YIOTA MILTIADOU & ASSOCIATES LLC

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1 YIOTA MILTIADOU & ASSOCIATES LLC /;4.,908 0, /; 8478 DOING BUSINESS IN CYPRUS Tel: , , Mob. Tel: , Fax: Web Site: Contacts: Yiota Miltiadou, CEO, LLB, LLM (M.Phil. Offshore sector) Koullis Mettis,(Bsc, Msc) Managing Director

2 Who we are The Firm Yiota Miltiadou & Associates LLC is a Cyprus law firm providing wide-ranging legal services and advices to local and international clients. The progressive and leading foundations of the company have been created by its founder and lawyer Yiota Miltiadou, with an excellent academic qualification and expert background from two of most reputable law firms in Cyprus. Our team is encompassed with experienced and expertise professionals and retain close relations with a substantial number of accountants and auditors in Cyprus, as well as with a number of law firms, financial institutions and regulatory bodies. Combining reliability, effectiveness and competitive costs, we are maintaining long-lasting relationships with our clients and associates, based on client s needs, confidentiality, mutual respect and trust Our offices are located in Nicosia, the capital of Cyprus, near the most of Government administration offices and banks. Our Mission We are committed to deliver a network of legal solutions, excellent legal representation and satisfaction to our clients through uncompromising dedication, professional excellence and ethical standards.

3 Our services by divisions Corporate Division Registration and management of companies Establishment and Administration of Trusts and Funds Registration of Branches Re-domiciliation of companies Re-organization of companies Mergers and acquisitions De-mergers Transfer of assets Nominee services Establishment of Offices in Cyprus Obtaining work and residence permits in Cyprus Opening and managing bank accounts in Cyprus and abroad International Taxes Escrow services Shelf companies Contracts Assistance on financing Property and Real Estate Insurance Property Division Industrial property Intellectual property Community Trademark (CTM) Real Estate transactions Granting for licenses Applications for permits for foreigners Pharmaceutical Law Debt recovery Debt collection Management schedules of payment Bankruptcy Negotiation with Bank Institutions, Companies & Individuals Family Division Litigation division Civil and commercial Law Banking Law Contract law Insurance Division Third Party Insurance Public Liability Life Insurance Health and Disability Insurance Professional Indemnity Employer Liability & Workers Compensation Divorces Child custody Child support collection Property separation Services provided through associates Accounting and bookkeeping Preparation Accounts of Management Preparation returns of quarterly VAT Tax advice Audit administration

4 The Cyprus Business environment Reputation and stability: Cyprus is an independent, sovereign republic with a presidential system of government and a written constitution which safeguards the rule of law, political stability, human rights and the ownership of private property. Cyprus is a member of EU since 1st of May Cyprus is a member of Commonwealth, the Council of Europe, the IMF, the UN, the World Bank and WTO. Cyprus is a member of Euro zone since 1st January 2008, further confirming the macro-economic stability of the country and its commitment to low inflation, low interest rates and high growth. In April 2009 the OECD included Cyprus on its original white list as one of only 40 countries in the world that have implemented internationally agreed tax standards, being the highest categorization possible. Cyprus is not on the list of countries that have recently made tax information exchange agreements in OECD with other nations. Strategic location Cyprus is a strategic location at the crossroads of three continents Europe, Africa and Asia. As a member of EU, Cyprus has been transformed into a key outpost in the Eastern Mediterranean.

5 Springboard for investments among Europe, Africa and Asia. Cyprus is an EU s key trading post in the Eastern Mediterranean, providing exchange between Europe, Africa and Asia, and is one of the key international transshipment centers. Macroeconomic stability Cyprus has a modern, free-market. Its economy is service-based. Approx 76% of the country s economy is based on the provision of services. Even during the global financial crisis, Cyprus enjoys macroeconomic stability which is reflected through various indicators including Real GDP Growth, Inflation and Unemployment which are above the average rates of the Euro zone ( International familiarity and efficient legal, accounting and banking services: Legal services Cyprus has a Common law legal system based on principles established through historical links with the United Kingdom. The laws regulating business and the origin of Cyprus company law are the laws of the UK, updated and harmonized with EC Directives.

