its misfortunes, the much troubled Levant faces the prospect of finding its place on the global energy map, with Cyprus, being the most economically, socially and politically stable country in the region aspiring to play a leading role in the process through the creation of an energy hub on the island in support of the region s gas and oil capabilities. A memorandum of understanding was agreed upon between Cyprus, Israel and their USA based exploration and production partners for the development of a natural gas liquefaction plant on the island s southern coast designed to serve the region s production prospects which at an estimated cost exceeding 12 billion will constitute the largest investment project on the island by a considerable margin. Talks between the parties are deep under way with investors from the USA, Russia and the Far East showing interest in the project which is planned to be operational by 2020, which will enable Cyprus to choose its export markets for a product whose economics are dynamic and highly complex. In the meantime, industry specialists continuously and increasingly stress the probabilities of viable oil reserves being present with production partners announcing a total gross unrisked deep oil potential for the Aphrodite field alone of around 3.7 billion barrels. 6 AMICORP GROUP CYPRUS

9 AMICORP CYPRUS Realizing the potential of Cyprus and to better service its international clients, Amicorp opened its Cyprus office in February Amicorp Cyprus has a team of young and highly qualified legal, accounting and tax professionals who are committed to providing workable solutions to clients, always adhering to Amicorp s high quality standards and personalized service. Our team follows closely our Group philosophy of being a truly global business reaping the benefits of cultural diversity. Languages spoken fluently in the office include Greek, English, Italian, Spanish, Lithuanian, Russian and Ukrainian. Amicorp Cyprus offers: Cyprus companies, partnership incorporations and branch registration; Incorporation of shipping companies and ship registrations; Provision of services in respect to the re-domiciliation of companies; Liquidation/dissolution of companies; Arranging for the set-up of trusts and foundations; Management Services including Professional Director Services, Company Secretary and Registered Office; Registration of funds and collective investment schemes; Fund administration; Specialized transactional services and trading structures; and BPO/KPO services Additional services: Day-to-day company management and administration; Preparation of legal and corporate documents; Certification services; Accounting, bookkeeping, tax compliance and coordination of auditing services; VAT registration and filings; Banking services and cash management; Payroll administration and invoicing; Tax and legal support; Virtual Office and office space leasing services; Coordination with Amicorp offices worldwide for the incorporation of foreign entities/structures; and Local support services. AMICORP GROUP CYPRUS 7

10 THE CYPRUS LEGAL FRAMEWORK The legal system in Cyprus is based on English common law and the law of equity, with the exception of administrative and constitutional law, which follow the principles of the civil law. Following Cyprus s accession into the European Union, legislation was amended to adopt European Union regulations and directives, and Cyprus legal system is now in full compliance with EU law. ENTITIES IN CYPRUS There are four types of legal arrangements through which an investor may route business activities: Company; Partnership; Branch; and Sole proprietorship or business name. The most commonly used entities are registered companies, which are either: Public companies or Private companies. 8 AMICORP GROUP CYPRUS

11 PRIVATE LIMITED LIABILITY COMPANY General Characteristics The word limited must appear at the end of the name of the company; The liability of its members is limited to the amount paid for their subscribed shares; The minimum number of members of the company is one and the maximum number is limited to fifty; The same person whether legal or natural may act as sole shareholder, director and secretary of the company; The shares cannot be issued to the bearer; There is a prohibition against inviting the public to subscribe for any shares or debentures; Different classes of shares with preferential or other rights may be issued; The right to transfer shares may be restricted; The board of directors must consist of at least one member, without a maximum number of members. The directors may be either local or foreign nationals. Alternate directors may also be appointed; The meetings of the board of directors may be held anywhere in the world by either teleconferencing or videoconferencing. However, this may affect the tax residency status of the company; The statutory books required are: -- The register of members containing details of members full names, addresses, identification numbers, the class and number of shares held by each member, dates of subscription or transfer; -- The register of directors and secretary; -- The minute book of all the meetings of directors and shareholders; and -- The register of charges relating to the property of the company. Charges, debentures and mortgages must be registered with the Registrar of Companies; Annual returns must be filed with the Registrar of Companies at the end of each financial year with the audited financial statements of the company; The company may hold multi-currency bank accounts either in Cyprus or abroad; and Movable or immovable property of any type may be registered under the name of the company. PUBLIC LIMITED LIABILITY COMPANY General Characteristics The name of the company must end with Public Company Limited ; The minimum registered capital shall be 25,629; and The company must have at least seven members Memorandum of Association The company s memorandum and articles of association must be signed by the subscribers and be submitted to the Registrar of Companies. The memorandum must state: The name of the company; The address of the registered office, which must be in Cyprus; The main objects for which the company is formed; The amount of the authorized and paid up share capital, which can be in any currency; Special provision as to the liability of the members of the company, which is limited to the amounts payable for their subscribed shares; and The names, addresses and description of the subscribers, together with the number of shares for which they subscribe. Articles of Association The articles of association contain the regulations for the internal management of the company. These may be amended by special resolution of the members. The articles of association may include provisions as to the accounts and audit, right of transfer and procedure to transfer the shares, voting rights, debentures, general meetings of the company, the appointment, removal and meetings of the directors, annual general meetings, extraordinary meetings and meetings for special resolutions, winding up of the company, loans to directors, etc. PARTNERSHIP AND BUSINESS NAMES LAW The Cyprus legal framework provides for two general types of partnerships: General partnership; and Limited partnership. Partnerships are wholly transparent entities for tax purposes, and taxation in respect of partnership profits is assessed individually on each partner according to applicable personal circumstances. The minimum number of partners required for partnerships (whether general or limited) is two and the maximum is twenty. General Partnership In the general partnership every partner is liable jointly and severally with all the other partners for an unlimited amount for the debts and obligations of the partnership. A partner can also be a company with limited liability or another partnership. The partners of a partnership may consist of companies with limited liability or only partnerships or both. AMICORP GROUP CYPRUS 9

