Amendments to Income Tax Law- Attractive benefits for relocating Companies’ operations and Individuals to Cyprus

On 14th of July 2022, the Cyprus House of Representatives passed the following amendments to the Income Tax Law (“ITL”):

  1. Amendments to articles 8(21) and 8(23) of the Law, that provide a 20% or 50% exemption from income tax for individuals that take up first employment in Cyprus.
  2. Amendments to article 9A of the Law, that provides a deduction from income tax for persons that invested in a small or medium innovative business, as defined in the relevant legislation.

Details of the changes are below:

Amendments to articles 8(21) and 8 (23) of the Law:

  • Income Tax Law – 20% exemption (Article 8(21)):

Based on the new provisions of the Law, the following will apply:

From the date of the publication of the new legislation in the Official Gazette of the Republic, the provisions of article 8(21) will not be applicable and the provisions of the new article 8(21A) will apply.

The individuals that are currently eligible for the exemption of 20% based on the provisions of article 8(21) of the ITL, and are not eligible for the transitional provisions of the new Law, will continue to claim the exemption for the remaining years, without being affected by the provisions of the new Law.

Based on the provisions of article 8(21A), the exemption of 20% (or €8.550, whichever is lower) will be granted to individuals that take up first employment in Cyprus, provided that during the 3 years preceding their employment they were exercising their employment outside Cyprus for a non-Cypriot resident employer. The exemption will be granted for 7 years, starting from the tax year which follows the year of employment in Cyprus.

  • Income Tax Law – 50% exemption (Article 8(23)):

Based on the new provisions of the Law, the following will apply:

From the date of the publication of the new legislation in the Official Gazette of the Republic, the provisions of article 8(23) will not be applicable and the provisions of the new article 8(23A) will apply.

The individuals that are currently eligible for the exemption of 50% based on the provisions of article 8(23) of the ITL, and are not eligible for the transitional provisions of the new Law, will continue to claim the exemption for the remaining years, without being affected by the provisions of the new Law.

Based on the provisions of article 8(23A), the 50% exemption from income tax for the individuals that take up first employment in Cyprus will be granted subject to the following conditions:

  • The exemption will be granted in any tax year in which the remuneration from employment in Cyprus exceeds the amount of €55.000, provided that during the first or second year of employment the remuneration exceeded the amount of €55.000 per annum.
  • The exemption will be granted if the individual was not a resident of Cyprus for 10 consecutive years prior to his/her employment.
  • The exemption will be granted in the cases where the first employment in Cyprus will commence on or after 1 January 2022.
  • The exemption will be granted for a period of 17 years starting from the year of employment in Cyprus

Transitional provisions based on the amendments made to the Law

The following transitional provisions are included in the amendments made to the Law:

The individuals who were not Cypriot tax resident during any of the 10 years preceding the year of employment will be eligible to claim the 50% exemption during any tax year in which their remuneration exceeds the amount of €55.000, starting from the year 2022 until the completion of 17 consecutive years from the year of their employment, provided that they meet one of the following conditions:

  • They were eligible for the 50% exemption based on the provisions of Article 8(23) of the ITL and they have a continuous employment in Cyprus starting from the year of employment until the tax year 2021; or,
  • Their first employment in Cyprus commenced during the years 2016 until 2021 with a remuneration exceeding the amount of €55.000 per annum; or,
  • Their first employment in Cyprus commenced during the years 2016 until 2021 with a remuneration not exceeding the amount of €55.000 per annum, and within 6 months from the date of publication of the new Law in the Official Gazette of the Republic their remuneration will exceed the amount of €55.000 per annum.

Amendments to article 9A of the Law

Provisions that are applicable since 2017

As of 2017, qualifying individuals that invest in a small or medium innovative business (as defined in the legislation) are eligible to deduct the costs of their investment from their taxable income, subject to certain conditions and the following limitations:

The tax deduction is limited to 50% of the investor’s taxable income in the year in which the investment is made.

The total deductible amount may not exceed €150,000 per year.

Any non-deductible investment may be deducted in the five years following the year of investment, subject to the restrictions mentioned above.

New provisions of the Law based on the amendments

Based on the new provisions of the Law, that will be effective retroactively from 14 February 2022, the deduction from the taxable income will also be granted to legal persons that invest in a small or medium innovative business (as defined in the legislation), subject to certain conditions and  the following limitations:

The tax deduction is limited to 30% of the amount invested in the small or medium innovative business by the legal person.

The tax deduction is limited to 50% of the taxable income of the legal person in the year in which the investment is made.

The total deductible amount may not exceed €150,000 per year.

Any non-deductible investment may be deducted in the five years following the year of investment, subject to the restrictions mentioned above.

The provisions of article 9A of the Law are applicable until 30 December 2023.

The law Firm of NASOS A. KYRIAKIDES AND PARTNERS LLC can assist you with any clarifications you may be needing, assess whether the above changes can apply to your case/s and further take actions for the implementation of the changes.

Feel free to contact us if you have any queries.

Cyprus digital nomads visa scheme

Following the Cyprus government approval of the introduction of the Digital Nomad Visa Scheme in Cyprus, this specific visa program provides particular incentives for people who would like to take advantage of all the benefits of living in Cyprus while working for companies who operate outside the country.

What is the “Cyprus digital nomad visa”
The “Cyprus Digital Nomad Visa” Scheme allows nationals from non-EU and non-EEA countries, who can perform their work location-independently using telecommunications technology, to reside temporarily in Cyprus and work for an employer registered abroad or perform work through telecommunications technology for companies or clients located abroad.

The Scheme’s goal is to strengthen Cyprus as a center for the provision of electronic services, where in combination with the other advantages offered by Cyprus, the attraction of digital nomads will contribute to the development of the business ecosystem and consequently to the economic development of the country. The introduction of the “Cyprus Digital Nomad Visa Scheme” is included in the Strategy for Attracting Businesses for Activities or/and Expansion of their Activities in Cyprus.

Who can benefit
Non-EU or non-EEA nationals who:

  • Can perform work remotely through telecommunications technology;
  • Are employed in a company registered abroad, for which they can work location-independently, or are self-employed offering services remotely for clients located abroad;
  • Can prove that they have stable and sufficient monthly net income of at least €3500 (after the deduction of contributions and taxes).

What are the benefits
Individuals that are granted with a Digital Nomad residence permit will benefit from the following:

  • Right of residence for a year in Cyprus, with a possibility of renewal for further two years.
  • Right of residence for family members, for the same period as the Digital Nomad, without the right to be employed of perform economic activity in Cyprus.
  • If they reside in the Republic for one of more periods that in total exceed 183 days within the same tax year, then they are considered tax residents of Cyprus, provided they are not tax residents in any other country.

Family members

  • Digital Nomad’s family members can reside in Cyprus for the same period as the Digital Nomad, without the right to be employed of perform any economic activity in Cyprus.
  • Family members include the spouse/ partner in a civil union and underaged children.
  • Family members also need to obtain a temporary residence permit following the procedure below.

Procedure

  • Within 3 months of arrival, the applicant should submit the relevant application along with the required documents, as stated in the relevant document lists, at the Offices of the Department in Nicosia, after arranging an appointment through the online platform, to obtain a temporary residence permit. All documents accompanying application forms should be officially translated and duly certified/ ratified.
  • In case the applicant legally resides in Cyprus under a different status, he/she has the right to submit the relevant application to be granted a temporary residence permit as a Digital Nomad, at the Civil Registry and Migration Department in Nicosia.
  • Applications can be submitted personally or through an authorized representative.
  • Applications that are not accompanied by all the required documents will not be accepted for consideration.
  • Any change in the applicant’s data during the examination of the application should be notified immediately to the Department.
  • For the application submission, the amount for applicable fees shall be paid as stated below.
  • For the issuance of the temporary residence permit capturing of biometric data (photo and fingerprints) and signature of the third country national is necessary, which is done with the presentation of the application submission receipt and a valid travel document. The biometric data can be captured at the same time or after the application submission, at the offices of the Department in Nicosia or at the district unit of the Aliens and Immigration Service of the Police of the district of residence of the third country national. From persons who have not reached the age of six years at the time of submitting the application only the photo is captured. This data is also captured for the renewal of the temporary residence permit.
  • Applications for renewal should be submitted to the Civil Registry and Migration Department in Nicosia along with the necessary accompanying documents, at least one month before the temporary residence permit’s expiration date. For the application submission, the amount for applicable fees shall be paid as stated below.
  • In case the application is approved, the applicant will receive a letter notifying them on how to receive their temporary residence permit.
  • In case the application is rejected, the applicant will receive a letter informing them for the rejection reasons.

Examination time

The time of examination is between 5 – 7 weeks.

Duration of temporary residence permit

  • A first temporary residence permit is issued with a validity of one year.
  • In case of renewal, the temporary residence permit is issued with a validity of maximum two years.

The law Firm of NASOS A. KYRIAKIDES AND PARTNERS LLC can provide full legal assistance in applying for a Digital Nomad Visa, or for any other immigration services required.

Cyprus residence for foreign individuals and families if they have EURO 40,000 annual income

Foreign nationals can work or stay in Cyprus if they have an income of 40,000 euros annually, a privately-owned house of 250,000, when they are investors or self-employed or employees under certain conditions:

The above is provided in rules that the Cabinet has approved, according to which an immigration permit may be granted to foreign nationals who fall under the following categories:

  1. Self-employed foreign nationals who intend to work in a business in the Republic of Cyprus provided that they have the qualifications to exercise this profession, have the necessary permits for the job, have sufficient funds, have settled any dues to Social Insurance and Income Tax, and the specific job will benefit the Republic.
  2. Foreign nationals employed provided they will not constitute unjustified competition in their sector. The employer and the employee must have signed a relevant agreement, duly certified and the employer must satisfy the preconditions to employ foreign nationals and have settled any dues to Social Insurance and Income Tax.
  3. Foreign nationals who are investors, meaning persons who have proceeded with an important investment in the Republic, with funds coming from legal sources.
  4. Self-supported foreign nationals, meaning people who intend to live in Cyprus without exercising any profession but who have a secured income of 40,000 euros annually, increased by 10,000 euros for every additional member of the family, as well as a privately-owned house valued at 250,000.

Additionally, the foreign nationals must have a valid passport or other travel document and will not constitute threat to national security or public order or public health.

The Law Firm of NASOS A. KYRIAKIDES AND PARTNERS LLC, can provide full legal support on all procedures and application with the Ministry of Interior for obtaining Cyprus residence permit.

Cyprus residence for the UBO and company Employees – Registration of a Foreign Interest Company in Cyprus

The Council of Ministers of Cyprus approved on October 15th 2021, the “Strategy for Attracting Businesses for Activities or/and Expansion of their Activities in Cyprus”. The Strategy is a very important initiative towards attracting both international investments and talent, including a series of actions and reforms in several areas of intervention, aiming to enhance Cyprus’ position as an international high-growth business centre, such as the provision of Cyprus residence permits for the Foreign Interest Companies UBOs and employees and their family members.

Companies must meet the following criteria Criteria:

  1. Third country shareholders should own the majority of the company’s shares.
  2. Deposited amount of at least €200.000, supported by a Bank SWIFT or other similar document which proves a foreign direct investment by the ultimate beneficial owner, legally admitted to Cyprus (This requirement only applies to companies which will employ staff from third countries for the first time.)
  3. The Company should operate in independent offices in Cyprus and pursuant to the relevant regulations.

Employment Payments:

  1. Directors – This category includes the Directors or Partners registered in the Registrar of Companies and Official Receiver, the General Managers of branches and of mother companies of alien companies, the Departmental Managers and the Project Managers. Minimum acceptable gross salary is €4.000 Euro and the maximum number of persons for this category is 5.
  2. Middle Management Executives and other Key Personnel – This category includes the upper / middle management personnel and the other administrative, secretarial, or technical staff. Minimum acceptable gross salary amount is between €2.000 Euro and the maximum number of persons for this category is 10.
  3. Specialists – Companies are entitled to employ third country nationals in professions and / or with skills relevant to the Company’s operating activities. The minimum acceptable gross salary amount for this category is €2.000 Euro.
  4. Support Staff – There is no maximum number for the employment of third-country nationals under this category, provided that the necessary approvals from Department of Labour have been obtained.

Types of eligible Companies

  1. Public companies registered on any recognized stock exchange.
  2. Companies of international activities (formerly off-shore), which operated before the change of regime, whose data are held by the Central Bank.
  3. Cypriot shipping companies.
  4. Cypriot high-tech/innovation companies*
  5. Cypriot pharmaceutical companies or Cypriot companies active in the fields of biogenetics and biotechnology.
  6. Companies of whom the majority of the total share capital is owned by persons who have acquired Cypriot citizenship by naturalization based on economic criteria, provided that they prove that the conditions under which they were naturalized continue to be met.

An enterprise qualifies as ‘High Technology Company’ if:

  1. it is already established and has a presence in the market, and
  2. it has a high level or experimental R&D intensity, and
  3. it developed product/s that fall into one of the following categories: products related to aviation and space industry, computers, electronic and telecommunication products, pharmaceuticals, biomedical, research and development equipment, electrical machinery, chemicals, non-electrical machinery.

The Law Firm of NASOS A. KYRIAKIDES AND PARTNERS LLC can provide full legal support on all procedures and application with the Ministry of Interior for obtaining Cyprus residence permit.

Amazon brings the “Cloud” to Cyprus

The agreements were signed at the Presidential Palace

The modernization of the state technological infrastructure and the acceleration of the adoption of cloud services in the public and private sector of Cyprus are the main objectives of the Memorandum of Cooperation signed on Tuesday at the Presidential Office between the Ministry of Research, Innovation and Digital Policy of Cyprus and Amazon Web Services. (AWS).

Undersecretary Kyriakos Kokkinos said after the signing ceremony that the cooperation with Amazon Web Services opens a new era of opportunities for the country, allowing and facilitating the adoption of the cloud in all areas of government and industry.

On behalf of Amazon Web Services, European Public Sector Director Cameron Brooks stated that AWS is part of the wider digital transformation of Cyprus, as the country launches a new era of innovation, with entrepreneurs, public organizations and companies sharing the vision of a modern

“Through this Memorandum of Understanding, we are committed to supporting this vision by offering initiatives that will promote innovation, help grow local businesses, support the modernization of technology infrastructure and develop digital skills for future generations “, he added.

EU consumer protection rules 14 days return policy

As per DIRECTIVE 2011/83/EU OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 25 October 2011, on consumer rights:

EU consumer protection rules ensure that when you buy goods and services in the EU you have clear information on the product or service you’re buying, its price, shipping and delivery costs as well as on your rights when things go wrong.

Under EU rules, a trader must repair, replace, reduce the price or give you a refund if goods you bought turn out to be faulty or do not look or work as advertised.

If you bought a product or a service online or outside of a shop (by telephone, mail order, from a door-to-door salesperson), you also have the right to cancel and return your order within 14 days, for any reason and without a justification.

The below website may give further guidance as to EU consumers rights and complaints:

https://europa.eu/youreurope/citizens/consumers/shopping/guarantees-returns/faq/index_en.htm 

Locating company headquarters in Cyprus

Cyprus government approves new tax scheme for foreign workers and companies

The Cabinet of Ministers of Cyprus on Tuesday 11 of May approved a new tax incentives scheme aimed at attracting foreign companies and high-quality workers to Cyprus to relocate their headquarters in Cyprus.

In statements made after the Cabinet meeting, Finance Minister Constantinos Petrides said additional measures are expected to be implemented in order to further incentivise foreign workers into relocating to Cyprus to be implemented by the Ministry of Interior.

“We are convinced that this scheme is one of the most competitive of its kind in the European Union,” Petrides said.

“There is already a lot of interest, and it particularly concerns high-tech companies, which in recent years seem to choose the island as a place to relocate their headquarters,” the minister added.

Petrides also explained that the government is confident that the scheme will further promote the development of the technology sector in Cyprus, as both a medium and long-term strategic objective. The main advantages are the following:

a.50 per cent tax break for workers receiving upwards of €55,000 in annual wages.