6 Highly qualified and well trained professionals can provide reliable and expert advice of commercial and business law, both local and international. Accounting services The accounting services are very well represented, with many international companies operating in Cyprus, as well as a number of private individuals providing accounting, auditing and consulting services. Most accountants are British trained and members of either the Institute of Chartered Accountants or the Chartered Association of Certified Accountants. Banking, financial services and regulations The Commercial Banks and specialized financial institutions are offering full and varied local, national and international services on personal and corporate level. The island offers a wide range of services including insurance, leasing, hire purchase finance, factoring, mutual fund management, investment and consulting as well as custody and asset management services. Local business and financial consultants have been typically trained at European or US Universities and many have worked overseas before setting up in Cyprus.

7 There are currently over 40 Cypriot and international banks operating in Cyprus and, of course, no exchange controls. The banking system is conformed to the EC Directives, under the regulation of the constitutionally independent Central Bank of Cyprus, as integrated with the Eurosystem. The Cyprus Securities and Exchange Commission (CySEC) supervises and controls the operations of the Cyprus Stock Exchange and the issuers of securities listed on the exchange. The Central Bank and CySEC supervise and license the rising number of investment services companies, collective investment schemes, brokerage firms, investment consultants and mutual fund management companies. Advanced telecommunications network and infrastructure: Telecommunications Cyprus is connected to a number of advanced technology submarine cables providing excellent connectivity to Europe, Middle East and Asia. Additionally, seven satellite earth stations provide satellite telecommunications connectivity making easy for companies to be located and connected globally through an advanced and reliable communications network. A number of companies can provide modern telecommunication products and solutions. Air Transportation The two international airports, at both Larnaca and Paphos, are operating with more than 35 Airlines with scheduled flights from and to Larnaca International Airport and Paphos International Airport.

8 The modern airport terminals at both international airports can serve up to 10 million passengers per annum. Shipping transportation Cyprus has two deep-sea Ports in Limassol and Larnaca Port with modern terminals and one shipping terminal at Vasilikos. Reputable international shipping centre: Cyprus is ranking among the 10 leading maritime nations in the world: more than 1000 registered vessels with 21 million gross tonnage under the Cyprus flag more than 130 ship owning and ship management companies maintain offices in and conduct international activities from Cyprus, controlling a fleet of 2300 ships with 46 million gross tonnage Ship management: Cyprus accounts for 16% of the EU fleet, thus enhancing the market share of the European fleet in the International sea transport. It is one of the largest ship management centers in the world. The majority of the largest in the world ship management companies have established fully fledged offices in the island. Around 50 ship management companies and marine-related foreign enterprises are conducting their international activities in the country. Transshipment: transshipment centre for Asia Pacific trade with Europe as well as with shipping markets situated along the costs of the Levant and Black sea, or the North Adriatic natural hub for main-line deep sea traders traversing the Mediterranean, to North Africa and the Middle east pioneer in the development of purpose-built container terminals

9 Efficient custom formalities. Reliable handling and delivery system. Fiscal and regulatory regimes as well as its legislation are fully aligned with the EU s Acquis Communautaire. New Shipping Tonnage Tax System since March 2010, covering Ship owning, Ship management and Chartering of Vessels. Highly qualified workforce and standard of living: Cyprus has a young and flexible workforce, with university education obtained predominantly in the UK and the USA. In 2010, 32.3% of the population of Cyprus between the ages of years old held a Bachelor, Masters or PhD degree with EU27 average equivalent 22.7% for the same year. English is spoken universally and is the accepted language of business. The island offers a high standard of living with an enjoyable climate and a very low crime rate. Very attractive tax regime and stable tax law: Lowest EU Corporate Tax rate of 10%. Lowest EU Value Added Tax rate of 17%. Double Taxation Agreements and treaties with 44 countries, ensuring that the same income is not taxed in more than one country. Cyprus has been voted the most attractive European tax regime by major business organizations across Europe and has been commended for the stability of its tax law, the consistency in interpreting its tax legislation and its low tax rates. Low cost based centre: Cyprus is placed amongst the few international financial centers with low operational costs. The costs of setting-up and maintaining a business structure are low when it comes to incorporation costs and fees for meeting tax and company law obligations. The cost of labour, rents and services are highly competitive and often low than in other European countries.