12 Limited Partnership The limited partnership is a partnership in which at least one of the partners must have unlimited liability for the debts and obligations of the partnership, whereas the remaining partners may have limited liability. Limited liability companies may also be partners in a limited partnership, as the partner with unlimited liability. Sole Proprietorship or Business / Trade Name Individuals may carry on business in their own name or under a business name registered in accordance with relevant laws. A business name does not constitute a legal entity but may be registered by any individual or any legal entity carrying on business under a different name. Information required for registration: The business name; The place of business; The nature of business; The name, address, nationality and occupation of the person or legal entity applying; and Date of commencement of business. The application for registration of a business name must be filed within 30 days from the date of commencement of business. BRANCHES OF OVERSEAS COMPANIES An overseas company can establish a place of business in Cyprus through a branch. To register a branch of an overseas company, the following documents are required in Greek: A written report with respect to the overseas company, including its name and legal form, the registered address, the purpose and objects, the amount of capital subscribed and the law of the state governing its operations; A certified copy of the charter, statutes or the memorandum and articles of association, or other instrument constituting or defining the constitution of the overseas company; A list of directors, the secretary and any persons authorized to represent the company; and Name and address of at least one person resident in Cyprus authorized to accept on behalf of the company service of process and any notices required to be served on the company. A Cyprus registered branch of an overseas company may or may not be a taxable entity, depending on whether it may be considered a Cyprus permanent establishment for tax purposes. 10 AMICORP GROUP CYPRUS

13 STRUCTURING THROUGH CYPRUS The structures outlined below are usually set up using a limited liability company. This is a normally taxable entity that is able to conduct all kinds of activities by having a general corporate object. HOLDING COMPANIES Cyprus has become the most prominent holding company jurisdiction in the European Union and is one of the most popular in the world. It has also consistently ranked among the top 5 sources of foreign direct investment in Russia for several years. The main reasons for this are a low flat tax rate of 12.5%, a broad dividend exemption, a capital gains exemption on titles/securities and the absence of any withholding tax on dividends paid out from the Cypriot holding company to its shareholders. In addition, Cyprus has numerous favorable tax treaties based on which the withholding taxes on dividends received by the Cypriot company are substantially reduced, in many cases to nil. The Cyprus holding company is extensively used for structuring inbound and outbound investments for countries of Central and Eastern Europe (CEE), the Commonwealth of Independent States (CIS), the Middle East and India. Example of Holding Companies: Treaty Country Companies Investors 0% Cyprus Companies 0% EU Companies Companies in zero tax jurisdictions Using a Cyprus company as a holding company for companies in the EU or for companies in zero tax jurisdictions would result in zero taxation on profit distributions from the operating locations to the ultimate investor. Similarly, in cases where a Cypriot company holds companies in countries with which there is a double tax avoidance treaty, its use will result in a minimal withholding tax on dividend distributions all the way to the investor. Also a future sale by the Cypriot holding company of its investments will not result in any tax implications in Cyprus. Likewise, the disposal of the shares in the Cypriot company or the liquidation of the Cypriot company will not give rise to any Cyprus taxation. FINANCING COMPANIES Cyprus companies can be used very efficiently for financing activities of group-related or even of unrelated entities as Cyprus has no thin capitalization rules or any withholding tax on interest payments. Back-to-back financing arrangements can achieve a double-dip effect, provided the financing is undertaken from a tax efficient location. The interest will be tax deductible in the operating location and will be tax free in the recipient jurisdiction. Any margin remaining in the Cyprus company will be subject to income tax at the rate of 12.5%. In addition, Cyprus s network of tax treaties can be used to reduce possible withholding tax on interest received in Cyprus whilst any foreign withholding tax suffered may be relieved against the Cyprus tax liability. Example of Financing Companies: Treaty Country Companies ROYALTY COMPANIES Treaty Country Companies Treaty Country Companies Treaty Country Companies A Cyprus company can be used as an intermediary licensing company between a foreign licensor and a foreign licensee operating in a Cyprus treaty location. Back-to-back royalty transactions through the Cyprus intermediary licensing company can reduce the taxable profits in the licensee s location and achieve a double-dip effect so that the royalties will be tax deductible in the operating location and will be tax free in the ultimate licensor s jurisdiction (provided he is located in a zero tax jurisdiction). Any margin remaining in the Cyprus company will be subject to income tax at the rate of 12.5%. Example of Royalty Companies: Royalty Payable Overseas Licensor Company Cyprus Royalty Company Royalty Receivable Overseas Licensor Company AMICORP GROUP CYPRUS 11