  1. The time period for which the tax break would be applicable will be extended to 17 years, up from its current period of 10 years.
  2. Spouses of employees of third countries, to be able to work in Cyprus.

The time period for the tax break kicks in the worker’s first year of employment in Cyprus.

Moreover, the above terms will also be applied retroactively to current eligible workers making more than €55,000 in annual wages, provided that they resided abroad for 12 straight years before they started working in Cyprus. A grace period of two years will be given to new employees, as well as a period of six months to existing workers, in order for them to gain the necessary prerequisite criteria for the scheme.

This concerns cases where an employee’s initial remuneration started at an amount below the minimum annual salary of €55,000.

“Through this relocation, the tax base is expanded and consequently the state’s tax revenues,” the minister concluded.

Cyprus permanent residence by investment

The Department of Population and Migration has proceeded with a revision and subsequent improvement of the criteria for granting an immigration permit to applicants who are third country (Non-EU) nationals and who invest in Cyprus.

  1. LEGAL FRAMEWORK

1.1 In accordance with the provisions of Regulation 6(2) of the Foreign and Immigration Regulations, the Minister of Interior decided to issue immigration permits to third-country nationals, in cases of investments that meet the requirements outlined below.

1.2 The applicant must meet one of the investment criteria set out in paragraph 2.1, as well as the qualitative criteria set out in paragraph 3 below. It is noted that the funds to be used for the investment have to come from abroad.

  1. INVESTMENT CRITERIA

2.1 The applicant must make an investment of at least €300,000 in one of the following investment categories:

(A) Investment in a house/apartment: purchase of a house or apartment from a land development company, which should be for a first sale of at least €300,000 (+ VAT).

(B) Investment in real estate (excluding houses/apartments): purchase of another form of real estate such as offices, shops, hotels or similar developments or a combination of them with a total value of €300,000. Such an investment may involve a resale property.

(C) Investment in the equity capital of a Cyprus registered company with activities and staff in Cyprus: The investment must have a value of at least €300,000 in the equity capital of the company, which is both based and active in the Republic of Cyprus and has a proven physical presence in Cyprus and employs at least five (5) people.

(D) Investment in units of a Cyprus Collective Investment Enterprise (either AIF / AIFLNP / RAIF).

It is understood that any alienation of the holder of the immigration permit from the investment in which he/she has made without its immediate replacement with another of the same or greater value, which should meet the conditions set out above, will result in activation of the process of cancellation of the permit under the provisions of Regulation 6 of the Immigration Regulations.

2.2 The applicant must, in addition to the investment under paragraph 2.1 above, be able to prove that he/she has at his/her disposal an insured annual income of at least €30,000. The annual income increases by €5,000 for each dependent family member respectively and €8,000 for each dependent parent (of the applicant and/or his/her spouse). This income may emanate from salaries, pensions, dividends from shares, bank deposits, rents, etc. coming from abroad in cases where the applicant chooses to invest as per paragraph 2.1.(A) above. The calculation of the total income may include that of the spouse.

In instances where the applicant chooses to invest as per paragraphs 2.1.(B), 2.1.(C) or 2.1.(D) above the applicant’s total income or part of it may also be derived from sources or activities within the Republic of Cyprus.

  1.  PERSONAL CRITERIA

3.1 The applicant and the spouse must submit a clean criminal record certificate from their country of residence or from the Republic in case they reside in Cyprus.

3.2 The applicant and the spouse shall certify that they do not intend to be employed in the Republic except as directors of a company in which they have chosen to invest under this policy.

3.3 In cases where the investment does not relate to the share capital of a company, the applicant and/or the spouse may be shareholders in companies registered in Cyprus and the income from dividends in such companies may not be considered as an impediment for the purposes of obtaining the immigration permit. They may also hold the position of director in such companies without pay.

3.4 In cases where the applicant chooses to invest as per paragraphs 2.1.(B), 2.1.(C) or 2.1.(D), he/she should present data on his/her place of residence in the Republic by way of producing, for example, a title deed of property, a sale purchase agreement or rental agreement).

Notice for the Payment of Levy for 2018 – only for Cyprus Companies

Dear Associates,

We would like to bring to your attention that according to the Cyprus Company Law, Cap. 113 all Companies are liable to pay the levy of €350 for the year 2018.

Please note that the deadline for the payment is 30/06/2018. If the levy is not paid till 30/06/2018, penalties will be imposed as follows:

• amount due to be paid is €385 if paid between 01/7/2018 – 30/08/2018;
• amount due to be paid is €490 if paid between 01/09/2018 – 30/11/2018;
• amount due to be paid is €500 if paid later than 30/11/2018.

Non-payment of the levy may result the deregistration (strike off) of the company from the Registry. The reinstatement of the company to the Registry can be effected only through Court Order.

Please contact our team at info@naklaw.com for further assistance by 15th of June 2018 the latest in order to facilitate the electronic payment on your behalf.

Sincerely,

NakLaw Team

Shell company ban in Latvia. Last-call for restructuring of operations and banking in solid EU jurisdictions

On April 19 the Latvian parliament with majority votes supported a bill banning Latvia’s banks from doing business with shell companies in the first reading.

Under the draft law, the shell company is defined as an entity that fits one or several of the following three criteria. Firstly, there is no actual economic activity and no documentary proof to the contrary. Secondly, the entity is registered in a jurisdiction where companies are not required to submit to the authorities their financial statements. Thirdly, the entity has no place of business in its country of domicile.

The bill says banks will have to cease cooperation with shell companies within 14 days and close their accounts within 60 days. Therefore clients have time to finalize their business and move assets abroad freely until end of June 2018.

Following this period, these clients will be able to retrieve the money to their accounts in the holder bank or another one, but the clients will not be able to use this money for business.

This serves as a last call to businesses to abandon old style tax-free and audit-free structures, and relocate their business and banking to more reputable jurisdictions like Cyprus and others benefiting from minimal tax obligations but complying fully with all EU and international standards and requirements.

Should you require any advice on closure of Latvian bank accounts, or solutions for relocating your businesses and funds, please get in touch with us and NAKLAW team will be happy to help!

Meet us at the VEDOMOSTI LEGAL FORUM in Moscow, 12-13 of April 2018

Nasos A. Kyriakides & Partners LLC is participating at the VEDOMOSTI LEGAL FORUM in Moscow on April 12th and 13th.

You can visit our booth No. 1 to discuss the latest legal developments in Cyprus companies, Cyprus banks, Tax issues, Cyprus passport by investment and any other questions that you may have.

Furthermore following the liquidation of ABLV Bank in Latvia and near term closure of all offshore accounts in Latvian banks, our Firm as the Major Law firm in representing depositors of ABLV and other banks. Therefore whilst in Moscow we are also available to meet regarding this matter and present possible legal steps for recovery of blocked deposits as well as further solutions for banking.

Senior members of our Firm will attend the forum, including Mr. Nasos Kyriakides, the Managing Director of our Firm and Mr. Martins Rozitis – Legal Consultant from Latvian branch.

You can book an appointment with us at info@naklaw.com or come directly to our booth in VEDOMOSTI LEGAL FORUM in Moscow, Marriott Royal Avrora Hotel on 12. and 13. April.

We look forward to meeting you!

FBME Bank Ltd – Cyprus Deadline for the submission of application for the Deposit Guarantee Scheme

Dear Associates,

Since 9th of April 2016 the Central Bank of Cyprus (CBC) has activated the Deposit Guarantee Scheme (DGS) compensation for FBME Bank Ltd – Cyprus Branch (FBME) deposit holders.

The Deposit Guarantee and Resolution of Credit and Other Institutions Scheme, which has been established by Law (“the DGS”), will pay via the Deposit Guarantee Fund for Banks compensation to the depositors of FBME in relation to their deposits at FBME which are covered by the DGS, with the maximum amount of compensation to each eligible FBME deposit holder being €100.000 per depositor.

The eligible depositors of FBME are reminded to submit the standardized statement of particulars for compensation, which upon assessment by FBME is submitted to the CBC for review. The last day of submission of depositors’ particulars and accompanying documentation regarding the payout procedure for deposits at FBME is the 11th of April 2018. DGS will proceed to compensate all eligible FBME deposit holders.

Nasos A. Kyriakides and Partners LLC, may act on behalf of FBME eligible deposit holders and provide support during the compensation process by the DGS.

For any information, you may contact us at info@naklaw.com

ABLV – bonds, stocks, ETFs, funds, futures, options.

With regards to the liquidation of Bank ABLV, we have partner European fully regulated broker, that can open accounts for clients from any jurisdiction and provide transfer for any transferable securities (bonds, stocks, ETFs, funds, futures, options) from bank ABLV.

• Account opening within 1-2 days in case all necessary documents are provided.
• Minimal value of transferable securities – at least 100K EUR
• Procedure of security transfer depends on each situation individually and is discussed directly with client.

Please get in touch with us for further instructions or in case you have any additional questions.

Mr. Martins Rozitis
info@naklaw.com
Nasos A. Kyriakides & Partners LLC
Office: +357 25352352, Mobile: +371 26536624

Tax Certificates for the year 2018

Dear Associates,

Company tax returns (form IR4) for all companies must be filed within 15 months from the end of the tax year, which is 31 December, i.e. the tax return for the year 2016 must be filed not later than 31 March 2018. The tax returns must be based on audited financial statements.

In case of late filing, an immediate penalty of €100 is imposed, with further penalties arising until submission.

Legal action may be initiated against the company and its directors for failure to submit company tax returns.

Furthermore be reminded that if you wish to obtain a Tax Certificate for the year 2018:

Any request up to 31.03.2018 – IR 4 of 2015 must be submitted at the Tax Office.

Any request from 01.04.2018 – IR 4 of 2015 & 2016 must be submitted at the Tax Office.

For more information please contact us at info@naklaw.com

Thank you,

NakLaw Team

19.03.2018

ABLV announcement: Our services for reclaim of funds and new bank account opening

Further to the recent announcement of ABLV, in accordance with the Deposit Guarantee Law, there are available for payment up to EURO 100 000 guaranteed deposits to each eligible client from Deposit Guarantee Fund.

ABLV has sufficient amounts of liquid assets to ensure repayment of all sums; therefore, the Bank has already transferred more than EUR 480 million to the Fund for disbursement guaranteed compensations.

1. State-guaranteed compensation disbursement to ABLV Bank clients will is provided by Citadele Bank as the intermediary bank for the purpose of payments of March 3rd.

Citadele Bank will receive an ABLV Bank client register details from the FCMC which will show the clients’ information as well as how much must be paid to each client, up to EURO 100.000.

All payments will be made in EURO currency and deposits in other currencies will be calculated into Euro.

Clients whose total deposit sum with ABLV Bank is more than the 100,000 Euro limit set by the state can submit their claims as creditors as part of the ABLV Bank liquidation process.

2. Who can receive state-guaranteed compensation.

In accordance with the Deposit Guarantee Law, ABLV Bank’s Latvian and international clients – private customers and legal persons – with deposits at ABLV Bank can receive state-guaranteed compensation. State-guaranteed compensation applies to all deposited funds – term deposits, current accounts, wage accounts, savings accounts, etc. (not including financial instrument accounts).

State-guaranteed compensation can be issued via transfer to the client’s bank account at Citadele or any other bank.

3. By law, guaranteed compensation is not issued:

For deposits with no transactions in 2 years, for deposits linked with money laundering, credit and financial institutions, insurance companies, private pension funds, investment firms and investment broker companies.

4. International clients and relevant necessary documentation.

a. Private customers: Would need to present valid passport and representatives of a private customer to present authorized representation documentation eligible to represent the private customer.
b. Legal persons: would need to present valid passport valid, and representatives of a legal person to present authorized representation documentation eligible to represent the legal person.

i. Director’s appointment decree and/or notarized power of attorney)
ii. Registration certificate, statutes (current edition) and certification of the rights to represent a legal person
iii. Document certifying the legal person’s active status

5. How we can help:

Our firm has 17 years of experience firm in the area of banking and the particular as legal representatives of big a number of clients following revocation of banking license of FBME Bank and Trasta Komercbanka for the successful payment of state guaranteed funds of up to EURO 100.000, and continuation of legal measures for recovery of further amounts following future liquidation procedures.

We are fully organized and capable in providing the same services in the case of ABLV, from representing any client through our native Latvian legal expert who has been in our legal team in the procedures of both FBME and Trasta Komercbanka for successful returns of deposits to our clients.

Our services would be the following:

i. Full representation before Citadele Bank for recovery of the guaranteed deposits of up to EURO 100.000.
ii. Opening on behalf of our clients of new bank account in a bank in Cyprus, or in another bank in Europe, for a private person or for a company for transfer of amounts up to EURO 100.000 from Citadele Bank, and remaining funds during liquidation process.
iii. Legal representation in the liquidation procedure of ABLV in Latvia until the full recovery of all deposited amounts.

We shall be at your disposal for anything we could be of assistance.

Liquidation of ABLV bank in Latvia. Reclaim of funds

Following FinCeb USA announcement the European Central Bank has initiated on 23.02.2018 the liquidation process of ABLV bank in Latvia. First payouts of state guaranteed deposits up to 100.000 EUR will start on 07.03.218. Further all remaining deposits will be claimed during process of liquidation. Both individual and corporate claims will be processed.

Nasos A. Kyriakides & Partners are taking immediate actions:

 Represent clients for claims of guaranteed deposits of up to 100.000EUR;
 Organizing group action on behalf of more clients together to gain more voting power during liquidation process;
 Proceed with possible group court action for claiming amounts more than 100.000EUR.

Representing clients will be Mr Martins Rozitis who is our lawyer permanently based in Latvia and has 15 years experience with banking and liquidations in Latvia.
Please get in touch with us for further instructions or in case you have any additional questions.
Draft template of Special Power of Attorney can be found on our website www.naklaw.com

Martins Rozitis
info@naklaw.com
“Nasos A. Kyriakides & Partners LLC”
Office: +357 25352352, Mobile: +371 26536624

Preparation and submission of Transfer Pricing Analysis for Back-To-Back loans

Following the introduction of the transfer pricing legislation since July 1st 2017, we wish to inform you that Nasos A. Kyriakides & Partners LLC is in a position to assist you and your clients to prepare the relevant transfer pricing studies and adhere to the new reporting obligations according to the revised tax treatment of intra-group back to back financing arrangements.

The new tax treatment concerns Cypriot and non-Cypriot tax resident companies with a permanent establishment in Cyprus which carry out group financing transactions. The term “intra-group financing transaction” refers to any activity of granting of loans or cash advances remunerated by interest to related companies, financed by financial means and instruments such as debentures, private loans, cash advances and bank loans.

For the purposes of transactions falling within this circular, it is necessary to be determined for each intra-group financing transaction whether the agreed remuneration complies with the arm’s length principle (as set out in Article 9 of the OECD Model Tax Convention on Income and on Capital).

We remain at your disposal for any further information/clarifications you may require as to the above.

Sincerely,

NakLaw Team

Legal Entity Identifier (LEI) code – Do you need it?

The Legal Entity Identifier (LEI) is a 20-digit alpha-numeric code based on the ISO 17442 standard developed by the International Organization for Standardization (ISO) and refers to a unique identification given to legal entities participating in financial transactions. In simple words, the publicly available LEI data pool can be regarded as a global directory, which greatly enhances transparency in the global marketplace. Please email us at info@naklaw.com in case you require any assistance on getting a LEI code.

81.680 companies to be dissolved

The Department of Registrar of Companies and Official Receiver warns for dissolution of 81,680 companies.

Please be informed that further to the Department of Registrar of Companies and Official Receiver (hereby referred to as the “RoC”) announcement dated October 10, 2017 the RoC further announces that companies that have not paid the annual fee for each of the years 2012, 2013, 2014, 2015 will be deleted from the Register of the Department of Companies in December, stressing out that there are no extension margins.