10 Benefits of forming a company in Cyprus Corporate Tax and effective tax regime 0% tax on Dividends received Dividends received by a Cyprus Company, on certain conditions, are free of tax making Cyprus the most competitive jurisdiction for holding companies. 0% withholding tax on Dividend payments Dividends payable by a Cyprus resident company to its foreign shareholders (whether a company or individual) are not subject to any withholding tax in Cyprus. Companies engaged in the trading of titles Trading companies in shares and other securities as identified in the law may be formed with 0% taxation on profits from this trading. No capital gains tax is payable on the sale or transfer of shares. No capital gains tax is paid on the transfer of immovable property owned by a Cyprus Company abroad (outside Cyprus). No estate duty is payable on the inheritance of shares In case of the death of a shareholder there is no estate duty payable in Cyprus. 10% Taxation for tax resident companies. Resident trading companies, subject to certain exceptions for holding companies, and companies trading in shares / securities pay one of the lowest taxation in Europe (10%) on their net profits.

11 0% Taxation for NON tax resident companies. Non tax resident trading companies engaged in global international trading, may be established with 0% taxation in all respects, provided their management and control is outside Cyprus. Trading companies which are now looking for respectable jurisdictions with the EU stamp have the possibility to use such a structure on their trading tax planning. 0% taxation on profits from foreign establishment. A resident company is not taxed on profits received from its oversea establishment, subject to certain conditions. Unilateral Tax Credit Relief. Unilateral tax credits are granted on any tax paid abroad to any foreign country, irrespective of whether Cyprus has a Double Taxation Treaty or not. In such a case the income is not taxed twice but only once. Double Tax Treaties / International Tax planning Cyprus has signed a considerable number of Double Taxation Treaties with various countries, to avoid the double taxation of income earned in any of the two contracting states. Re-organizations of companies The new tax legislation has provided extensively and flexible reorganization rules. It implemented the European Commission Merger Directive. The Cyprus legislator implemented the Directive in a very liberal approach and the Cyprus reorganization rules are far more flexible than the EC Directive. The re-organizations according to Cyprus Law apply not only to companies but also to any body of persons

12 they can be made not only between Cypriot or European Union entities but equally apply to entities from non-member states any profits or gains made by reason of reorganizations, the transfer of property, and the transfer of shares in exchange for shares in another company are exempt from income tax. Re-organizations include merger, de-merger, transfer of assets and exchange of shares between Cyprus resident companies and / or non-resident Cyprus companies. Losses Losses can be carried forward and set off against future profits indefinitely. There is no time limit. Group relief Group relief (set off of the loss of one company with the profit of another) is allowed provided both companies of the group are tax resident in Cyprus. [The requirement of the Income Tax Law that both companies must be tax residents of Cyprus in order to apply group relief, might be in conflict with the EU Law according to the decision of the European Court of Justice (ECJ) in the court case of MARKS & SPENCER PLC against the UK Inspector of Taxes where it approved that group relief within Member States is possible. According to this judgment foreign subsidiaries may transfer losses back to their parent company if the losses cannot be used for tax purposes in the country where they were made]. Two companies are deemed to be members of a group if: One company is the 75% subsidiary of the other or Both are 75% subsidiaries of a third company 75% subsidiary means holding either directly or indirectly at least 75% of its voting shares and beneficially entitled directly or indirectly to at least 75% of the income and 75% of the assets in case of winding up. Group relief is available only when both companies belong to the same group for the whole financial year. Losses incurred in one year can be set off only against profits of the same year. A partnership transferring business into a company can carry forward tax losses into the company for future utilization. Thin Capitalization Rules Cyprus tax legislation does not contain Thin Capitalization provisions, namely there are no provisions in the Law requiring the companies to maintain a particular debt to equity (particular) ratio.