14 EMPLOYMENT COMPANIES A Cyprus company can be used to employ staff on overseas assignments and charge operating companies on a cost-plus basis. The profits will be taxable in Cyprus at the rate of 12.5% and the taxable profits of the operating companies will be reduced accordingly. A Cyprus employment company can prove particularly advantageous for companies operating in jurisdictions with relatively high social security and other employer contributions, as is the case in most EU countries. The salary cost to the employer (the operating company) can be significantly reduced in addition to possible reductions in employee contributions. The employees will not be subject to tax in Cyprus. Example of Employment Companies: Cyprus Employment Company Cost plus margin taxed at 12.5% Overseas Operating Company COMPANIES TRADING IN GOODS AND SERVICES Cyprus companies can be used efficiently in trading activities either in the form of purchasing and selling goods or receiving and providing services. Any profit realized by the Cyprus company would be taxable at the rate of 12.5% with no further corporate tax implications. In addition, the profits accumulated in the Cypriot company can be expatriated to the holding company with no withholding taxes, irrespective of the country of residence of the recipient or the existence of a double tax treaty. The Cypriot company conducting the trading activities would be able to obtain a VAT registration number, but the physical delivery of the goods in Cyprus is not a requirement. Example of Company Trading in Goods and Services: Purchase of goods and/or services Investor Cyprus General Trading Company Taxed at 12.5% Sales of goods and/or services PERMANENT ESTABLISHMENT ABROAD Profits from a permanent establishment (PE) abroad are exempt from taxation in Cyprus. This, together with Cyprus s extensive treaty network, can result in such profits becoming free of taxation altogether. The 0% tax effect can be achieved when, for example, a Cyprus company carries out a project (construction, assembly, etc.) in a foreign country lasting more than 3 months (minimum period to satisfy the permanent establishment criteria according to Cyprus law), but not more than 12 months (the minimum period for establishing a PE according to generally applicable double tax avoidance treaty provisions). In such a scenario, right of taxability does not arise in the country where the project is carried out but remains with Cyprus. In Cyprus, the PE requirements are fulfilled and therefore profits from the project are exempt from Cyprus taxation, arriving at the 0% overall tax effect. Example of Permanent Establishment Abroad: Investor Cyprus company 0% tax NON-RESIDENT COMPANIES PE Abroad 0% tax Companies managed and controlled outside of Cyprus are not tax resident in Cyprus and will be taxable in Cyprus on their Cyprus source income only. Therefore, a company deriving income from sources outside Cyprus will not be liable to taxation, but at the same time can enjoy the prestige of an EUregistered company. In the case of a trading company, it will also receive an EU VAT registration number. RE-DOMICILIATION OF FOREIGN COMPANIES As of July 2006, Cyprus law allows foreign companies to be re-domiciled in Cyprus and for Cyprus registered companies to be re-domiciled abroad. A foreign company registered in a country that allows re-domiciliation and whose memorandum and articles of association allow for it may apply to the Registrar of Companies in Cyprus to be registered in Cyprus as a continuing company in accordance with Cyprus law. The opportunity offers international investors, businesses and their entities the benefits of Cyprus s favorable legislative provisions. 12 AMICORP GROUP CYPRUS

