Cyprus Crisis and its aftermath for international business.

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1 Cyprus Crisis and its aftermath for international business 1

2 ORGANISATION PROFILE 2

3 What we are good at What we are good at Eurofast Taxand International Tax Tax efficient real estate structures including investment funds Tax advice surrounding transactions, disposals and spin offs Designing acquisition and holding structures Minimizing tax obstacles in real estate transactions Transfer Pricing VAT planning & compliance Tax controversy and litigation Tax Litigation Real Estate Eurofast Global Accounting & Payroll Mergers & Acquisitions Cross border transactions Transaction advisory Intellectual property Compliance reporting Cross border structuring Shipping Bringing value to clients with our service 3

4 Where can you find us Single point of Contact, Many Points of View Lefkosia Pristina Athens Banja Luka/ Sarajevo Thessaloniki Zagreb Sofia Cairo/ Alexandria Bucharest Podgorica Belgrade Kiev Tirana Moscow Skopje Tbilisi 4

5 What others think about us What others think about us

6 Who do we work with Real Estate Manufacturing

7 Who do we work with Transportation Retail Service Providers

8 Cyprus Bailout - Impact

9 Cyprus Bailout - Impact

10 Cyprus Bailout - Impact Severe impact on Cyprus banking. Laiki Bank mostly affected (known long ago!). Other banks not so much. Continue to be transaction banks. Very good liquidity in other banks and in Bank of Cyprus too! 10

11 Cyprus Bailout - Impact An accident? Negligence? A conspiracy? 25 th of March Agreement. Was a no possible? Economic Miracle of Cyprus after It now stopped Structural Reforms. 11

12 Cyprus Bailout - Impact Statement of Jeroen Dijsselbloem that it may be treated as a model for other countries in the Eurozone. The decisions of the Eurogroup have shaken the confidence of the investors worldwide in the banking system - lifetime savings are not necessarily safe in European banks and clients moving funds to Singapore etc... Especially countries where their banking sector exceeds their real GDP at least 4 times under scrutiny. Model must change! 12

13 Cyprus Bailout Impact on Corporate Structuring Corporate structuring not affected. No actual link with banking. Concern is more psychological than actual. No change in main principal behind Cyprus s attractiveness. Minor changes being made to the tax and legal regime. 13

14 Double Tax Treaty between Cyprus and Ukraine Facts DTT was signed on 8th November 2012 Exchange of diplomatic notes concluded in August, treaty provisions will be effective as of the 1 st of January 2014 Capital gains - favourable capital gains provision for property companies remained unaffected. Cyprus remains the most favourable jurisdiction for the disposal of shares Dividends 5% WHT (if BO holds 20% of capital of company paying dividend or invested EURO for acquisition of shares/ or other rights of company) All other cases 15% WHT. Interest 2% Royalties - The withholding tax rate is either 5% (copyright, patents, secret formula etc) and 10% in all other cases. 14

15 The Ukrainian love affair with Cyprus WHY CYPRUS? Strategic geographical location Transparent Legal System Well developed infrastructure World class professional services Large network of double tax treaties with other jurisdictions Member of the European Union (EU) Tax system fully compliant with EU and OECD requirements Low corporate tax Not in any black/grey lists only white lists Minor losses in Cypriot banking crisis 15

16 The Ukrainian Connection Ukrainian / Russian Community in Cyprus It is estimated that >100,000 Russian / Ukrainians citizens live in Cyprus 50% of the population live in Limassol. Russian schools and Orthodox Churches have been built. Russian-language television and radio service has been set up. There is a Russian Center for Science and Culture in Nicosia. The Limassol Municipality organizes the Cyprus Russian Festival since 2005 where every year more than 15,000 people gather to celebrate. Most businesses have Russian speaking personnel working for them. 16

17 New Tax Regime for IP Rights

18 Royalties Tax Structure Cyprus Law 20% of the net royalty profits are subject to 12.5% CIT Gains on the sale of IP rights may be exempt from CIT; IP rights must be owned in Cyprus (e.g. Trademark) 0% WHT on Royalty payments in accordance with current DTT; Application of EC Interest and Royalties Directive (2003/49/EC) if EU-resident UBO License Cyprus IP Company Licensee Company Ukraine CIT -2.5% CY UKR Royalties

19 CYPRUS INTERNATIONAL TRUST TRUSTS

20 Tax advantages of a Cyprus International Trust Tax Advantages Foreign income or profits of a Trust are not taxable in Cyprus. Dividends received by a Cyprus company under the control of a trust is not taxable No withholding tax on payments to non-resident beneficiaries. No capital gains tax on the disposal of Trust assets. In general, Cyprus International Trusts with non-cyprus residents Beneficiaries, non-cyprus sourced income and no immovable property in Cyprus are tax free. Beneficiaries - Derive benefit Settler Eurofast Trust Cyprus Company Transfers Assets investments property Trading Trustees - manage property

21 No inheritance or gift tax on the property transfer by the Settler to the trust; No income tax or CGT on deemed disposal basis at the level of the Settler; No VAT on the transfer of the assets by the Settler (private individual & not a VAT payer); Tax imposed at the level of the beneficiaries - on a remittance basis (depending on the type of income) Real Estate Co For rent Trust Trust Cyprus Cyprus Holding Holding Co Co Real Real Estate Estate Co Co For For sale sale Non Non Resident Resident Co Co Investment Investment Co Co Listed Co Shares Listed Co Shares Holding Holding Co Co Private Family Co Private Family Co Shares Shares

22 Practical Examples

23 Exposure to threats UBO Finance Co Interest Holding Co Dividends Tax Authorities: Is the Holding Company the Beneficial Owner of the Dividends or the UBO? Royalties IP Co Tax Authorities: Does the loan fall under thin cap rules? Investment Co Investments Trading Co Tax Authorities: Is there a business purpose for the said transaction?

24 DTT Cyprus - Ukraine Distribution of dividends to the Cy Hold Co: 0% WHT (current treaty) 5/15% new treaty Cyprus Holding Company Ukrainian Company At the level of Cyprus: No corporation tax on dividends received; No Defence contribution either. No Defence Contribution on distribution of dividends to shareholders (non resident) At the level of the Ukraine: 21% CIT. (19% in 2013, 16% in 2014)

25 Investing in Ukraine via Cyprus Distribution of dividends to the Ru Parent Co: no withholding taxes at the level of Cy. Distribution of dividends to the Cy Hold Co: 0% WHT (current treaty) 5/15% new treaty Russian Parent Company Cyprus Company Ukrainian Company At the level of Russia: O% CIT on dividends repatriated under certain conditions. 9% in all other cases. At the level of Cyprus: No corporation tax on dividends received; No Defence contribution either. No Defence Contribution on distribution of dividends to shareholders (non resident) At the level of the Ukraine: 21% CIT (19% in 2013, 16% in 2014)

26 Our objective Our objective and priorities - is to increase the well-being of all our respected customers, and we build our relationships based on trust, confidentiality and mutual agreement

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29 Thank you! Questions/ Answers