The names of the companies have been published in the Official Gazette of the Republic at periodic intervals since last September. For example, in the 11th November issue, around 5,000 company names was included, giving them a three-month notice.

However, it should also be noted that 3,500 companies responded to the RoC’s call and settled their debts, while the number of compliant companies is expected to increase within the next few days.

The RoC reports that companies that owe the annual fee for previous years are over 80 thousand, while the total number of registered companies in the Registry is 215.702.

The problem of non-payment of fees is not only big but also perpetual, since only 50% of companies meet their obligation for payments of the annual fee of €350.

More specifically, companies that paid on time – by year are:

  1. For 2017 only 103,728
  2. For 2016 only 53%
  3. For 2015 only 50%

As a total of 227,840 companies, only 114.117 paid the fee.

Please arrange all pending levy of your company, thank you!

VAT Summary

Dear Associates,

With this letter, we would like to inform you that we, Nasos A. Kyriakides & Partners LLC, have recently proceeded with setting up a VAT advisory and compliance department. The services to be provided will include specific review of agreements and assistance with VAT compliance including registration and filing of quarterly VAT returns. The need to set up a specialised department has arisen from the fact that lately it has come to our attention that we are asked to execute various agreements without those agreements being reviewed from a VAT viewpoint.

We take this opportunity to present a very brief summary of the VAT legislation applicable in Cyprus.

1. VAT REGISTRATION

A. Registration with the Cypriot VAT authorities is compulsory for businesses with (a) turnover subject to VAT in excess of €15.600 during the 12 preceding months or (b) expected turnover subject to VAT in excess of €15.600 within the next 30 days.

B. Businesses with turnover of less than €15.600 or with supplies that are outside the scope of VAT but for which the right to claim the amount of the related input VAT is granted, have the option to register on voluntary basis, enhancing their status as a business person within EU.

C. Furthermore an obligation for VAT registration arises for businesses carrying out economic activities from the receipt of services from abroad for which an obligation to account for Cyprus VAT under the reverse charge provision exists, subject to the registration threshold of €15.600 per any consecutive 12 month period.

D. Additionally, as from 1 January 2010 an obligation for VAT registration arises for businesses engaged in the supply of intra-community services for which the recipient must account for VAT under the reverse charge provisions. No registration threshold exists for the provision of intra-community supplies of services. In addition, a Company providing intra-community supplies of services is obliged to register with for VIES and make electronic declarations of intra-community supplies of services on a monthly basis.

2. EXAMPLES OF APPLICATION OF THE VAT LAW FOR COMPANIES ENGAGED IN INTERNATIONAL TRANSACTIONS

VAT may have an impact for companies engaged in international activities outside of Cyprus.

In the examples stated below, NO VAT MUST BE CHARGED BUT COMPULSORY VAT REGISTRATION ARISES due to the obligation to account for Cyprus VAT under the reverse charge provisions for the receipt of services from abroad. All companies will be able to claim 100% of the input VAT suffered in Cyprus and via the reverse charge provisions. All companies will always be in a VAT refund position (VAT suffered on services from Cyprus (e.g. legal and accounting fees).

A. A Cyprus company providing consultancy services to a Russian company. For the rendering of those services, the company subcontracts the services of a non EU company. No VAT must be charged on the provision of consultancy services to a Russian company.

B. A Cyprus company engaged in the purchase and sale of equipment with non EU parties. Goods are shipped from one non EU party to the other non EU party. The Cyprus company also pays a third party for intermediary services for the acquisition of equipment. No VAT must be charged on the sale of equipment.

C. A Cyprus company engaged in the granting of a loan to a company established outside the EU. The company received certain consultancy services from abroad in relation to the loan activities. No VAT must be charged on the interest.

D. A Cyprus company is engaged in intellectual property activities. It pays license fees to a company established in a non EU country and sublicenses those rights to another company established outside the EU. No VAT must be charged on the the license fees.

3. HOLDING COMPANIES

Holding of investments is not considered to be a business activity for VAT purposes. Hence, pure holding companies do not have the right or the obligation to register with the VAT authorities. This is an advantage in case where services related to holding activities are received from outside the E.U. If received within the E.U, the provider of the service will charge the Cyprus Company with VAT of its jurisdiction.

In case where a Company carries out economic activities (e.g. provision of loans or services) and also holds investments (subsidiaries) then on the receipt of services relating to its holding activities from abroad, it will need to self-charge VAT. This VAT may not be claimed since it does not relate to economic activities. Hence careful planning is needed in case where a company carries out economic activities and also holds investments.

4. PENALTIES

The penalty for late registration is €85 per month calculated from the month from which a company has an obligation to register with the VAT authorities. In addition, a penalty of €51 applies for each quarterly VAT return submitted late. In case that there is a VAT payable and this is not paid within the deadline, 10% penalty on the VAT payable and interest will arise. The penalty for late VIES registration is €50 per month.

In summary VAT is a transaction based tax. It’s therefore highly recommended that prior to the execution of an agreements, this is reviewed from a Cyprus Viewpoint.

Cyprus: Announcement by the Department of Registrar of Companies and Official Receiver in relation to the Annual Company Fee (Levy)

Please be informed that further to the Department of Registrar of Companies and Official Receiver (hereby referred to as the “RoC”) announcement dated 15 December 2016 and in accordance with Article 327 (3) (c) of Chapter 113, the RoC announces that as at September 22, 2017, it has proceeded to a Quarterly Publication of Companies in the Official Gazette of the Republic, which will be strike off, and will continue with the Quarterly Publications for all companies that have not paid the Annual Fee (Article 391 of the Companies Law, Cap. 113) for a period of one year from the date this should have been paid.

More specifically, it concerns those companies that have not paid the Annual Fee for each of the years 2012, 2013, 2014, 2015.

Please arrange all pending levy of your company, thank you!

Cyprus Tax Residency In Only 60 Days as at 14.07.2017

Friday 14th of July 2017 – A new bill was voted amending the Income Tax Law allowing an individual to acquire Cyprus tax residency by staying only 60 days in Cyprus, instead of 183 days, according to the Income Tax Law of 2002.

All of the following criteria must be met by an applicant:

1.  Remain in Cyprus for at least 60 days during the tax (calendar) year;
2.  Maintain a permanent residence in Cyprus, which can be either owned or rented;
3.  Not be a tax resident of any other State or remain in any other State for a period or periods exceeding          183 days in respect of any year he claims Cyprus tax residency;
4.  Exercise business in Cyprus or being employed in Cyprus or be a director in a company registered in              Cyprus at any time during the tax year.

Effectively this provision allow an individual who does not stay – for one or more periods, which do not exceed 183 days in total – and who is not a tax resident in any other country to be considered as a resident of the Republic of Cyprus.

It is clarified that an individual who cumulatively fulfils the above conditions is not considered as tax resident of Cyprus in the tax year, if in that year the exercise of any business and/or employment in Cyprus and/ or the holding of a post to a taxable person of Cyprus have ceased.

Exemption from special defence contribution tax which is levied on dividends, interest, and rental income for all those individuals that tax resident in Cyprus but are not domiciled in Cyprus.

It is noted that for employment purposes in Cyprus with earnings in excess of Euro 100,000, an individual is allowed for an exemption from tax of 50% of the salary for a period of 10 years, which significantly reduces his income tax liability.

We remain at your disposal for any further information/clarifications you may require as to the above.

Sincerely,
NakLaw Team

New Position on Back-To-Back loans

Cyprus Tax Department has announced that as from 1st July 2017 all related Company transactions, including B2B (Back-To-Back) loans, where Cyprus Tax Resident Companies are involved, should follow the arm’s length principle. The Cyprus Tax Authorities decided to change the current tax regime in relation to the B2B Loans with intention to fully comply with the OECD BEPS framework.

In addition, the announcement indicates that independent Transfer Pricing Study (TPS) should be provided as supporting document evidencing that the interest rate used in the particular transaction will be considered as correct having based on the market’s conditions existed at the time the transaction took place. Information such as accounting records and taxable profits should be satisfactorily provided. Therefore, the TPS will be an essential part of the client’s strategic tax risk management.

 As per the new Circular dd 30/06/2017 the minimum acceptable net profit margin must be at 2% (after deducting the relevant expenses and exchange differences).

EXAMPLE: If one company receives a loan with 3% interest rate p.a, it must grant this loan to other parties for at least 5% pa, thus the profit margin comes to 2%.

We remain at your disposal for any further information/clarifications you may require as to the above.

Legal Alert! Annual Levy 2017

Dear Associates,

We would like to remind you that the deadline for the payment of the special levy of €350 to the Department of the Registrar of Companies for the year 2017 is on 30th of June 2017.

Please note that in case of late payment, penalties are imposed and due amount is increased as follows:

  • €385 (€350+€35 penalty) for payments made between 01/07/2017 to 31/08/2017
  • €490 (€350+€140 penalty) for payments made between 01/09/2017 to 30/11/2017

Please arrange for the execution of the above payment or contact Nasos A. Kyriakides & Partners LLC for further assistance by 26th of June 2017 the latest in order to facilitate the electronic payment on your behalf.

We remain at your disposal for any further information/clarifications you may require as to the above.

Sincerely,

NakLaw Team

Abolishment of minimum margins on back-to-back loans – Notional Interest Deduction on new equity

Abolishment of minimum margins on back-to-back loans.

Following notification provided to the Institute of Certified Public Accountants of Cyprus (ICPAC) by the Cyprus Tax Department (CTD) by, the existing policy on minimum profit margins back-to-back loan transactions (“the back-to-back regime”) shall be abolished by the 1st of July 2017. The decision was made so as to align Cyprus Tax treatment with the transfer pricing rules of the OCD BEPS Action Plan.

From the 1st of July 2017, all related-party financing transactions should be supported by Transfer Pricing (TP) Studies prepared by independent experts, and will required for purposes of issuing tax rulings and corporate tax calculations.

It would be therefore highly important as well as recommended for existing as well as for future intra -group financing arrangements to be reviewed in order to assess the potential impact of the upcoming changes and if necessary to take corrective actions.

Notional Interest Deduction

The Cyprus Tax Department has recently announced the official 2017 reference rates to be used for Notional Interest Deduction (NID) purposes. Specifically, Article 9B of the Income Tax Law of 2002 as amended provides for a notional interest deduction for tax purposes on new equity capital injected into Cyprus resident companies or permanent establishments of foreign companies in Cyprus as from 1st of January 2015, provided the new equity funds are used for business purposes.

The above mentioned provision allows for a tax benefit through a Notional Interest Deduction (NID) on new equity. The provision, not only reduces the effective tax of the Cyprus company by up to 80%, but it also effectively tackles the topical tax issue of being the ‘beneficial owner of income’, especially in the cases of loans granted by the Cyprus company.

The advisable and beneficial practice following the NID provisions is that instead of engaging the Cyprus company through a back-to-back loan arrangement, one can take advantage of the NID provisions and grant out a loan through own funds that were introduced in the share capital of the Cyprus company. The outcome of the above could be proven very beneficial as it could entitle Cyprus companies to receive NID and at the same time to tackle the issue of beneficial owner of income test on interest received by the borrower.

Cyprus – Double Tax Treaty signed with Luxembourg & Barbados

GRAND DUCHY OF LUXEMBOURG
The Double Taxation Avoidance Agreement between the Republic of Cyprus and the Grand Duchy of Luxembourg was signed on 8th of May 2017 in Nicosia.

Assuming the ratification process is completed before the end of 2017, the treaty is expected to enter into force and come into effect as from the 1st of January 2018.
The treaty applies to taxes on income as well as on gains from alienation of movable or immovable property. In the case of Luxembourg, the treaty covers the income tax, the corporation tax, the capital tax and the communal trade tax, whereas in the case of Cyprus, it covers corporate and personal income tax, defense tax and capital gains tax.

The new treaty is generally based on the OECD Model Tax Convention framework with some modifications and bears the following main provisions:

Dividends:
• 0% in case where there is at least 10% participation by a tax resident company
• 5% in all other cases

Interest: There is no withholding tax on interest.

Royalties: There is no withholding tax on royalties, as long as the recipient of the royalties is the beneficial owner of the income.

Capital gains: Gains from the sale of shares of immovable property rich companies are taxed in the country where the immovable property is located.

BARBADOS
The Double Taxation Avoidance Agreement between the Republic of Cyprus and Banbados was signed on 03rd of May 2017 in London.

Assuming the ratification process is completed by both countries before the end of 2017, the treaty is expected to enter into force and come into effect as from 1st January 2018.

The treaty applies to taxes on income as well as on gains from alienation of movable or immovable property. In the case of Barbados, the treaty covers the income tax and corporation tax, whereas in the case of Cyprus, it covers corporate and personal income tax, defense tax and capital gains tax.

The new treaty is generally based on the OECD Model Tax Convention framework with some modifications and bears the following main provisions:

There is no withholding tax on dividends, interest and royalty payments.
Capital gains arising from the sale of shares of a company are taxable only in the state where the seller is tax resident. This provision also covers the tax treatment of sales relating to shares of immovable property-rich companies.

Completion of the Informative event organization by Nasos A. Kyriakides & Partners LLC

NASOS A. KYRIAKIDES & PARTNERS LLC is delighted to announce that the seminar on “How to keep your business alive” held in Athens on 18th of May 2017 at Royal Olympic Hotel was very successful and constructive.

Among other, attendees had the chance to be introduced to the role of Cyprus in the international economic and business development, the benefits and facilities of the country in international operations, the business and tax environment and the banking sector as a center of international business.

The seminar was organized under the auspices of the Cyprus Embassy and sponsorship of Bank of Cyprus.

 

Cyprus Court rejects FBME Bank liquidation

Cyprus courts have rejected the Cyprus Central Bank’s demand to place FBME Bank under liquidation.
The court ruled that the terms and conditions for liquidation of FBME Bank had not been met.

In his ruling, the judge said that he does not see liquidation as serving the interest of the Cyprus banking system.
“I do not believe that, after the tragic events of March 2013, that in this way the reputation of the Cyprus banking system is upheld and the public interest secured. Consequently, the Central Bank’s demand is rejected,” said the judge.

The ruling is significant for the future of FBME Bank, which is currently on life-support after Tanzania’s Central Bank revoked its banking license and placed it under liquidation just days ago.

Trouble for the depositors began in July 2014, when the Financial Crime Enforcement Network (FinCEN) of the US Treasury labelled the bank as a money laundering centre with ties to Hezbollah, the Lebanese militant group which is considered a terrorist organisation in the US and EU.

FinCEN’s report froze FBME Bank transactions in the US and led to the Central Bank of Cyprus taking action, placing the bank under special administration and subsequently resolution.

The Central Bank’s request for FBME’s liquidation had been submitted in December 2015, one year after first taking action against the bank.

Management Accounts For BVI, Belize, Panama and Seychelles Companies

  1. BVI Business Companies

Section 98 of the BVI Business Companies Act 2004 (BCA) has always provided that a BVI business company must keep records that:

  • are sufficient to show and explain the company’s transactions; and
  • will, at any time, enable the financial position of the company to be determined with reasonable accuracy.

Additionally to the above, Section 5A (1) of Mutual Legal Assistance (Tax Matters) Act 2003 (MLAT) applies to all companies registered under the BCA and provides that every company shall keep “records and underlying documentation” in order to show and explain the company’s transactions; and will, at any time, enable the financial position of the company to be determined with reasonable accuracy:

  • Such records and underlying documentation may be kept at the office of its registered agent (“the RA”) or at such other place or places, within or outside the Virgin Islands but if not kept at the office of the RA, a record of the location where they are kept must be given to the RA.
  • Every company shall retain the records and underlying documentation for a period of at least five years from the date of completion of the transaction to which the records and underlying documentation relate; or the company terminates the business relationship to which the records and underlying documentation relate.

Any BVI authority including Financial Services Commission, Financial Investigation Agency, International Tax Authority, Registrar of Corporate Affairs is allowed to make a necessary inspection in relation to availability of such records.