15 Example of Foreign Companies re-domiciliation: Old Holding Company Investment or operating Company SHIPPING COMPANIES Shareholder Cyprus Holding Company Investment or operating Company A company of an unfavourable tax regime may re-domicile Old holding company in diagram is not liquidated, but continues as Cyprus Company Benefits of the Cyprus regime are applied to the now new Cyprus Company Cyprus is one of the most attractive shipping and ship management centers in the world. It offers exemption from Cyprus corporate taxation on profits arising from ownership, operation and management of qualifying vessels in qualifying activities to: Owners of Cyprus flagged vessels; Owners of EU/EEA flagged vessels; Owners of EU/EEA and non-eu/eea mixed fleets; Cyprus tax resident charterers of any flag registered vessel; and Cyprus tax resident ship managers of any flag registered vessel. Instead, a very favorable tonnage tax system is in place under which vessels are taxed based on stepped fixed rates according to their gross tonnage, significantly reducing the relevant tax leakage. Moreover, under the tonnage tax system the following are exempt from taxation in Cyprus: Dividends that are paid directly or indirectly from profits of qualifying shipping activities; Capital gains on the sale of a vessel (or share in a vessel); The sale of the shares of a ship owning company; and Interest income resulting from working capital or from the financing, operation,maintenance and management of a vessel (excluding interest arising from investment of funds). Also, earnings of the crew and officers of a Cyprus-flagged qualifying vessel are exempt from Cyprus income tax and social security contributions. In addition, non-cypriot crew members may enjoy total tax exemption, depending on Cyprus s tax treaties and the tax legislation in their home countries. IP RIGHTS BOX REGIME Legislation was enacted as of January 1st 2012 introducing a series of exemptions relating to income from Intangible Assets (IA s) and Intellectual Property (IP) Rights, to create what is commonly referred to as an IP Rights Box. The regime s main features can be summarized as follows: the cost of acquisition as well as for the development of a relevant IA or IP right held by a Cyprus company may be capitalized and amortized for tax purposes on a straightline basis over five years; 80% of profits earned from the use of relevant IA s and IP rights (including any compensation for infringement), and of gains realized on disposal, are tax exempt; and the taxable profits subject to the 80% exemption are calculated after allowing for costs borne exclusively in generating the relevant income which include tax deductible amortization of the assets (as per above), financing costs for their acquisition or development and any other directly attributable expenses. Applying the Cyprus corporate income tax rate of 12.5% results in an effective tax rate after allowable deductions well below 2.5% which is the lowest from comparable regimes available in other reputable financial centers around the world. COMPANIES TRADING IN SECURITIES Cyprus legislation specifically exempts profits from the disposal of securities from Cyprus tax. As defined by the legislation, securities broadly refers to shares, debentures, government bonds, founder s shares or other shares of companies or other legal entities that have been incorporated in Cyprus or abroad, and any kind of options thereon. Security trading companies taking advantage of the above exemption can structure their operations via Cyprus and achieve nil taxation and at the same time enjoy EU identity and directives access. Example of Cyprus Security Trading company: Purchase of securities Investor Cyprus Security Trading Company Taxed at 12.5% Sales of securities AMICORP GROUP CYPRUS 13