13 In this respect, a Cyprus holding company may be capitalized with loans without any risk that interest paid at arms length to the parent company will not be deductible. Re-domiciliation Cyprus has recently enacted a new law allowing re-domiciliation of foreign companies in Cyprus and Cyprus Companies to be redomiciled abroad. This possibility gives tremendous flexibility to foreign holding companies which are currently using particular holding jurisdictions, which are not suitable, to move their holding companies in Cyprus without disturbing their overall structure. Withholding Taxes on Interest and Royalties There are no withholding taxes on payments of interest to nonresidents. Any interest due to non-residents is paid free of withholding taxes from Cyprus. There are also no withholding taxes on royalties arising from sources outside Cyprus. Royalties arising from the use of an asset in Cyprus are subject to 10% withholding tax. Liquidation If a Cyprus holding company is liquidated and distributes its assets to its shareholders, in the case that the shareholders are non-residents of Cyprus then the distribution is done without any taxation on the non-resident shareholders. Benefits of Personal Income Tax Based on Eurostat's latest statistics (May 2006), Cyprus does not only exhibit the lowest corporate tax rate, but also one of the lowest top statutory personal income tax rate at 30%. Moreover, various tax exemptions apply for personal income tax as well, such as: exemptions in respect of dividends subject to certain conditions no tax on interest income subject to certain conditions favorable tax treatment of losses

14 no tax on profits earned from permanent establishments abroad under certain conditions no tax on capital gains derived from the disposal of securities no tax on remuneration by services rendered abroad no tax on specific type of income such as compensation for injuries, provident fund, pension fund or other approved Benefits of Value Added Tax Value Added Tax (VAT) rate is imposed on the supplies of goods and services, as well as on imports to Cyprus. Depending on its activity, a Cypriot company may be able to register for VAT in Cyprus and recover VAT suffered. The standard VAT rate of 17% applies to Cyprus; the lowest rate permitted in the EU. Cyprus also applies reduced VAT rates, on specific goods and services, of: 8% 5% 0% Listing in Stock Exchanges The Cyprus Holding Company can be listed either in the Cyprus Stock Exchange or in any other reputable International Stock Exchange. Its corporate structure, which is based on the English company Law, makes it a suitable vehicle for such listing. In order to proceed with such listing the following are required: transformation into public company engaging an adviser/broker for the preparation of the admission document, the application for listing and the carrying out of the listing process including road shows proceed with the listing of the shares With Cyprus being a member of the European Union, the use of a Cyprus holding company as a vehicle for listing has the benefit of adding credibility because it applies the regulations and standards imposed by the Union. At the same time it can benefit from the various incentives and common platforms provided by European legislation. Possible now to keep the register of Members abroad.

15 Holding Company Financing its Group of Companies A holding company acting as the financing vehicle of its group of companies is considered that the interest income it receives from financing the group, is closely related to its ordinary activities and this interest income will be taxed only with income tax and not Special Defense Contribution Tax. Trusts International Cyprus Trusts may be established holding the shares or to be used as a vehicle for a tax structure: the income of an international trust is not taxable in Cyprus, including dividends, interest or other income received from a Cyprus company the gains of the disposal of the assets of the trust are not subject to capital gains tax in Cyprus international trusts are not subject to estate duty or inheritance tax in Cyprus the income of the trust is not taxable in Cyprus even where the settler is a beneficiary. Cyprus is not considered to be a tax heaven country but a tax incentive country. Financial assistance The Government of Cyprus has introduced a framework of incentives within the EU Acquis-Communautaire and the harmonization process in general.

16 Such schemes and incentives aim at the reconstruction of Cyprus traditional economic sectors, improvement of labour skills and productivity, the development of technologically advanced products and services and the attraction capitalintensive foreign investments in new high-tech industries and the development of skill intensive products. 100% foreign ownership can be achieved when forming a company in Cyprus. It is easy to open global corporate bank accounts to support Cyprus company formation. The bank accounts in Cyprus are strictly protected with privacy under the Cyprus Law and there is not an access from government institutions with exceptions of illegal actions. Establishing a Cyprus company portrays a positive image to customers, suppliers, investors and venture capitalists in Europe and around the world. The formation of a Cypriot company or the relocation of HQ combined with an attractive tax regime and a stable business environment has a positive effect on maximizing the ROI, amount of savings, level and pattern of investment, growth, costs, cash flow, quality, industrial relations and etc.

17 The Cyprus Company, with its European diversion and acceptability opens the gates to Europe. In effect, it is The Gate to Europe for non- EU nationals or even the gate to move outside EU for EU and non EU Nationals. Cyprus is not on the list of countries that have recently made tax information exchange agreements in OECD with other nations. Disclaimer This publication has been prepared as a general guide and for information purposes only. It is not a substitution for professional advise as this information cannot apply to all business cases with the same manner. One must not rely on it without receiving independent advise based on the particular facts of his/ her own case. No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication, as well as changes in some regulations can occur.

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