Failure to comply with the above requirements can result in fines being charged against the company and its directors, negative liabilities for the directors and/or the company being “struck off” from the register of companies. The exact amount of fine and/or penalties as well as respective administrative consequences is to be determined individually for each particular case.

  1. Seychelles Companies

This jurisdiction places requirements similar to the ones applicable in BVI.

  1. Panama and Belize Companies

Panama and Belize have similar requirements as BVI, and the main difference with BVI is that the RA and any competent Authority of Belize and Panama may ask to be provided and/or presented with such accounting records when and if they deem necessary.

In compliance with the above laws and regulations concerning BVI, Panama, Belize and Seychelles, please note that our associates can provide any customized report such as management accounts or any other one deemed necessary for record keeping purposes. Additionally, many companies choose to do so in the interest of their stakeholder as well for management purpose.

In case you wish to receive more information regarding any of the above jurisdictions as well as preparation of management account, please contact:

Mrs. Cleo Loizou Kyriakidou (info@naklaw.com) at NASOS A. KYRIAKIDES & PARTNERS LLC, by telephone (+357 25 352352) or by fax (+357 25 352353).

Obligation of Cyprus resident companies to provide information to Tax Authorities in relation to Deemed Distribution of Dividend by 31st January 2017

Dear clients and associates,

In accordance with the  provisions of the Special Defense Contribution (SDC) Law, a company  must distribute 70% of its accounting profits by the  end  of the  second  year following the year of assessment, and  where this has not been done it will be deemed  to have made this distribution for SDC purposes.

The company is obliged to prepare and submit by the 31st of January 2017 the Deemed Distribution of Dividend form (I.R.623)

In the event that a company has a non-Cyprus tax resident beneficial shareholder (UBO) and a Cypriot nominee shareholder, is obliged to prepare and submit by the 31st of January 2017 the Auditor’s and Director’s declarations informing the tax authorities that the company has no obligation to distribute dividends and therefore no SDC needs to be paid.

The aforementioned obligation is serious and urgent, so as for the company to avoid any unfair taxation being imposed as a result of confusion or lack of proper consultation on the matter.

Cyprus Court to Decide on FBME Liquidation

FBME Liquidation and FBME Claim

This article contains details in regards to FBME Liquidation and FBME Claim.

On the 21st of December, the final hearing concluded the legal procedure of the application filed to the Nicosia District Court by the Central Bank of Cyprus for the winding up and liquidation of FBME (Cyprus) LTD (hereinafter referred to as “FBME”). The procedure for the payment of compensation from the Deposit Guarantee Fund for Banks in relation to deposits up to EUR 100,000 held in FBME still continues despite the liquidation procedure.

FBME Liquidation

Following the probable successful issuance of a court order approving the liquidation of FBME, the judge will further appoint an external liquidator who will investigate the assets and liabilities of the bank. Once this investigation is completed, the payments can be made to the depositors with blocked amounts as they are considered to be preferential creditors.

It is expected that by the beginning of February 2017 the Court shall reach its decision as to whether it shall issue an order for the liquidation of FBME.

FBME Claim

FBME Liquidation and FBME Claim

In any event it shall be very important for all the people who have their amounts blocked with FBME to proceed with action as on the one hand the Deposit Guaranteed Scheme (hereinafter referred to as “the DGS”) payments shall at some point come to an end (so the depositors would lose such right to receive the first guaranteed amount of EUR 100.000) and on the other hand to claim the remaining amount blocked in their bank accounts.

Why choose us for your FBME Claim

Our Law Firm currently represents almost 10% of the bank’s customers on a constant basis helping them to firstly receive amounts up to EUR 100.000 by the DGS and shall further represent them to receive their remaining blocked amounts in court procedures, as well as in the probable liquidation process of FBME, that is soon expected to start.

If you are interested in attending our event (in Moscow and/or in Kiev) concerning the liquidation of the FBME as well as the procedures governing compensation of blocked amounts, please let us know accordingly.

Benefits of the Double Tax Treaty between Russia and Cyprus fully remain in place.

Cyprus and Russia reached agreement for postponing the implementation of amending Article 13 “Capital Gains” of the Cyprus – Russia double tax treaty.

Cyprus and Russia signed a Protocol on 7 October 2010, which amongst others, provided changes in the taxation of capital gains in relation to disposals by a resident of one country of shares held in companies which derive a substantial part of their value (more than 50%) from immovable property situated in the other country.

The amendment is in line with Article 13 of the latest OECD model treaty principle, which provides that such gains should be taxable in the country where the real estate is situated (provided that more than 50% of the value of shares is represented by immovable property situated in the other state).

As a result, any income from such sales of shares would have been taxable in Russia at the rate of 20%, starting from the year 2017.

The Governments of Cyprus and the Russian Federation have agreed to postpone the application of the Protocol amending Article 13.

The Cypriot Ministry of Finance announced that an additional Protocol is in the process of being finalised, revising provisions of Article 13, only once similar provisions are introduced in other bilateral agreements for the avoidance of double taxation between the Russian Federation and other European countries.

Maintaining a Physical Office and Substance in Cyprus

Time for your company to have real substance
– OECD Model Convention & BEPS –

Following the OECD’s Action Plan to address Base Erosion and Profit Shifting (“BEPS”) intending to ensure that profits are taxed where the relevant economic activity that generates the said profits takes place, the need for companies to prove real substance in order to meet the requirements under the OECD Model Convention in order to qualify for the benefits of double-tax treaties between various countries, is becoming a real necessity.

Nasos A. Kyriakides & Partners LLC are glad to inform you that they have expanded the range of their administrative services in order to cover the increasing needs for a real substance of your business.

  • OFFICE RENTAL – HOT DESKING:

Check out our Rent an Office or Rent a Desk spaces with flexible schedules for employees, the most flexible rates at minimum costs, coming with business internet connectivity, an independent telephone and fax line and package for utility payments.

The offices are located in a corporate business center which was designed to accommodate international foreign companies, situated in the heart of Limassol.

Access to a full range of business support services, such as conference and meeting rooms, everyday corporate administration, and secretarial support.

  • REAL SUBSTANCE SUPPORT SERVICES:

Full assistance for the employment of part-time or full-time staff for your company, as well as in the employment of a qualified director (located and employed in Cyprus), establish of office presence, call answering center, IT administration, payment of local utilities and taxes.

  • ΑCCOUNTING – BANKING:

a. Provision of business & accounting records.

b. Bank Account Operation in your office in Cyprus.

It is important to note, however, that each company and each set of circumstances are different and solutions are tailor made for our clients incorporating some or all of the below as required.

For your tailored made “Substance” solutions please contact Mr. Nasos Kyriakides nasos@naklaw.com or Mrs. Cleo Loizou Kyriakidou cleio@naklaw.com by email or call our office in Cyprus directly on +357 25 352352.  All information will be treated in the strictest confidence.

Job Position – Bookkeeper for full time

The  Law Office of NASOS A. KYRIAKIDES AND PARTNERS LLC wishes to employ a bookkeeper  for full time employment 8:00 – 13:00 & 15:00 – 18:00.

Job Position-Duties: Bookkeeper

  • Bank Reconciliation
  • Debtors/creditor Reconciliation
  • Transactions postings in Accounting Software  (Intelisoft)
  • Liaise with customers
  • Prepare/assist in VAT/VIES returns
  • Excel, Word

Requirements:

Previous experience in same or similar position.

Solid understanding of bookkeeping and accounting payable/receivable principles at least 3 years book keeping experience.

Fluency in English, pleasant personality, hard worker, team player and self- motivation.

EBA Education Update: Funds, Trusts, Investment Firms and International Tax Compliance (CFC, Deoffshorization)

Nasos A. Kyriakides & Partners LLC together with EBA Education Team invite you to participate in the EBA Education Update: Funds, Trusts, Investment Firms andInternational Tax Compliance (CFC, Deoffshorization) scheduled for September, 29, at 11:00 – 13:00.

During the lecture the participants will receive valuable information on the below matters:

• New era for international companies as a result of CFC rules – Deoffshorization / Real Substance / CRS- FATCA DTT network with Ukraine;
• The effectiveness of Cyprus Investment Firms and Funds for collective investments;
• Cyprus trusts as an effective tool for assets protection and international tax planning;
• Opening bank accounts nowadays – current requirements and changes;
• Maintenance of bank accounts – large European banks practice: how the CRS & FATCA are actually affecting;
• Real substance – the crucial pillar stones to be used in this concept;
• Beneficial ownership – new definitions and perspectives;
• Practical experience when dealing with Real Substance.

To register, fill theEBA Education Update – Registration Form and forward it back to us by email at: info@naklaw.com

Location on Google Maps

In case of any questions feel free to contact our firm at info@naklaw.com or EBA Education Team: education@eba.com.ua or +38 044 496 0601

Speakers of the Seminar will be:
Mr. Nasos Kyriakides, Managing Partner and
Ms. Anastasia Kareba, Senior Lawyer

Venue:
EBA Kyiv Office (Address: 1A Andriyisky Uzviz, 1st floor, Kyiv, 04070, Ukraine)

Language:
English
Russian

Participation fee:
Free of charge

Authorized persons for the activation of compensation payment procedures from FBME Bank

Following the announcement on 11 April 2016, it was decided to resolve the continuous problems with FBME’s personnel. The Identification of beneficiary depositors will start by duly authorized persons at the offices of FBME Avenue Archbishop Makarios III, Nr. 90, Nicosia, Cyprus, on 15 June 2016.

 It is noted that this process is intended, according to the announcement of Administrative Committee for the activation of the compensation payment procedure by the Deposit Guarantee Fund Banks issued on 9 April 2016.
It is clarified that as in relation to legal persons, the data declarations will have to be submitted by someone who has access to account management in FBME and is already placed in FBME archives, it can also be done by individuals who are either / the actual / final / ultimate beneficial owner (s) of such account in FBME which is consistent with the relevant file of FBME.

Cyprus Courts reject FBME’s application

By its decision which took place in May 2016, the High Administrative Court of the Republic of Cyprus has rejected the unilateral application, made by the FBME Bank Ltd (FBME) on the 22nd of December, 2015 in connection with the issuance of a decree, which would temporarily suspend the enforceability of a decision taken by the Central Bank of Cyprus on the 21st of December, 2015.

The High Administrative Court’s decision is based on the withdrawal of a license authorization previously granted to FBME for its branch operation in Cyprus.

Following the above decision, the number of depositors claiming to receive the guaranteed deposit of up to € 100.000, as well as οf those, taking part in the liquidation procedure of FBME has recently increased a lot.

Payment of up to 100.000 EUR to FBME blocked depositors

The Central Bank of Cyprus has activated the Deposit Guarantee Scheme (DGS) as it considered that FBME Bank LTD- Cyprus Branch appears for the time being unable to repay deposits,  and seems that will not do so in future due to its financial condition. Deposits include all deposits held by natural or legal persons in Euro and in other currencies.

According to the DGS the maximum amount payable as compensation to a depositor, for the aggregate of eligible deposits with FBME is EURO 100.000, including accrued interest.

The DSG covers eligible deposits in all currencies but the compensation will be paid in Euro and the compensation amount will be calculated based on the exchange rate against the Euro published on the European Central Bank’s website on 8 April 2016.

The statement of particulars and application form should be submitted in person by the depositor or legal representative, to the Central Bank of Cyprus together with signed confirmation of an EU credit institution to which payment of amount will be made. On this signed confirmation, the following should appear: IBAN, BIC and the same of the beneficiary as the one on the statement of particulars.

a. For the claim to be valid for natural persons – demonstration of valid passport with a clear photograph of the actual beneficiary and submission of photocopy is necessary.

b. For Cyprus companies – an original certificate issued by the Registrar of Companies is needed.

c. For companies registered outside Cyprus – original certificate should be certified by the claimant’s embassy or consulate in Cyprus or the special appointed administrator.

Provided all documentation is submitted together with the necessary particulars compensation should be paid in the bank account of the beneficiary or in the Clients Account of the Service Provider within 7 working days.

Revocation of license for activities of JSC "Trasta Komercbanka"

On Friday, 4th of March, the Central Bank (CB) of Cyprus announced the withdrawal of the license of the Bank of Latvia JSC “Trasta Komercbanka”, the oldest private bank in Latvia which has a branch in Nicosia, Cyprus from September 2006.

This is a statement, which republishes the announcement made on 3rd of March by the competent authority of Latvia (“Financial and Capital Markets Commission” – FCMC), under which the European Central Bank (ECB) adopted a decision for revocation of the license of the Bank.

The ECB’s decision was based on the proposal imposed by FCMC, in view of the fact that the Bank has committed a “serious and persistent breaches of regulatory requirements in several areas for a long period of time” as per FCMC’s statement.

Furthermore, it is stated, that according to assessment of FCMC, in its capacity as a national banking supervisory authority in Latvia, a reorganization of the Bank or a rescue with public funds would not be in the public interest.

Cross-Border Corporate M&A Transactions – Corporate Finance Documentation and new era in international banking transactions (M&A)

Mergers and  acquisitions (M&A)
Mergers and acquisitions (M&A) involves the following types of transaction

  • Acquisition: the purchase of a controlling interest in any company, private or public.
  • Takeover: the acquisition of a publicly quoted company, rather than a private company.
  • Merger: a combination of two companies, neither of them acquiring the other.
  • Disposal/divestiture: the sale of a controlling interest in any company.
  • is the Spin-off/demerger: the disposal of a subsidiary of a public company by way of flotation of the subsidiary on a stock exchange, as a separate quoted entity.
  • Scheme of Arrangement: a process whereby a company may be reorganized, including in such a way that an acquisition merger, takeover or disposal is achieved.

Motivations for Acquisition

Only have an acquisition  if the acquisition “creates or enhances shareholder value

The merged entity worth more than the value of the two stand-alone companies.

  • Value creation, as a result of synergies:

          either revenue synergies (economies of scope) or

          cost synergies (economies of scale)

Public Mergers & Acquisitions

Divestiture

Two main types of divestiture :Trade Sales and Spin-Offs

  • A trade sale involves the sale of a business to a commercial (trade) buyer, as distinct from a financial buyer such as a private equity firm.
  • A spin-off involves the flotation, as a separate entity, of all or part of a subsidiary of the parent, restructuring the subsidiary to be suitable for listing.

Financing Acquisitions

Four main options when financing acquisitions. The bidder can offer:

  • cash in exchange for target shares;
  • new shares in a share swap;
  • loan notes or
  • Or a combination of any of these.

 Private Equity Transactions

The private equity is direct equity investment in private companies, usually intended to finance a change in the company invested in, intending to maximise potential gains.

Buy-Out Types

  • A buy-out is a private equity investment in the acquisition of a company as opposed to investing development capital in a company.
  • A management buy-out (MBO)– the company is purchased from its owners which may still manage it.
  • A management buy-in (MBI)-an external management acquires the company and manages it.
  • A buy-in, management buy-out (BIMBO) –combination of buy-out and buy-in.
  • An institutional buy-out (IBO) –led by private equity funds (institutions) wishing to acquire the target.

Initial Public Offerings (IPOs)- Rationale

  • Companies may float to raise cash for expansion;
  • to give them access to capital in the future,
  • to realise an exit for existing investors,
  • to gain status and credibility,
  • to create currency for further shares,
  • to create  acquisitions.

IPO Alternatives

  • Introduction– no shares are issued or sold; when existing shares are traded on the market.
  • Retail offering– offer of shares to retail shareholders.
  • Institutional offering– offer of shares to institutional investors such as investment firms and funds.

Documentation for Equity Issues

  • A prospectus is a document prepared to provide potential investors with full information about a company proposing to issue new securities, or to list on an equity market.
  • full information on the offering price,
  • full information on the business of the company,
  • audited financial statements.

Contents of the Prospectus

  • Within the European Union the contents of a prospectus are prescribed by the EU Prospectus Directive.

Its three elements are:

  • Summary – must convey concisely, the  key information relevant to the securities which are the subject of the prospectus, and  help investors to consider to invest in the securities.
  • Registration document – containing information about the business, management history and financial information.
  • Securities note – containing information about the securities to be issued, price and subscription procedure.