16 INVESTMENT VEHICLES NON REGULATED INVESTMENT VEHICLES A variation of the traditional holding company can be used efficiently as an investment vehicle by private investors. Such a company would not be subject to financial services regulations, which might prove a significant benefit for investors wishing to avoid the restrictions posed by regulators and the costs involved in maintaining a regulated entity. Example of Non-regulated Investment Vehicles: Convertibles Multi-Class Shares Redeemables Treaty Country Companies Cyprus non-regulated Investment Company EU Companies Companies in zero tax jurisdictions A private limited company can be set up with different classes of shares with varying rights to serve as the investment vehicle. Shares with varying rights may be issued to suit particular risk/ investment profiles and to ensure that each investor has access to and is entitled to distributions only from the investments that meet his preferences. Redeemable preference shares can be issued at a premium to avoid otherwise high initial issue costs and also to present a viable exit strategy. Hybrid instruments such as convertible debt can be issued to take advantage of their characteristics offered from both a financial and taxation perspective. CYPRUS REGULATED INVESTMENT FUNDS Cyprus is a reputable and tax-efficient financial center, where investors and managers alike can benefit from establishing their investment vehicles. The main advantages of using a Cyprus entity as an investment vehicle may be summarized as follows: Being recognized as operating in and through a developed financial center with an up-to-date infrastructure and a streamlined regulatory environment with full application of EU directives; Single EU Passport facilitates access to European securities markets and enhances fund raising opportunities as substance is not subject to review by other EU Member States. Cyprus regulated investment vehicles are subject only to formal compliance review in other EU Member States; No tax on disposal of titles, which includes in the definition shares, bonds, debentures, and any other type of security or options thereon, no withholding tax on repatriation of distributions to foreign tax residents and full application of the Cyprus participation exemption; that is dividend income from foreign investments is exempt from Cyprus taxation (subject to non-stringent conditions); and Also the disposal, redemption or repurchase of own and other fund shares or units is exempt from Cyprus taxation, paving the way for investors to realize their investments in a tax efficient manner as well as for Cyprus funds to act as funds of funds (master-feeder and umbrella funds). Three general forms of regulated investment vehicles are available: Cyprus International Collective Investment Scheme ICIS The sole object of an ICIS must be the collective investment of funds of investors/shareholders who may not be Cyprus tax residents; Available in the legal forms of unit trusts, variable or fixed capital companies or investment limited partnerships, they may have a set or indefinite life span according to the incorporators wishes; The units / shares issued by an ICIS may be redeemed or repurchased at the option of the unit holder directly out of the scheme s assets; ICISs are distinguished in types according to the target market of investors and therefore three types are recognized: private, marketed to the public or marketed to experienced investors. Minimum capital requirements may apply accordingly; and Private ICISs are subject to regulation by the Central Bank of Cyprus, which exempts them from much of the regulation applicable to ICISs marketed to the public or to experienced investors such as regulations on their trustees and managers. Private ICIS are further exempted from any investment restriction regulations. Cyprus Investment Company with Variable Capital ICVC ICVC characteristics are in general terms much like ICIS. However, the law provides for ICVC s to be organized as protected cell entities, therefore allowing their employment as 14 AMICORP GROUP CYPRUS

17 umbrella funds with an unlimited number of sub-funds being segregated asset portfolios. ICVC s are regulated by the Cyprus Securities and Exchange Commission (CySEC). Open-ended Undertakings for Collective Investments in Transferable Securities UCITS UCITS: Are considered to be undertakings the sole object of which is to collectively invest publicly collected capital in transferable securities and money market instruments via stock markets, banking deposits and any other investments, and whose operation is based on the principle of risk diversification, and whose units can be redeemed directly or indirectly using the undertaking s assets upon the unit holder s request; May take the legal form of either a mutual fund managed by a management company or the form of variable capital investment companies; and May not be a closed-ended entity and may not be an entity that raises its capital without promoting its units in Cyprus and other EU Member States. UCITS are regulated by CySEC and are subject to much more stringent requirements than ICIS and ICVCs. CYPRUS INVESTMENT FIRMS The Investment Firms Act of 2002 provides the legal framework for the provision of investment services as well as for the registration and regulation of operations and supervision of Cyprus Investment Firms ( CIFs ), carried out by CySEC. CIFs are allowed to carry on activities categorized in two broad groups: Core investment services which include reception and transmission of orders and execution of such, dealing on own account, portfolio management on discretionary basis and underwriting services; and Non-core ancillary services which include safekeeping, administration and safe custody services, granting of credit, underwriting, investment and financial research, analysis and advisory services, foreign-exchange services services related with the operation of a Multilateral Trading Facility. Low set-up and operational costs (averaging % lower than those in comparable jurisdictions) as well as the single passport concept which allows CIFs to solicit their services throughout the European Economic Area without any additional requirements imposed by the host state, in addition to Cyprus s tax regime favoring securities transactions with zero taxation provides the island s investment firms with an unmatched competitive advantage over their foreign established competitors. AMICORP GROUP CYPRUS 15

18 CYPRUS TAX FACTS INCOME TAX - COMPANIES Scope of Taxation Legal entities that are managed and controlled in Cyprus are considered tax resident in Cyprus. A company tax resident in Cyprus is liable to tax in Cyprus on income accruing or arising both from sources within and outside the Republic. Companies that are not tax resident in Cyprus are liable to tax in Cyprus on income accruing or arising from sources within Cyprus only. Tax Rate and Deductible Expenses A uniform flat corporate tax rate of 12.5% applies for all companies operating either locally or internationally. This rate applies to business income after the deduction of all expenses incurred wholly and exclusively for the production of the said income. Restrictions on deductibility of certain expenses, including entertaining and private motor vehicle expenses and other minor restrictions, are provided for by law. Exempt Income The main income exemptions are: Dividend income; Profits from the disposal of titles / securities, which include, amongst others, as defined by the tax authorities, shares, government stocks, debentures, bonds, founder s shares, and rights and options thereon; Interest income unless it is received in the ordinary course of business or is closely connected to the ordinary course of business, in which case it is taxed as ordinary business income; and Profits of a permanent establishment of a Cypriot tax resident company maintained outside Cyprus, subject to conditions. Wear and Tear Allowances The depreciation expense included in the financial statements is not a tax-deductible expense. However, there are predetermined rates in calculating the wear and tear allowance for business assets that are tax deductible. Withholding Taxes There is no withholding tax on payments of dividends and interest to non-tax resident persons (individuals or companies). Payments of royalties that are derived from abroad and are paid abroad are also free from withholding tax. 16 AMICORP GROUP CYPRUS

19 Tax Losses and Group Relief Tax losses can be carried forward and set-off against taxable profits of the next 5 years or can be surrendered to group companies provided certain conditions are met. Two companies are considered to belong to the same group for group relief purposes if one is controlled directly or indirectly by the other by at least 75% or both are controlled directly or indirectly by a third party by at least 75%. Re-organizations Special provisions apply in respect to company reorganizations to avoid any adverse tax implications arising. These provisions are in line with the EU directive on mergers, acquisitions and reorganizations. Unilateral Tax Relief Relief for taxes paid abroad is granted in the form of a tax credit against tax payable in Cyprus. The relief is given unilaterally irrespective of the existence of a double tax avoidance treaty. Where a treaty is in force the treaty provisions (if more beneficial) would apply. INCOME TAX - INDIVIDUALS Cyprus Tax Residents Individuals are considered to be tax resident in Cyprus if they are physically present in Cyprus for an aggregate period exceeding 183 days in the tax year. Tax resident individuals are liable to tax in Cyprus on their worldwide income whereas nonresidents are liable only to tax on income accruing or arising in Cyprus. Exempt Income The main exemptions are as follows: Dividend income; Profits from the disposal of securities which include amongst others, as defined by the tax authorities, shares, government stocks, debentures, bonds, founder s shares, and rights and options thereon; Interest income, unless it is received in the ordinary course of business or is closely connected to the ordinary course of business, in which case it is taxed as ordinary business income; Profits of a permanent establishment of a Cypriot tax resident maintained outside Cyprus subject to conditions; The lower of 20% of the remuneration from employment which is exercised in the Republic by a person who was a non-resident before the commencement of his employment, or 8,550. This exemption applies on an annual basis for a period of three years from January 1st of the year following the year in which the employment commenced; 50% of remuneration from any office or employment exercised in the Republic by an individual who was a nonresident before the commencement of his employment, for a period of 5 years, for employments commencing as of January 1st 2012, provided that the annual remuneration exceeds 100,000; The emoluments from salaried services performed abroad for an aggregate period in the tax year exceeding 90 days, for a non-resident employer or for a foreign permanent establishment of a Cyprus tax resident employer; and Lump sums received in the form of retirement gratuity, commutation of pension or compensation and capital lump sums accruing from life insurance scheme or approved provident fund repayments. Personal Allowances and Tax Deductions Personal allowances and tax deductions of which individuals may avail themselves (subject to certain limits) include contributions to the Social Insurance Fund, approved provident funds medical funds, general medical plan or other approved plans, insurance premiums paid to insurance companies for the life assurance of the taxpayer, donations to approved charities, professional and trade union subscriptions, 20% of gross rental income, and interest on the funding of business assets as well as current and prior year losses. SPECIAL CONTRIBUTION FOR DEFENSE LAW All Cyprus tax resident persons (natural or legal) are subject to a special contribution for defense on sources of income as detailed below. Non-tax residents are exempt from the special contribution for defense. Dividends Every resident person receiving dividends from a company, whether incorporated in the Republic or abroad, is subject to a special defense contribution at 17% on the amount of the dividend income received. However, dividends received by a resident company from another resident company are exempt unless they are declared after the lapse of four years from the end of the year in which the profits (out of which the declared dividends emanate) were generated. In addition, dividends received by a resident company from a non-resident company or a non-resident company that maintains a permanent establishment in the Republic are exempt from the defense contribution. The exemption from the defense contribution will not apply if the overseas company paying the dividend is more than 50% engaged in activities which give rise to investment income and the foreign tax burden on the income of the company paying the dividend is substantially lower than the Cyprus tax burden. AMICORP GROUP CYPRUS 17