Necessary Documentation in a Corporate Transaction

Corporate Finance Documentation  

  • Confidentiality Letter: outlines the fact that the vendor is providing non-public information to potential investors or   purchasers, who undertake the obligation to keep it confidential.
  • Engagement Letter: the letter used  to engage an adviser for a particular assignment, establishing the adviser’s duties and the company’s responsibilities.
  • Representations, Warranties and Indemnities: During the sales process the vendor represents (confirms) that certain information is true and/or complete, and further provides a warranty (a promise or assurance) that this is so, relating to a number of subjects, such as property, tax, accounting and other information, and additionally, provides indemnities for certain specific matters where there is uncertainly, such as the current year’s tax liability, or ongoing litigation.

Information Memorandum (IM)

  • The information memorandum  (IM) is a description of the business that is for sale, prepared by the vendor, aiming to provide sufficient information to potential investors.

          The IM normally includes:

  • description of the business and potential risks, ownership, management,
  • material legal issues,
  • previous two to three years’ financial statements,
  • other relevant information.

Sale and Purchase Agreement

  • The Sale and Purchase Agreement is a legal contract creating an obligation for the seller to sell and the buyer to buy the business for the price specified and on the terms and conditions outlined in the Agreement.

     Agreement will typically include amongst others:

  • A description of entities and assets to be sold, and the amount.
  • The completion date and terms of completion.
  • Representations, warranties and indemnities.

Due Diligence requirements on a private company acquisition

The 21 Golden Rule

Freshly issued Company Incorporation Certificates

  1. The Company’s Memorandum and Articles of Association
  2. Incorporation Certificate.
  3. Updated Certificate of Good standing issued by the Registrar of Companies.
  4. Updated Certificate of Incumbency issued by the Company Secretary/ Director, with specific mention to any pending legal actions involving the company.
  5. Certificates of:  a.   Shareholders   b.   Directors and Secretary  c.  Registered office of the Company.
  6. Company Resolutions of any share capital increase or reduction.
  7. Any share Purchase Agreements and proof of filed changes  with the Registrar of Companies.
  8. Register of Members showing all past and current shareholders and share capital history.
  9. Register of Directors showing  history of all past and current directors.
  10. Copies of all necessary Resolutions, Resignations or Appointment letters of company officers
  11. Details of any options, warrants or conversion rights for the purchase or subscription rights of any shares .
  12. Documentation proving direct Beneficial Ownership of shares by individuals, and in the event of  use of nominees, the necessary Certified Trust Documentation.
  13. Evidence of any pledges, or other encumbrance over any of the shares in the Company.
  14. Evidence of any charges or other encumbrance over any of the assets of the Company.
  15. Evidence that  share capital of the Company is fully paid, and detailed description and valuation of the assets used for this purpose.
  16. Minutes of Shareholders and Directors meetings from the date of the Company incorporation.
  17. Any Powers of Attorney or other expressed or implied  authority given by the Company to any third person  which is still valid together with any relevant company resolutions.
  18. Copies of all licenses, consents, permits,  and registrations held now or were held  by the Company.
  19. Details and copies of all filings made by the Company with the Registrar of Companies, Income Tax Office, VAT Office and any other government organisation.
  20. Proof of settlement of all taxes, and information as to  any pending tax  liabilities.
  21. Provision of company annual audited accounts and auditors reports.

New era of European Union anti Money Laundering Regulations in Banking Practice

EU 4th Money Laundering Directive

In 2014 the Eur. Commission released its proposal  for the 4th MLD giving countries years to roll up the changes. It is important for banks and corporates to be prepared to meet the following major changes:

                Beneficial Ownership

                Politically Exposed Persons (PEP)

                Customer Due Diligence

                Inclusion of Tax Crimes

                Due Diligence Outsourcing

                Information Requirements for Fund Transfers

The recent terrorist attacks on Europe’s people and values were coordinated across borders, showing that we must work  together to resist these threats.

European Commission President Jean -Claude Junker

2 February 2016 in Strasbourg, the Commission presented  the “Action Plan” to strengthen fight against terrorist financing.

Main goal to prevent the EU financial system from being used for money laundering and terrorist financing purposes.

Two main objectives: 

  1. PREVENT THE MOVEMENT OF FUNDS AND INDENTIFY TERRORIST FUNDING concentrating in the following areas:
  • Ensuring a high level of safeguards for financial flows from high risk third countries.
  • Enhancing the powers of EU Financial Intelligence Units and facilitating their cooperation.
  • Centralised national bank and payment registers/ central data retrieval systems in all Member States.
  • Tackling terrorist financing risks linked to virtual currencies.
  • Tackling risks linked to anonymous pre-paid instruments (e.g. pre-paid cards).
  • Improving the efficiency of the EU’s transposition of UN asset freezing measures.
  • Criminalising money laundering.
  • Limiting risks linked to cash payments.
  • Assessing additional measures to track terrorism financing.
  1. DISRUPT SOURCES OF REVENUE FOR TERRORIST ORGANISATIONS

Illicit trade from occupied areas is currently a primary source of revenue for terrorist organisations.

The Commission and the European External Action Service will provide technical assistance to Middle East and North African countries to fight against the trafficking of  goods and provide support to third countries to comply with United Nations Security Council Resolutions in this field.

Compliance with EBA regulatory products- EBA Guidelines and Recommendations

The European Banking Authority (EBA) issues regulatory guidelines and recommendations in its fields.

Regulation (EU) No 1093/2010 establishing the EBA requires that competent authorities and financial institutions make every effort to comply with the EBA guidelines and recommendations (Article 16).

Guidelines and recommendations after officially announced, competent authorities across the EU must inform the EBA whether they comply or intend to comply and financial institutions might also have to report whether or not they comply.

Non EU supervising bodies

US Financial Crime Enforcement Network 

Cross-Border Corporate M&A Transactions – Corporate Finance Documentation and new era in EU and International banking transactions

New era of European Union anti Money Laundering Regulations in Banking Practice    

In 2014 the Eur. Commission released its proposal  for the 4th MLD giving countries years to roll up the changes. It is important for banks and corporates to be prepared to meet the following major changes:

  • Beneficial Ownership
  • Politically Exposed Persons (PEP)
  • Customer Due Diligence
  • Inclusion of Tax Crimes
  • Due Diligence Outsourcing
  • Information Requirements for Fund Transfers

The recent terrorist attacks on Europe’s people and values were coordinated across borders, showing that we  must work  together to resist these threats.

European Commission President Jean -Claude Junker

2 February 2016 in Strasbourg, the Commission presented  the “Action Plan” to strengthen fight against terrorist financing.

Main goal to prevent the EU financial system from being used for money laundering and terrorist financing purposes.

Two main objectives: 

  1. Prevent the Movement of Funds and Identify Terrorist Funding concentrating on the following areas:
  • Ensuring a high level of safeguards for financial flows from high risk third countries:
  • Enhancing the powers of EU Financial Intelligence Units and facilitating their cooperation:
  • Centralised national bank and payment registers/ central data retrieval systems in all Member States
  • Tackling terrorist financing risks linked to virtual currencies:
  • Tackling risks linked to anonymous pre-paid instruments (e.g. pre-paid cards):
  • Improving the efficiency of the EU’s transposition of UN asset freezing measures
  • Criminalising money laundering:
  • Limiting risks linked to cash payments:
  • Assessing additional measures to track terrorism financing:
  1. Disrupt Sources of Revenue for Terrorist Organisations

Illicit trade from occupied areas is currently a primary source of revenue for terrorist organisations.

The Commission and the European External Action Service will provide technical assistance to Middle East and North African countries to fight against the trafficking of  goods and provide support to third countries to comply with United Nations Security Council Resolutions in this field.

Compliance with EBA regulatory products- EBA Guidelines and Recommendations

The European Banking Authority (EBA) issues regulatory guidelines and recommendations in its fields.

Regulation (EU) No 1093/2010 establishing the EBA requires that competent authorities and financial institutions make every effort to comply with the EBA guidelines and recommendations (Article 16).

Guidelines and recommendations after officially announced, competent authorities across the EU must inform the EBA whether they comply or intend to comply and financial institutions might also have to report whether or not they comply.

Non EU supervising bodies

US Financial Crime Enforcement Network

Banking and Legal Considerations on documentation relating to INITIAL PUBLIC OFFERS and Alternatives

Initial Public Offerings (IPOs)- Rationale

  • Companies may float to raise cash for expansion;
  • to give them access to capital in the future,
  • to gain status and credibility,
  • to create currency for further shares,
  • to create  acquisitions

IPO Alternatives

  • Introduction– no shares are issued or sold, when existing shares are traded on the market.
  • Retail offering– offer of shares to retail shareholders.
  • Institutional offering-offer of shares to institutional investors such as investment firms and funds.

Propectus for Equity Issues

  • A Prospectus is a document prepared to provide potential investors with full information about a company proposing to issue new securities, or to list on an equity market.
  • full information on the offering price
  • full information on the business of the company,
  • audited financial statements.

Contents of the Prospectus

  • Within the European Union the contents of a prospectus are prescribed by the EU Prospectus Directive.

its three elements are:

  • Summary – must convey concisely, the  key information relevant to the securities which are the subject of the prospectus, and  help investors to consider to invest in the securities.
  • Registration document – containing information about the business, management history and financial information.
  • Securities note – containing information about the securities to be issued, price and subscription procedure.

Necessary Documentation in a Private Corporate Transaction

Corporate Finance Documentation  

Information Memorandum (IM)

  • The Information Memorandum (IM) is a description of the business that is  for sale, aiming to provide sufficient information to potential investors  including amongst others:
  • potential risks
  • material legal issues
  • last 2-3 years financial statements
  • Confidentiality Letter: outlines the fact that the vendor is providing non-public information to potential investors or purchasers, who undertake the obligation to keep it confidential.
  • Engagement Letter: the letter used  to engage an adviser for a particular assignment establishing the adviser’s duties and the company’s responsibilities.

Representations, Warranties and Indemnities:

During the sales process the vendor represents (confirms) that certain information is true and/or complete, and

further provides a warranty (a promise or assurance) that this is so, for a number of subjects, such as property, tax, accounting and others,

additionally,  provides indemnities for certain specific matters where there is uncertainly, such as the current year’s tax liability , or ongoing litigation.

Sale and Purchase Agreement

  • The Sale and Purchase Agreement is a legal contract creating an obligation for the    seller to sell and the buyer to buy the business including amongst others:
  • A description of entities and assets to be sold, and the amount.
  • The completion date and terms and conditions of sale and completion.
  • Representations, warranties and indemnities.

Due Diligence requirements on a private company acquisition

The 21 Golden Rule

Freshly issued original and apostiled Company Incorporation Certificates

  1. The Company’s Memorandum and Articles of Association
  2. Incorporation Certificate.
  3. Updated Certificate of Good standing issued by the Registrar of Companies.
  4. Updated Certificate of Incumbency issued by the Company Secretary/ Director, with specific mention to any pending legal actions involving the company.
  5. Certificates of:  a.   Shareholders   b.   Directors and Secretary  c.  Registered office of the Company.
  6. Company Resolutions of any share capital increase or reduction.
  7. Any share Purchase Agreements and proof of filed changes  with the Registrar of Companies.
  8. Register of Members showing all past and current shareholders and share capital history.
  9. Register of Directors showing  history of all past and current directors.
  10. Copies of all necessary Resolutions, Resignations or Appointment letters of company officers
  11. Details of any options, warrants or conversion rights for the purchase or subscription rights of any shares .
  12. Documentation proving direct Beneficial Ownership of shares by individuals, and in the event of  use of nominees, the necessary Certified Trust Documentation.
  13. Evidence of any pledges, or other encumbrance over any of the shares in the Company.
  14. Evidence of any charges or other encumbrance over any of the assets of the Company.
  15. Evidence that  share capital of the Company is fully paid, and detailed description and valuation of the assets used for this purpose.
  16. Minutes of Shareholders and Directors meetings from the date of the Company incorporation.
  17. Any Powers of Attorney or other expressed or implied  authority given by the Company to any third person  which is still valid together with any relevant company resolutions.
  18. Copies of all licenses, consents, permits,  and registrations held now or were held  by the Company.
  19. Details and copies of all filings made by the Company with the Registrar of Companies, Income Tax Office, VAT Office and any other government organisation.
  20. Proof of settlement of all taxes, and information as to  any pending tax  liabilities.
  21. Provision of company annual audited accounts and auditors reports.

Amendment of Cyprus tax law

The House of Representative of Cyprus voted on 10 December 2015 on changes to the tax laws, which were previously agreed with the private sector over the past few months. The changes relate to income tax and capital gains tax law. The brief overview of the most crucial changes is presented below.

Income Tax Law

  1. Offshore activities
  • The definition of the term “Republic of Cyprus” now includes specifically and clearly the territorial sea, the contiguous zone, the exclusive economic zone and the continental shelf of Cyprus.
  • The definition of the term “permanent establishment” now includes all activities for the exploration and exploitation of the seabed in the exclusive economic zone, as well as services related to such exploration or exploitation activities.
  • The gross income which is earned from sources within Cyprus by a person who is not a tax resident of Cyprus or who does not have a permanent establishment in Cyprus in consideration for providing services mentioned above would be subject to tax at the rate 5%.
  • Applicable starting from 1st of January 2016.
  1. Income exempt from tax
  • Exchange differences, both gains and losses, and irrespective of whether they are realized or unrealized will no longer be taxable / tax deductible, irrespective of the purpose for which the funds in a foreign currency have been used for.

NOTE: this will not apply in the case of companies trading in foreign currencies and related products – they shall be taxed only when such gains or losses are realized.

  • Applicable as from the tax year 2015.
  1. Hybrid instruments and artificial transactions for dividends
  • In certain cases, dividends received by a Cypriot company from a company located outside Cyprus shall no longer be exempt from income tax, if in the case of Cyprus these amounts received are considered as dividends, while in the country where the company paying dividend is located those payments are treated solely as tax deductible expense. These are considered as “hybrid instruments”. Starting from 1st of January 2016 the dividends received by a Cypriot tax resident company which fall under the definition of “hybrid instrument” will no longer be exempt from income tax, but must be taxed as normal business income and will be exempt from defence tax.
  • Applicable starting from 1st of January 2016.
  1. Loss from using IP Box regime
  • Under Cyprus IP box regime an 80% deduction is allowed from the net profit received from the use or disposal of IP rights. If a loss is resulting from the said activities, in this case only 20% of the resulting loss can be offset against income from other sources or carried forward to be offset against income of subsequent tax years.
  • Has a retroactive effect starting from the year 2012.
  1. Group loss relief
  • Previously the group loss relief can only be given for losses incurred by Cyprus tax resident companies.
  • In order to align the Cypriot tax laws with a European Court of Justice’s decision in the Marks & Spencer case, the law is amended so that a subsidiary company which is a tax resident in another EU member state can surrender its taxable losses to another group member company tax resident in Cyprus, provided that the subsidiary has exhausted all the means of surrendering or carrying forward the losses in the member state of residence of the subsidiary or to any intermediary holding company.
  • The taxable losses must be calculated on the basis of the Cypriot tax laws.
  • In order to determine as to whether 2 companies are members of the same group, the interposition of holding companies established in (a) another EU member state, (b) in a state with which Cyprus has concluded a DTT or (c) in a state which has signed OECD multilateral convention for exchange of information.
  • Applicable as from the tax year 2015.
  1. Anti-avoidance provisions for re-organizations
  • Corporate reorganizations are exempt from all forms of tax in Cyprus.
  • The law has been amended introducing provisions allowing the tax authorities to refuse to accept tax-free reorganisations if they have enough reasons to determine that the purpose/s of reorganization was reduction, avoidance or deferment of payment of taxes. However, such decision can be objected and/or appealed.
  • Tax authorities will also have right to impose conditions on the number of shares which can be issued as part of reorganization and the period for which such shares should be held (not more than 3 years).