20 Interest All resident taxpayers receiving or credited with interest earned in Cyprus or abroad are subject to special defense contribution at 15% for interest accruing up to 28 April 2013 and at 30% for interest accruing thereafter. Interest that is received as a result of carrying on a business activity, including interest closely connected to the ordinary activities of the business, is not considered interest for the purposes of the special defense contribution and is assessed under income tax. Interest from government savings certificates, government bonds and deposits with the Housing Finance Corporation, as well as interest earned by approved provident funds, is subject to a defense contribution at 3%. Deemed Distribution A company resident in the Republic is deemed to have made a distribution of 70% of its accounting profits after tax in the form of dividends at the end of the two-year period from the end of the tax year in which the profits relate to the extent that the profits relate to Cypriot resident shareholders only and must account for a 20% defense contribution thereon. The deemed distribution provisions do not apply to profits to the extent to which they relate to non-resident shareholders. Rental income Rental income is subject to a special contribution for defense at the rate of 3% after allowing a deduction of 25% on the gross rental income. Unilateral Tax Relief Relief for taxes paid abroad on income subject to the special defense contribution is granted in the form of a tax credit against the special defense contribution payable in Cyprus. The relief is given unilaterally irrespective of the existence of a double tax treaty. Where a treaty is in force the treaty provisions (if more beneficial) would apply. CAPITAL GAINS TAX Capital gains tax is imposed at the rate of 20% on gains from disposal of: expenditure incurred for the production of the gain, and the indexation allowance are deducted from the sale proceeds. The following alienations of immovable property are exempt from capital gains tax: Transfer on death; Gifts between spouses, parents and children and relatives up to third degree; Gift to a company whose shareholders are members of the donor s family and continue to be members of the family for a period of five years from the date of the gift; Gift by a family company to its shareholders, if the company had also acquired the property in question via donation, and provided the property remains in the possession of the shareholder for at least three years; Gifts to charitable organization or the Republic; Exchange or disposal under the Agricultural Land (Consolidation) Laws; Exchange, provided the gain is used for the acquisition of new property. The gain derived from the exchange reduces the tax base cost of the new property and the tax is deferred until the latter property is disposed of; Expropriations; and Transfer of ownership or share transfers in the event of company reorganizations. STAMP DUTY Legislation requires that any document drafted in Cyprus or abroad whose subject matter relates to assets situated in or matters to be concluded or executed or taking place in the Republic is subject to stamp duty at applicable rates according to the type of document, capped to a maximum per document of 17,086 for documents executed up to February 28th 2013 and 20,000 for documents executed thereafter. Stamp duty is not due on documents whose subject matter involves assets situated or business affairs taking place outside Cyprus or on documents pertaining to transactions that fall within the scope of a qualifying reorganization. VAT Value added tax is imposed on provision of goods and services in Cyprus, on acquisition of goods from European Union Member States, and on importation of goods into Cyprus as well as on services received under the main rule of place of supply of services under the reverse charge provisions. immovable property situated in the Republic, and of shares of companies that own immovable property situated in the Republic and not listed on a recognized stock exchange. In computing the capital gain, the value of the immovable property as of January 1, 1980 (or cost if the date of acquisition is later), the cost of any additions after January 1, 1980, any 18 AMICORP GROUP CYPRUS

21 Exempt supplies include rental of immovable property, financial services, hospital and medical services, postal services, insurance services, disposal of immovable property and others according to EU directives. Obligation to Register Every individual or company is obliged to register: At the end of any month, if the value of taxable supplies recorded in the last 12 months exceeds 15,600, or at any point in time if the value of taxable supplies is expected to exceed 15,600 in the next 30 days; If it engages in the supply of intra-community services for which the recipient must account for VAT under the reverse charge provisions, regardless of the registration threshold; If it engages in economic activity and is receiving services from abroad with a value in excess of 15,600 during any consecutive 12-month period and for which an obligation to account for Cyprus VAT under the reverse charge provisions arises; If it conducts intra-community acquisitions of goods with value in excess of the registration threshold of 10, during any calendar year; If it acquires a business on a going-concern basis; and If it engages in distant sales in the Republic with a registration threshold of 35,000 during any consecutive 12-month period. Right of Registration The following retain the right but not the obligation to register for VAT in Cyprus: Persons whose taxable supplies do not exceed the registration threshold; Persons who trade outside the Republic in goods or services that would have been taxable if they were provided within the Republic; and Groups of companies and company divisions. VAT Returns and Payment of VAT Any registered person must submit to the VAT Commissioner a VAT return within 40 days from the end of any tax period and pay the VAT due. VIES As of January 1, 2010, persons engaging in the intra- Community supply of goods and of services for which the recipient is liable to account for VAT under the reverse charge provisions must complete and submit a VIES (VAT Information Exchange System) declaration electronically, on a monthly basis. AMICORP GROUP CYPRUS 19