NOTE: Not applicable for publicly listed companies and transfers of shares as a result of succession.

  • Applicable starting from 1st of January 2016.
  1. Related party transactions
  • Starting from 1 January 2015 the profit received from transactions between the related parties onto an arm’s length basis and if the profit of one party is increased, a corresponding deduction for the counterparty to the transaction should be given.
  1. Fees for issuing certificates / rulings
  • The fees paid to the tax authorities for issuing tax residence certificates and tax rulings may be increased.

Capital Gains Tax Law

  1. Capital gains from sale of shares in property companies
  • Gains from sale of shares in companies which indirectly own immovable property in Cyprus by holding directly or indirectly shares in a company, which owns immovable property in Cyprus, will also be subject to capital gains tax.

NOTE: Applicable only if the value of immovable property is more than 50% of the value of the assets of the company which shares are sold.

  1. Trading gains from sale of shares of property companies
  • Currently, if a company is selling shares of companies which would be considered as transactions of a trading nature and thus falling under the provisions of the income tax laws, any gains from the sale of such shares are exempt from income tax.
  • The law was amended so now such gains shall be subject to capital gains tax.
  1. Transactions between related parties
  • In case if there is a sale of property between related persons, the tax authorities will have the right to replace the sale price declared by the parties concerned with the market value of the property sold, if the selling price declared is lower than the market value.

The above provisions are to come into effect starting from the date of publishing the new law in the Official Gazette. The publication is expected to be made before the end of December 2015.

A double tax treaty between Cyprus and Ukraine is amended

A double taxation avoidance protocol (“the Protocol”) amending the double tax treaty between Cyprus and Ukraine was signed on 11th of December 2015 in Kiev. The signed protocol will come into force not earlier than the 1st of January 2019, the date that the existing Convention will expire,” a press release issued by the Cyprus Ministry of Finance says.

It is added that the existing Convention was signed on the 8th of November 2012 and came into force on the 1st of January 2014.
The protocol will “enhance further trade and economic relations, between the two states,” the press release points out. It is further noted that during the negotiations, “a most favourable clause has been adopted, for taxes on interest, dividends, royalties and capital gains.” This clause, the ministry explains, “is considered of high importance as Cyprus will be treated equitably with other competing jurisdictions.” The protocol itself is based on the OECD Model Tax Convention for the Avoidance of Double Taxation.
“Upgrading and expanding the network of Double Tax Conventions, is of high economic and political importance for Cyprus,” it concludes.

The full text of the Protocol is available upon request.

OECD Global Forum upgraded Cyprus rating

The recent Global Forum on Transparency and Exchange of Information for Tax Purposes of the OECD took place on 29 and 30 October 2015 in Barbados. Following crucial changes in Cyprus’ legal framework, practices and procedures, the new rating of Largely Compliant has been finally assigned to the Republic of Cyprus.

The last evaluation of the island’s profile took place in November 2013 when Cyprus received the rating of Non-Compliant jurisdiction due to the fact that the Republic has failed to exchange information on requests received from double tax treaty partners on a timely basis. According to OECD, it is required that each and any request for exchange of information is responded by the receiving jurisdiction within 90 days from the date of receipt of the relevant request. The Non-Compliant rating level has motivated Cypriot tax authorities to review and advance their internal systems and procedures relating to communication with taxpayers especially concerning requests, as well as to develop mechanisms enhancing filing of tax returns with the tax authorities and to take appropriate actions against those taxpayers failing to respond to requests received from the tax authorities.

The coordinated efforts of the Cypriot Ministry of Finance and Tax Department that worked tightly with such professional associations as the Institute of Certified Public Accountants of Cyprus and the Cyprus Bar Association, improved the response time significantly and in March 2015 the Peer Review Group of OECD has confirmed the great achievements as well as productive and effective results of the improvements, enabling the Global Forum to change the rating of Cyprus to Largely Compliant one.

Article for "Ukrainian Lawyer" Magazine

The article of our Senior Lawyer Anastacia Kareba has been published in the latest edition of the “Ukrainian Lawyer” Magazine, which concerns the ways of promoting business via productive networking as well as contains some tips as to how to boost the relevant networking skills.
You may read the said article written in Ukrainian by clicking the following link.

«Ukrainian Lawyer» Magazine

New CySec Directive On Corporate Governance Of CIFs

The Cyprus Securities and Exchange Commission (“CySEC”), as an authority regulating the operation of Cyprus Investment Firms (hereinafter referred to as “the CIFs”), has recently issued guidance on what it considers to be significant Cyprus investment firms (“CIFs”). This guidance was presented in the form of the CySEC Directive DI 144-2014-14 for the Prudential Supervision of Investment Firms (“the Directive”), which itself amended the Investment Services and Activities and Regulated Markets Law, Law 144(I) of 2007. The said Directive provides for more stringent and exact requirements regarding corporate governance of CIFs which are considered and/or deemed to be significant by reference to their size, internal organisation or the nature, scale and complexity of their activities.
CySEC’s policy is to apply an objective definition with pre-defined thresholds to determine which CIFs are considered significant for the purposes of these requirements. A CIF is deemed to be significant if it meets any of the following criteria:

• total assets in excess of €43 million;
• revenue for the preceding 12 months in excess of €50 million;
• clients’ money in excess of €60 million;
• clients’ assets in excess of €2 billion.

CIFs must regularly assess whether they meet the criteria as this shall directly affect the internal procedures to be taken. As soon as a CIF becomes aware that it is likely to meet any of them it must make arrangements to establish and have in place sound, effective and comprehensive strategies, processes and systems to achieve compliance with the requirements that apply to a ‘significant CIF’. One of the most important step is to build up a strong and effective system of evaluation of potential risks that may arise taking into consideration the clients’ portfolio, future projects etc. of the CIF. These arrangements must be in place and effective no later than three months from the date the CIF meets any of the criteria.
If a ‘significant CIF’ falls below all of the thresholds it must nevertheless continue to comply with the requirements applicable to a ‘significant CIF’ until the first anniversary of the date on which it ceased to be a ‘significant CIF’. In cases where it deems it appropriate CySEC may require a CIF to comply with the requirements that apply to a ‘significant CIF’, even though the CIF does not meet any of the criteria.

New CySec Directive On Corporate Governance Of CIFs

Greek shipping companies looking into Cyprus

Dear Colleagues,

In view of the latest developments in EU, we would like to inform you about the services we are capable of providing in the sectors of shipping and maritime law, which can be of help for you.
Firstly, let us dedicate few words for the general overview of the benefits of Cyprus.

  • Cyprus is the only open registry approved by the EU;
  • Effective application of the Tonnage Tax System – no other taxes on shipping activities apply except from Tonnage Tax;
  • Capital gains tax, income tax for seafarers, estate duty, stamp duty on documents or mortgage deeds, tax on shipping profits, tax on paid dividends – don’t apply;
  • Cyprus flag is included in the “White List” of the Memorandum of Understanding of Tokyo and Paris;
  • Low cost of ship registration;
  • Recognition of Competence Certificates from many countries;
  • Wide range of bilateral agreements on cooperation in merchant shipping;
  • Protection of interests of the beneficial owners by using nominee and/or trustee shareholders.

We are in full position to act as a stop-one-shop law firm starting from registration of a ship to filing tax returns.
The full specter of our shipping services as well as a detailed information regarding Cyprus shipping and maritime area (including legal and tax environment), can be found on our website. Please follow the next link: https://www.naklaw.com/shipping/
If you have any questions please feel free to contact us and we shall be happy to assist you.

Newsletter July 2015

Dear Colleagues,

In the present newsletter we would like to inform you about three recent announcements that you may find interesting and useful.

Extension For The Payment Of Companies Annual Levy For 2015

Following a request by a large number of professionals and general public who encounter difficulties to pay the annual fee of three hundred and fifty euro (€ 350) for the year 2015 for various reasons, it was decided by The Department of the Registrar of Companies and Official Receiver that this can be paid by 31 July 2015 instead of 30 June 2015.

We recommend you to ensure that your company has duly settled this obligation before 31 July 2015, so that to avoid charging of penalties.

Cyprus may benefit from Chinese investments flow

According to the recent report produced by the Mercator Institute for China Studies (MERICS), China is intended to triple its overseas investments by 2020. Such growth is closely connected with the recent developments in the Chinese policies concerning liberalization of abroad investments.

The period from 2000 to 2014 showed that China has invested around 46 billion Euros in the economy of member-states of European Union. The MERICS report also states that Cyprus may become one of the leading countries to receive an influential cash-flow from Chinese sources in the upcoming years. The analysts emphasize that Cyprus property sector is the most attractive for the Chinese investors providing them with the opportunity to receive EU passport by means of purchasing real estate and/or devoting money directly into local businesses, provided that the conditions of governmental investment programs are fully satisfied and covered.

The Chinese foreign direct investment type named as Outbound Foreign Direct Investment is expected to grow globally from 744 billion USD to approximately 2 trillion USD by 2020.

Legislation prohibiting loan securitization is extended until 10 July 2015

The extension of the law prohibiting loan securitization and the sale of loans to third parties has been approved by the House of Representatives of the Republic of Cyprus. Previously the said ban had to be terminated on 26 June, but the Parliament decided to extend it for another 2 weeks.

The sale of loans is one of the crucial methods that shall decrease the level of Non-Performing Loans (NPLs) in Cyprus. The laws regulating sale of loans, drafted by the Central Bank of Cyprus, are currently awaiting approval and remarks from the side of EU, EC and IMF (so called Troika). The said framework shall adopt limitations or specific criteria in relation to the participants of the loan sales market. One of the proposed most important conditions shall be the requirement to receive a license from the Central Bank of Cyprus for a bank intending to purchase such NPL, while the private equity funds shall receive approval in the form of special license from the Cyprus Securities and Exchange Commission. Another imperative rule states that the organisations willing to purchase NPLs shall be based in Cyprus.

Cyprus And Egypt Aim For Gas Import Deal

An energy deal was signed between Cyprus’s and Egypt’s energy ministers this past Monday, February 16th 2015, which could see the island supplying its Mediterranean neighbor with gas. Egyptian Prime Minister Ibrahim Mahlab was in Nicosia for the signing of the agreement by Cyprus Energy Minister George Lakkotrypis and his Egyptian counterpart Sherif Ismail.

Cyprus is keen to exploit the Aphrodite field off its southeastern coast but the reserves proven so far are not considered sufficient to make it viable for the island to develop onshore export infrastructure of its own.

The memorandum signed authorizes the “Egyptian Natural Gas Holding Company and the Cyprus Hydrocarbons Company to examine technical solutions for transporting natural gas, through a direct marine pipeline, from the Aphrodite field to Egypt… This will optimize the use of the gas infrastructure and achieve an added value for both Cyprus and Egypt,” a joint statement said.

The two sides aim to conclude a comprehensive agreement within six months. “We aim for an agreement on this regard within six months of the signing of the memorandum of understanding,” the Egyptian prime minister’s office statement said. Egypt’s oil minister said that prices were not expected to be agreed upon in that period: “There is no agreement on the Cypriot gas import prices. That will be negotiated after the expiration of the six months“.

Cyprus first discovered natural gas offshore in late 2011, while once gas-rich Egypt has turned into a net importer from an exporter due to increasing consumption and declining production. The Aphrodite field (Block 12), is estimated to contain between 102 billion and 170 billion cubic meters (3.6 trillion and 6 trillion cubic feet) of gas.

The island needs to find more reserves to make a proposed liquefied natural gas plant at Vassiliko on the south coast financially viable. But France’s Total and Italian-Korean venture ENI-Kogas have yet to find signs of underwater riches in other exploration blocks.

Greece’s prime minister Alexis Tsipras makes first foreign visit to Cyprus

Due to the visit of Greece’s Prime Minister Alexis Tsipras to Cyprus (this would be his first official visit to a foreign country after being elected as Prime Minister; it’s worth mentioning that the Cypriot President Mr. Nikos Anastasiades visited Athens in March 2013 on his first foreign visit as president), a joint press conference was given by the President of the Republic of Cyprus Nikos Anastasiades and the Greek Prime Minister, this past Monday, February 2nd, at the Presidential Palace.

While replying to a journalist’s question Mr. Tsipras said that “In cooperation with the Republic of Cyprus and recognizing that it is after all the Republic of Cyprus that has the initiative of movements for the solution of the Cyprus problem, the Greek Government will strongly support the decisions of the Cypriot Government, as it is after all the elected government of the people of Cyprus.” He also stated that “Since I am here in Cyprus I would like to point out the following: Cyprus and Greece are not just two small countries in the European Union and the Eurozone. The European Union and the Eurozone without Greece and Cyprus will be truncated with regard to their southeastern end, which today, more than ever before, must be stable and secure. Greece and Cyprus are pillars of security and stability in a geopolitically turbulent environment in the broader region.”

On his part, Mr. Anastasiades said that “I have previously stated that we will also work jointly with countries of the European Union, meaning partners who have the same views, in other words that emphasis must be given to the issues of growth, something that was of course been cultivated recently and during the European elections in particular. Included in Mr. Junker’s program was the necessity for the creation of conditions of growth, hence the latest announcements for making available 300 billion euro. We must now see – and especially with the strong mandate to the Greek government – how the group of states that share the need for turning toward growth will transform theory into action. We are, therefore, on the same page with regard to the need for changes for the benefit of the European citizens at large.”

The two countries, which share the same language and culture, have been trying to coordinate their policies within the European Union and express their dissatisfaction with the European Union’s policies regarding Russia – a major economic partner for both Athens and Nicosia. Replying to a question with regard to the EU sanctions against Russia, the Greek Prime Minister said that “We discussed with Mr. Anastasiades the need for the two Governments to have a coordinated stance in the European fora, so that the necessary bridge between Europe and Russia can exist, so that we can also claim what is beneficial for our people, but also for all the people of Europe, for the continuation of tension, the evolution of a war into an economic war cannot have any positive result for the people of Europe. In this respect, Greece and Cyprus can become a bridge of peace and cooperation also between the European Union and Russia.” The Cypriot President responding to the same question, said that “We have agreed that the Minsk Agreement and the diplomatic dialogue are those things that will provide the answer. We have also agreed that together with other states that have the same views, we will cooperate so that the policy of diplomacy will prevail over the policy of sanctions; sanctions which do not refer only to the country on which they are imposed but have repercussions on those that impose them as well.”

When asked by a Turkish Cypriot reporter to send a message to the Turkish Cypriots, the Greek Prime Minister said that “Our message to the people of Cyprus, Greek Cypriots and Turkish Cypriots, is a message of unity and cooperation. And it is only through unity and cooperation that we can secure both peace and progress for this tormented land.”

Legal Advice for "Cyprus Expert" Newspaper

On the latest edition of the Cyprus-based newspaper “Cyprus Expert” our Managing Partner, Nasos Kyriakides, has provided a legal advice to a reader with regards to the mandatory requirements imposed in order for citizen of EU to legally and for a long term  reside in Cyprus based to the reader’s case.  His legal advice was included in the  issue dated 03-17.12.2014 of Cyprus Expert newspaper.  You may download the said comment written in Russian by clicking on the link below.

Comment for Cyprus Expert 03-17.12.2014

Greek Government Brings Forward Crucial Presidential Vote

The Greek government decided to expedite all necessary procedures concerning the election of the President of the Republic.
Greek Prime Minister Antonis Samaras and Vice President Evangelos Venizelos met at Megaro Maximou, shortly after it became known that the representatives of the Troika will be returning to Athens in order to complete the assessment of the program.
The decision came after euro zone finance ministers said they were in favor of granting Greece its request for only a two-month extension to its bailout program, a boost for Prime Minister Antonis Samaras who has been pushing for an early exit from the program which is deeply unpopular in Greece. As announced by government spokeswoman Sofia Voultepses, the two men, Prime Minister and Vice President, after informing the current President Mr. Charles Papoulias, asked the President of the Greek Parliament to begin with the procedures for electing the President of the Republic so that the first round will be held on Wednesday December 17 instead of February 15 as previously scheduled. Mrs. Voultepses also underlined the need for Greek authorities to focus on troika talks following a decision by the Eurozone officials to approve a short extension to Greece’s bailout and to curb political uncertainty.
Prime Minister Samaras needs the support of 180 lawmakers in the 300 seat chamber to scrape through the vote, support he does not currently have. Shall he fail to get his candidate for president elected on the first round, there will be a second round of voting according to the Greek Constitution which is set to take place on December 22 and if a third one is required it shall take place on December 27.
If however the coalition government, which has 155 lawmakers in parliament at the moment, fails to secure the level of support it needs to survive and elect a president the Greek law stipulates that this parliament must be dissolved and therefore new elections should be called.