22 TREATY AND NON-TREATY COUNTRY WITHHOLDING TAXES Irrespective of the treaty- provided rates, Cyprus legislation does not provide for withholding taxes on dividends, interest or royalties paid to non-cyprus residents 20 AMICORP GROUP CYPRUS

23 Notes: 1. Under Cyprus legislation there is no withholding tax on dividends, interests and royalties paid to non-residents of Cyprus. 2. In cases where royalties are earned on rights used within Cyprus there is withholding tax of 10%. 3. Azerbaijan, Kyrgyzstan, Tadzhikistan and Uzbekistan apply the USSR/Cyprus treaty % if paid to a beneficial owner who invested less than 200,000 reduced to 10% if the recipient controls at least 25% of the paying company % if received by a company controlling less than 25% of voting rights of the payee. 6. Nil if paid to the Government, Central Bank or a Public Authority of the other State. 7. Nil for interest on deposits with banking institutions. 8. Applies to companies holding directly at least 25% of the share capital of the paying company; 10% in all other cases. 9. This rate does not apply if the payment is made by a resident of Bulgaria owning directly or indirectly more than 25% of the capital of the Cyprus company recipient being subject to a lower tax rate than the usual. 10. Nil if paid to a government or for export guarantee. 11. Nil on literary, dramatic, musical or artistic work. 12. This rate applies if received by a company (excluding partnership) which holds directly at least 10% of the shares for an uninterrupted period of no less than one year; 5% in all other cases % for patent, trade mark, design or model, plan, secret formula or process, computer software or industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience % if received by a person controlling less than 10% of the voting power. 15. Nil if paid to a Government bank or financial institution % on film and TV royalties. 17. This rate applies if received by a company (excluding partnership) which holds directly at least 10% of the shares for an uninterrupted period of at least 24 months; 5% in all other cases % on film royalties (apart from films broadcasted on television) % for payments of a technical, managerial or consulting nature. 20. Treaty expected to be effective during 2014 in relation to WHT 21. This rate applies for patents, trademarks, designs or models, plans, secret formulas or processes, or any industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience. 22. This rate applies if received by a company (excluding partnership) which holds directly 25% of the shares; 10% in all other cases. 23. Montenegro and Serbia apply the Yugoslavia/Cyprus treaty % if received by a person controlling less than 50% of the voting power % if dividend paid by a company in which the beneficial owner has invested less than 100, % if paid to bank or financial institution. 27. Slovakia applies the ČSSR/Cyprus treaty % on interest received by a financial institution or when it relates to sale on credit of any industrial, commercial or scientific equipment or of merchandise. 29. This rate applies for any copyright of literary, dramatic, musical, artistic or scientific work; 10% rate applies for industrial, commercial or scientific equipment; 15% rate applies for patents, trademarks, designs or models, plans, secret formulae or processes. 30. This rate applies to individual shareholders regardless of their percentage of shareholding. Companies controlling less than 10% of the voting shares are also entitled to this rate. 31. The nil rate applies if the beneficial owner is: the other contracting state, the Central Bank or any other agency (including a financial institution) owned or controlled by the other contracting state; a pension fund established, recognised for tax purposes and controlled in accordance with the laws of that other state; a company (other than a partnership) which holds directly at least 10% of the paying company s capital for an uninterrupted period of at least 12 months. The applicable rate rises to 15 % in all other cases % if paid to a beneficial owner who invested less than 150, The treaty provides for withholding taxes on dividends but Greece does not impose any withholding tax in accordance with its own legislation % if received by an individual or by a company controlling less than 10% of the voting power of the paying company % if received by an individual or by a company not limited at least partly by shares or by a company holding less than 10% of the shares of the paying company % if paid to a beneficial owner who invested less than EUR100,000 and holds less than 20% of the share capital of the paying company. 37. This rate applies to royalties paid for any copyright of scientific work, patent, trademark, secret formula, process or information concerning industrial, commercial or scientific experience; 10% in all other cases. AMICORP GROUP CYPRUS 21