Early Elections For Greece?

According to the Greek Constitution, if no candidate garners 200 votes in the first vote, a second vote follows five days later; if that is inconclusive, a third round is held with 180 votes needed for the election of a candidate. If the final vote is also inconclusive, snap general elections follow a month later.

NEWSLETTER – GREEK GOVERNMENT BRINGS FORWARD CRUCIAL PRESIDENTIAL VOTE TO NEXT WEEK

Effective VAT Rates

Dear Associates,

We would like to provide you with the organized information as to the applicable rates of Value Added Tax in Cyprus. Please see all details in the table below:

Rates

Applies in relation to

0%

Exports, commission from abroad for imports/exports to/from Cyprus, international air and sea transportation of persons, and goods and related services (except intracommunity transport of goods), ship management services, goods that are to be placed in customs warehouses/ bonded warehouses or free zones and be subjected to the relevant customs regime or temporary importation/ transit or transshipment regime goods that are intended to be incorporated into drilling, supply goods after importation but before customs clearance

5%

Supplies of animal feeding stuff, including food for birds and fish, supplies of fertilizers, supplies of coffins, supplies of liquefied petroleum gas, newspapers, books, magazines and similar items, supplies of various goods for incapacitated persons, supplies of food including drinks for human consumption but excluding alcoholic beverages (beer, wine) and refreshment drinks, supplies of medicines which are used for medical treatment, illness prevention and medical and veterinary purposes, supplies of vaccines for medicine and veterinary medicine and services supplied by undertakers, services of road cleaning, refuse collection and waste treatment (other than services provided by local administration), services of writers, composers and artists, services of hairdressers, renovation and repair services to private residences (subject to certain conditions), fares for urban and rural areas by bus, catering services from school canteens, purchase or construction of a flat or house to be used as a private main residence

9%

Restaurant services and other similar catering services which consist in the supply of manufactured or non-manufactured food or drinks or both for human consumption including refreshment drinks, alcoholic beverages (beer and wine), accommodation provided by hotels and other similar establishments, including the provision of holiday accommodation, transportation of passengers and their luggage by taxi

19%

All supplies of goods or rendering of services, except those taxed at 0%, 5%, 9% and exempt ones

Exemptions:

  • Rents
  • Suppliers of immovable property (except “new buildings”)
  • Insurance and financial services
  • Medical services
  • Educational services

If you are not sure as to which VAT rate is applicable in your particular case, please feel free to contact our lawyers.

NEWSLETTER – Effective VAT Rates

EBA Stress Test Successfully Completed By Cyprus Banks

When European Banking Authority announced the results of its “Stress Test” run on 130 biggest financial institutions of the Eurozone, it became obvious that Cyprus banking sector holds a satisfactory place amongst other jurisdictions. The purpose of the landmark “bank health check” was to reveal whether banks are ready for economic breakdown and have sufficient capital reserves. The stress test outcome displayed a stable and good standing status pertaining to three of four Cyprus banks that completed the stress test. In general, the results demonstrated that capital buffers of such banks as Bank of Cyprus, RCB and Central Co-op are more than sufficient to cover all the capital needs. It is worth mentioning that three banks were enabled to pass the stress test thanks to a wise crisis management and timely recapitalization which significantly strengthened their positions. The only Cypriot bank that did not pass the test due to a small capital shortfall is Hellenic Bank. The management of Hellenic Bank already considered the problem which will be resolved upon the board of directors to decide on supplementary equity issue in the nearest future. It is expected that the deficit is to be made up also by means of conversion of convertible debt securities without a need for additional financial support from the Government of Cyprus.

Such positive results of the stress test serve not only as a confirmation of the very fact that all the measures and efforts directed to reinforcement of banking sector and Cyprus economy in general were correct, targeted and well-weighed but also boost the trust and confidence of depositors and investors in Cypriot banks.

NEWSLETTER – Stress Test Successfully Completed By Cyprus Banks

Cyprus is one of first countries to sign OECD/G20 Standard on Automatic Tax Information Exchange

During the annual meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes in Berlin, Cyprus was noted as one of the first signatories of the new Standard on Automatic Tax Information Exchange.
The overall number of states that put their signatures on the document exceeded fifty. Execution of the Standards turns on a green light for activation of automatic exchange of information, based on the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

It is expected that the pioneers-signatories will pass the first information exchanges by September 2017. Others will follow in 2018.

 

Cyprus, Egypt and Greece vow to expand cooperation at summit

Greece, Cyprus and Egypt agree to speed up delineation of EEZs, urge Turkey to end provocative surveys.

The acceleration of negotiations between Greece, Cyprus and Egypt for the delimitation and declaration of the EEZ was decided by the leaders of the three countries during the Trilateral Summit, held on Saturday, November 8th 2014 in Cairo.

The trilateral meeting in Cairo concluded on Saturday, with the three sides issuing a joint communiqué to address the delineation of Exclusive Economic Zones and establish cooperation.
The tripartite summit would be the start of a new partnership between Egypt and the European Union, with Greece and Cyprus as “ambassadors”, said the Greek prime minister.

In their joint communiqué, the three countries have urged Turkey to stop the provocative surveys it is currently conducting in what is regarded as the Cypriot EEZ, while stressing the need for a solution to the Cypriot matter, in accordance with international law.
The three countries also vowed to pool their efforts in tackling terrorism, with stability and security being “the guiding principles” in their cooperation. Egyptian President el-Sisi added that “it is necessary to respect international law, on the basis of the UN and of respect of sovereignty and non-interference in the domestic affairs of other countries”.

The Cypriot President invited other countries in the region to consider cooperating with the three. Regarding the Cypriot dispute, Mr. Anastasiades argued that for a bi-zonal, bi-communal federation, with a single and unique legal personality and nationality, in line with UN resolutions.
In statements following the summit, the Greek PM, Mr Samaras, stressed that the meeting laid the foundations of a multiply significant strategic cooperation and a common front for geopolitical stability, energy security, fighting terrorism and economic growth. During the press conference, Sisi said the summit launched “a new level of tripartite cooperation which started over a year ago.”

Concerning the latest developments in the Middle East region, especially the fight against militant groups in the region, Sisi said the three leaders stressed their keenness on facing “terrorism and extremism firmly” through enhancing cooperation in all fields, including the security field.
Greece’s Samaras commended Sisi’s “pivotal” role in “fighting terrorism” in the region. He called on the developed world to stop the expansion of the “map of terrorism” worldwide. “We consider Egypt the cornerstone of stability in the Middle East,” Samaras said. Cypriot President Anastasiades condemned the latest militant attacks Egypt has faced and expressed his country’s solidarity with Egypt in its “war on terrorism”.

As far as the economic support is concerned, during his meeting with Samaras, Sisi said Egypt is looking forward for its European friends’ support for the economy, calling on them to contribute with direct investments in the country, a presidential statement read. He also invited them to take part in Egypt’s coming economic conference. Egypt’s Planning Minister Ashraf al-Arabi announced the country will hold a conference, entitled the Egyptian Economic Summit, in February to attract foreign companies, donor and international organizations. Samaras described the economic conference as a “good opportunity for negotiations, especially in the economic field.”

Last but not least, about the Turkish provocations Anastasiades stressed that the summit does not target any specific state. He nevertheless condemned the “Turkish provocations” in the region. On October 29, the governments of Egypt, Greece, and Cyprus, urged Turkey to quit trying to chart gas deposits in areas of the east Mediterranean claimed by Cyprus, saying the work was illegal. Anastasiades warned that such Turkish acts “restrict security and stability in the Mediterranean region.” In an interview with state-run news agency MENA on Saturday, Anastasiades pointed out that Egypt and Cyprus have already signed a border demarcation agreement last December during Anastasiades’ first visit to Egypt. The Cypriot president referred to the dispute in the island of Cyprus due to a division between the Turkish Cypriot Community and the Greek Cypriot one. The latter controls the internationally recognized Republic of Cyprus, which Turkey does not recognize, whereas the former controls the Turkish Republic of Northern Cyprus, an entity only recognized by Turkey.

Anastasiades said that negotiations over the dispute would only succeed if both parties, especially the Turkish party, show “good will” and take “constructive steps” toward the resolution of the conflict. Samaras thanked Sisi for supporting the “just” Cypriot cause and resorting to international law as his “[moral] compass”. Sisi stressed his respect for the United Nations principles and international law, especially in regards to states’ sovereignty. Turkish relations with Egypt have been strained since the military ouster of former Islamist President Mohamed Mursi in July 2013, following mass protests against his rule. Egypt expelled the Turkish ambassador to Cairo last November following critical comments from then Turkish Prime Minister Recep Tayyip Erdogan, prompting a similar response from Turkey. Both countries have downgraded their diplomatic ties since then.

The foreign ministers of Egypt, Greece and Cyprus previously met on October 29 in Nicosia to prepare for a summit between the three countries this month, when they also denounced the actions of Turkey.

Fitch ratings upgrades bank of Cyprus and Hellenic bank

On 4 of July internationally-known credit rating agency FITCH Ratings issued statement in relation to an upgrade of Bank of Cyprus’ (referred to as “BoC”) long-term issuer default rating (IDR) from RD to CC and Hellenic Bank’s (referred to as “HB”) – from RD to CCC. In addition to that, Fitch has also upgraded short-term IDR of both banks from RD to C. The Viability Rating (VR) of the banks was affirmed by the agency: BoC – at CC, HB – at CCC.

Fitch upgrade was announced on the second day after the board of BoC made unanimous decision as regards to searching investors for a proposed increase of capital that is expected to be in the amount of around €1b. The increase of capital is required for speeding up the process of restructuring and strengthening the financial position of the whole group.

The Minister of Finance of Cyprus Harris Georgiades considers such advancement to be of “vital importance”. The Minister also added that the upgrade of both banks “is a decisive factor in our effort to revitalize economic activity, which cannot come in without prospects and confidence”.

Notwithstanding the good news from Fitch, Cyprus still has to find solution of the problem related to non-performing loans (referred to as “NPL”) in the banking system as according to Fitch’s statement “the two banks’ most important challenge will be to improve NPL recoveries, for which banks have internally strengthened their recovery units”.

Russian deoffshorization law to pass another round of revision and amendments

Passing of a very well-known Russian draft law on taxation of profits of controlled foreign corporations and income of foreign corporations (the CFC draft law) is to be postponed.  The CFC draft law would lead to a so-called deoffshorization of Russian economy.  The general aim behind the said draft law is to motivate foreign companies which authorized capital or its part belongs to Russian legal entities and/or natural persons, to transit to Russian jurisdiction.

This week the Ministry of Finance and Ministry of economic development received an instruction from the Prime-Minister of Russian Federation to review the law once again and to complete it.  According to the information published on the website of the government, the new text of the CFC draft law would have been ready before 30 of June.  The passing of CFC draft law is to be postponed due to the fact that Russian Union of Industrialists and Entrepreneurs has addressed its comments concerning crucial provisions of the draft law.  The necessity to change the CFC draft law became obvious after the meeting on 18 of June organized with the board members of Russian Union of Industrialists and Entrepreneurs.  The main provisions of the CFC draft law that are subject to revision relate to accordance of the definitions used in the draft law to the existing legal system, requirement to clarify the list of persons that fall within the purview of the draft law.  Various departments of the ministries were ordered to find effective solutions in relation to the following: implementation of system stimulating transfer of companies to Russian jurisdiction, increase of profit level that is actually an indicator of a company falling within the provisions of law as well as other aspects.

New Announcement of the Registrar of Companies of Cyprus

We would like to inform our associates that Cyprus Department of Registrar of Companies and Official Receiver in addition to the Announcement dated 27 May 2014, announces that all registered companies must until 30/06/2014:
(1) Pay any amounts due for annual levy for the years 2012 and 2013 and,
(2) File all Annual Returns due (HE32) together with the corresponding Financial Statements.

All companies that fail to fulfill the above shall be de-registered by the Registrar under section 327 of the Companies Law.

Please make sure that your company has completed the above tasks and will remain registered in Cyprus.

Legal Comment for Newspaper Cyprus Expert

Managing Partner Mr. Nasos Kyriakides has provided a legal advice in relation to requirements imposed and required to be fulfilled in order to open private teaching practice in Cyprus.  His comment was published in newspaper Cyprus Expert, issue 04.06-18.06.  You may download the said comment written in Russian by clicking on the link below.

Expert opinion for newspaper "Cyprus Expert"

After our legal comment for the previous issue of “Cyprus Expert” was published, the editorial office received few more inquiries requesting a legal advise or a brief comment on specific situations and legal matters. Our Managing Partner Nasos Kyriakides prepared a laconic response on the question concerning General Power of Attorney, which was published in the Cyprus Expert, issue of 23 of April – 7 of May. You may download the said comment written in Russian by clicking on the link below.

Comment Cyprus Expert 23.04-07.05

Cyprus investment firms

The provisions of the Markets in Financial Instruments Directive 2004/39/EC (known as “MiFID”) allow companies providing brokerage and financial services to set up Cyprus Investment Firm (“CIF”) able to carry on its regulated investment business in Russia, EU markets, Asia, Africa and/or other countries. Starting from the moment of application to obtain a license the whole activity of CIF will be under regulation and supervision of Cyprus Securities and Exchange Commission (“CySEC”). The main document that regulates the establishment and operation of CIF is the Cypriot Law 144(1)2007 (with amendments) of 26 October 2007 (“the Law”).

Below we would like to provide you with the detailed information as to various procedures, requirements and benefits relating to CIF.

Benefits of using Cyprus as a set-up base for investment firm

  • The tax system of Cyprus is quite stable and attractive for foreign investments, offering the lowest corporate tax rate in Europe of 12.5%. In addition, there is no tax on capital gains.
  • There is no exchange control in Cyprus – the island allows to transfer abroad any gains (including capital gains), profits, dividends etc.
  • You may establish FX & CFD Brokerage Company in Cyprus provided that such firm has been duly licensed by CySEC. This option includes such benefits as to passport CySEC license in order to open branches and representative offices to provide investment services in any EU country with no obligation to fulfill the capital requirements of local regulating authorities.
  • You may engage your CIF into Forex and Binary Options Market as Cyprus is the only EU member state that regulates it.
  • The application procedure to obtain CySEC license is moderate in comparison to the existing procedures of other EU countries.
  • Cyprus provides for lower licensing and operational costs relating to companies providing investment and financial companies in comparison to the rest of EU countries.

Capital Requirements for CIF

The Law provides for the following minimum capital requirements:

  • A CIF that provides one or more of the following investment services and holds clients’ money or/and client’s financial instruments, must have an initial capital of at least two hundred thousand euro (€200,000):
  1. The reception and transmission of orders in relation to financial instruments;
  2. the execution of orders on behalf of clients;
  3. portfolio management;
  4. provision of investment advice;
  • A CIF that provides the investment services stated in subsection (a) or/and (d) above, and does not hold clients’ money or/and clients’ financial instruments, and which for that reason may not at any time place themselves in debt with their clients, may have an initial capital of:
  1. At least eighty thousand euro (€80,000); or
  2. at least forty thousand euro (€40,000) and professional indemnity insurance covering all member states or some other comparable guarantee against liability arising from professional negligence, that it enters into with an insurance undertaking, representing an amount of at least one million euro (€1,000,000), per claim, and in aggregate at least one million five hundred thousand euro (€1,500,000) per year for all claims.
  • A CIF that provides one or more of the following investment services or/and performs the following investment activities shall have an initial capital of at least one million euro (€1,000,000):
  1. Dealing on own account;
  2. Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis;
  3. Placing of financial instruments without a firm commitment basis;
  4. Operation of Multilateral Trading Facility

Requirements to obtain a CySEC license

  • ClF should have a minimum capital satisfying the requirements stated above.
  • The company should have an operational office in Cyprus.
  • The Executive Director of a CIF should be a Cypriot resident that would pass the “fit and proper” test. A person to be employed to this position should have a flawless business reputation, financial and investment experience as well as criminal record.
  • CIF should also appoint a General Manager and there is no requirement for him to be a Cypriot resident, though he is obliged to visit Cyprus on a regular basis. His role would be to observe and supervise the Board of Directors and Executive Director. General Manager should not have any executive powers.
  • The nature of the activity of CIF should be clearly stated in its Memorandum.
  • Shareholders of CIF should also pass the “fit and proper” test provided that they don’t have any criminal records and are experienced enough in order to set up and run such kind of business.
  • The company should establish strict internal control procedures including provisions regulating electronic protection of information, client protection, preservation of any kind of conflict of interest with its clients, control over the potential problem areas. CySEC will thoroughly check those internal control procedures in order to verify their suitability.

CySEC Application Procedure

In general, you may need around 1-2 months in order to prepare the application together with supporting documents. Upon submission of the complete application bundle to CySEC, the latter will have up to 6 months from the date of submission to review the documents and respond accordingly. The CySEC may also reject the application therefore we strongly suggest you to verify that the documents along with the application satisfy all the prescribed requirements.

The set of documents to be submitted to CySEC

  • The CIF application form (Form 144-03-01)
  • Company corporate documentation – Certificate of Incorporation, Certificate of Directors and Secretary, Certificate of Registered Office, Certificate of Shareholders, Memorandum and Articles of the company etc.
  • Three-year business plan
  • Operational guideline on internal procedures and anti-money laundering provisions
  • Manual on KYC procedures

The fees granting of CySEC authorization are 3,000 EUR increased by:

  1. 1,000 EUR per investment service of paragraph 1, 5 and 7 of Part I, Annex III of the Law;
  2. 1,500 EUR per investment service of paragraph 2 and 4 of Part I, Annex III of the Law;
  3. 2,000 EUR per investment service/activity of paragraph 3 and 6 of Part I, Annex III of the Law;
  4. 10,000 EUR for the investment activity 8 of Part I, Annex III of the Law;
  5. 500 EUR per ancillary service of Part II of Annex III of the Law.

Our Services

  • Provision of consultation in relation to preparation and drafting of application;
  • Structuring of CIF as well as advising on investment services to be provided;
  • Drafting Memorandum and Articles of CIF and submitting it to the ROC for a proper registration;
  • Advising on three year business plan of CIF;
  • Preparation of all documents supporting the application (including drafting of all required internal manuals and guidelines);
  • Submission of application to the CySEC;
  • Consulting on recruitment of CIF directors and officers (including auditors and compliance officers);
  • Acting as external legal advisors for a CIF that has been granted the EU MiFID CySEC license.

 

New decree of the ministry of finance

On 28 of March 2014 Cyprus Ministry of Finance has issued a new decree with validity of 35 days, providing a serious relaxation of the restrictive measures, agreed with the EU/IMF one year ago, following the “the overall stabilization and restoration of confidence in the banking system”, as announced in the relevant official press release.
It is specifically outlined that the Decree on International Banks remains unchanged.
The new relaxation measures are following:

  • Abolition of the cash withdrawal limits for both natural and legal persons;
  • Increase of the current monthly limits pertaining to money transfers within the Republic: for natural persons – from € 20.000 to € 50.000; for legal persons – from € 100.000 to € 200.000;
  • It is allowed to open a new account for any person not being an existing customer of a credit institution, provided that the new account will be a fixed term deposit created with cash funds and the overall amount to be deposited exceeds €5.000. But such new fixed term deposit cannot be terminated prior to its maturity.
  • The prohibition to terminate a fixed term deposit prior to its maturity date is cancelled.

In general, the Ministry of Finance has declared “the achievement of the milestones set out in the roadmap” which confirms that Cyprus banking sector effectively advances the process of reinforcement.

A company established in the republic of Cyprus but is not tax resident of the republic

In accordance with the Article 5A of the Assessment and Collection of Taxes Law no.4/78, as amended, a company is obliged to tax registration immediately after its incorporation or registration under any law in force in the Republic of Cyprus.
The subparagraph (2) of the Article of the same Law, provides that company which is incorporated in the Republic, but is not tax resident in the Republic, must provide to the Director of the IRD a filled form approved by the latter with the income statement of the current tax year until the 31st of December of that year.
For purposes of implementing the above-mentioned provision, a company which falls within the scope of Article 5 (2), shall submit the Company Income Declaration (Form E. IR4), only by completing the following required fields of the Declaration:

  1. Part 1 Table 1.1 – Tax Identification Certificate (TIC)
  2. Part 1 Table 1.2 – Company name
  3. Part 1 Tale 1.7 – Line 3 – Leave empty
  4. Part 1 Table 1.6 – Line 1 – “NO”
  5. Part 1 Table 1.7 – Line 5 – “YES”
  6. Part 2 Table 2.1 – Line E.I Issued Share Capital (current and previous fiscal year (even with zero))
  7. Part 2 Table 2.2 – Lines 34, 36 and 39 (current and previous fiscal year (even with zero))
  8. Part 5 Table 5.1.3 – Complete at least one field summed 100% (current and previous fiscal year)
  9. Part 7 DECLARATION: Name and Surname, TIC number and Name of the Company. The field TIC can be completed either with the ID number, passport number or other identification number of up to (9) alphanumeric characters. If the identification number is more than 9 characters, then fill only the last 9 numbers.

The Company Income Declaration is submitted electronically with the aforementioned way, from the fiscal year 2011 and beyond.

Circular from the Inland Revenue Department on 20 of March 2014.

New economic incentives for foreign investors to obtain Cypriot citizenship

A proposal of the Interior Minister, Mr. Socrates Hasikos, concerning the relaxation of certain criteria for foreign investors in order to obtain Cypriot citizenship, was approved and announced on 19.3.2014 by the Council of Ministers, in an attempt to further promote foreign investment in Cyprus, namely in assets held by Cyprus companies and organizations, government bonds, real estate and development projects, setting up businesses in Cyprus.

1.  The person concerned will be required to put up an investment at the reduced amount of €2.5 million, provided           that such person is being part of a collective investment scheme worth at least €12.5 million (5 investors of €2.5 million)
2.  The person concerned will be required to put up an investment at the reduced amount of €2.0 million, in return for     such person to be part of a collective investment scheme worth in excess of €12.5 million. This provision (2) will be       applicable only until 01.06.2014.

Despite the aforesaid, if an investor wishes to present a separate application for acquisition of Cyprus citizenship, then the amount to be invested is €5 million plus €500,000 + VAT for the purchase of a permanent residence in the Republic of Cyprus.

Another basic requirement provides for the applicants to have clean criminal record.

Required Documents:

For the examination of the applications by the Civil Registry and Migration Department, it is requested to submit the Application Form (M127) and present the following supporting documentation:

1.  Certificate of Clean Criminal Record (from the country of applicant’s origin)
2.  Documents on Purchase of immovable property in the Republic: 

  • Contract of Sale
  • Title Deed or Proof of submission of the Contract of Sale in the Department of Lands and Surveys
  • Proof of payment of the agreed purchase price as per the Contract of Sale
  • Proof of deposit in Cypriot bank in the name of the Seller, for the amount stated in the Contract of Sale

3.  Company Documents:

  • Certificate of Registration of the Company
  • Certificate of the Shareholders or Certificates proving that the investor is the ultimate beneficiary of the company
  • In case the applicant is an executive member it is required to provide his Contract of Employment and proceeds with its Certification from the Inland Revenue Department
  • Financial Statements of the Company of the last three years

4.  Documents regarding deposits in Cypriot Bank:

  • Confirmation by a Cypriot Bank for five (5) years fixed term deposits made by the applicant or the Company or the trusts in which the applicant is the final beneficial owner
  • Transfer of the deposit amount in a Cypriot commercial bank.

5.  Any other document requested by the Ministry of Interior or the Ministry of Finance (depending on the case).

We would like to outline, that all public documents issued abroad must bear an official translation into Greek or English from Press and Information Office (PIO) and be certified with Apostille by the Ministry of Foreign Affairs of the country of origin of the applicant and then by the Embassy of Cyprus in the relevant country or by the Ministry of Foreign Affairs of Cyprus.

The time frame for the examination of an application usually takes not more than six (6) months.

Nasos A. Kyriakides & Partners LLC professional legal team, with its vast experience and in-depth knowledge of the relevant legislation in the field of Immigration and Citizenship, can assist its clients with confidentiality starting from the drafting of documentation required for submitting an application to the Civil Registry and Migration Department. We will be continuously monitoring the status of the application and keeping the applicant updated on the progress of the examination procedure. Once citizenship is granted, we will assist with obtaining the Cyprus Passport and Identity Card.

Cyprus citizenship investment program

The Council of Ministers on 25 May 2013 approved a decision in order to make it easier for Investors to obtain Cypriot Citizenship and benefit from it.

A non-Cypriot may by exception apply for acquisition of Cypriot Citizenship if he/she meets one of the following criteria:

1.  Deposits and Donation to a State Fund

The applicant has made:

•  Mixed investments of at least €2,0 million for the purchase of shares and/or bonds of the Investment Company of the     State (deposited with the Treasury of the State until the shares/bonds are issued)
•  Donations of at least €0.5 million to the Research and Technology Fund.

Documentation required:

•  Receipts from the Treasury of Cyprus for the acquisition of shares and/or bonds from the state’s investment company     under formation.
•  Receipts for the investor’s donation to the Research and Technology Fund.

2.  Direct Investments

The applicant has direct investments in Cyprus of at least €5 million by any of the following ways:

•  Real estate, including residential, commercial, office space and accommodation developments or projects of similar      nature.
•  Purchase of Companies or businesses that maintain establishments and are operative in the Republic.
•  Purchase of shares in public companies in Cyprus.
•  Purchase of assets of financial nature, such as securities, bonds and debentures registered and issued in Cyprus,          including those to be issued by the National Solidarity Fund Law of 2013.
•  Participation of an investor in a company or joint venture undertaking the construction of a public project.

Documentation Required:

For Purchase of real estate:

•  Contract of Sale
•  Title deeds
•  Confirmation for submitting the contract to the Lands and Surveys Department
•  Receipts for paying the arranged price

For Purchase of a company or business:

•  Contract of Sale
•  Receipts for paying the arranged purchase price
•  Confirmation from the Registrar of Companies with regard to the shareholders.

For Purchase of shares:
•  Shares certificates
For Purchase of assets of financial nature:
•  Titles and other relevant documentation
3.  Deposits in Cyprus Banks

The applicant, or his privately owned companies or trusts must have personal fixed term deposits in Cypriot Banks for three years amounting to at least €5,0 million.

Documentation Required:

•  Confirmation of banking institutions with regard to the fixed terms deposits for three years of the investor or                 companies in which he is the beneficiary owner or of the trust in which he is the ultimate beneficiary.
•  As to the deposits of companies, the certificate of registration of the company by the Registrar of Companies and         any other relevant documentation need to be submitted.

4.  Combination of Mixed Investments and Donation to State Fund.

The applicant has made a combination of mixed Investments and a Donation to a State Fund, Direct Investments and Deposits in Cypriot Banks amounting to at least €5,0 million.

Documentation required:

Particular documentation includes the submission of the necessary documentation relevant to each condition.

5.  Business Activities

The applicant carries out business activities in Cyprus either as a shareholder, or beneficiary owner of a company or companies the management of which is in the Republic of Cyprus for over three years and has paid both to State Funds (corporate tax, V.A.T) and remuneration for the provided services (legal, accounting, auditing) of at least €500.000 per annum, reduced in €350.000 if it employs at least five (5) Cypriot citizens, or reduced to €200,000 if it employs more than ten (10) Cypriot citizens

Documentation Required:
•  Certificate of registration of the company by the Registrar of Companies.
•  Certificate of shareholders by the Registrar of Companies or certificates providing evidence that the applicant is the     beneficiary owner of the company.
•  Confirmation with regard to the amounts paid as to the remuneration for business services. The confirmation has to       be issued by the service providers.
•  Audited accounts of the company for the last three years prior to the year of application.
•  Confirmation from the Social Insurance Department as to the insurable income of the employees in the company of         the investor.

6.  Investors with impaired deposits after measures implemented against both banks after 15 March 2013.

The applicant’s deposits with the Bank of Cyprus or Popular Bank have been impaired due to the measures implemented in Both Banks after the 15th March 2013, amounting to a total of at least €3,0 million.
Documentation Required:

•  Confirmation with regard to the extent and date of the impairment of deposits.
• When it comes to deposits in companies in which the investor is the beneficiary owner, the certificate of registration    of the company by the Registrar of Companies and any other relevant evidence need to be submitted

Terms and Conditions:

•  The applicant must have a Clean Criminal Record and his name must not be included on the list of persons whose           property is ordered to be frozen within the boundaries of the European Union.
•  The applicant must hold a permanent privately-owned residence in the Republic of Cyprus with a market value of           €500,000 plus VAT (contract of sale and confirmation of settlement of the dwelling must be provided).
•  The naturalization may be revoked in the case where following a periodic inspection it has been ascertained that any     condition is being circumvented.

The contribution of Cyprus to the new European energy strategy (3rd energy symposium)

On 27th and 28th March 2014 IENE (Institute of Energy for South-East Europe) in cooperation with FMW (Financial Media Way) organized the 3rd Energy Symposium in Hilton Park Nicosia. The symposium was attended by a wide spectrum of National and International audience with a large number of speakers posing their views and ideas on the strategy for the exploitation of natural gas fields in Cyprus and the Eastern Mediterranean, the operation of the electricity market under the new liberalized regime and the Renewable Energy Sources parameter to achieve energy efficiency.
The speakers highlighted the geopolitical importance of the findings of hydrocarbons in the Eastern Mediterranean, as these were also recognized in the recent European Council Summit on 20/21 March 2014. As it was mentioned Cyprus is a European pillar of stability and a factor to achieve energy stability and security in the European Union. It was emphasized that the energy consequences of the late Russia – Ukraine crisis drove Russia into considering other potential importers such as China, and Europe searching for alternative suppliers. Currently the Union is entirely depended on imports, spending over 400 billion euro in 2012 for this purpose (natural gas, petrol) and 546 billion a year for carbon, which translates to 1500 euro per European citizen. The energy scenery is facing dramatic changes and Cyprus could be an important player to corroborate Europe’s energy needs and achieve diversification of its resources.

It is estimated, as the Minister of Energy of Cyprus indicated, that the European energy demand will increase from 45% to 60% by 2020. In this respect, the European Union has already approved three Projects of Common Interest (PCI) involving Cyprus: The Euroasia Connector between Israel – Cyprus – Greece, a pipeline from offshore Cyprus to Greece mainland via Crete, and an LNG storage located in Cyprus (‘Mediterranean Gas Storage’). The Minister added that there has been a progress in negotiations between the government and the licensed companies regarding the LNG terminal in Vassilikos and the challenge rests on the discovery of larger quantities of hydrocarbons to make it competitive. In the second semester of 2014 the consortium between ENI and KOGAS will begin the drilling activities in this respect.

The investments in Cyprus have already begun and there are projects which are almost completed as the CEO of VTT Vasiliko Ltd revealed. The construction of an oil storage terminal in Vassiliko, an investment of an estimated amount of 300million euros is expected to commence offering its service by July 2014 and is a clear indication of the interest of foreign investors on the prospects of Cyprus in the oil and gas sector.

The speakers also drew special attention to the value of renewables could play in the battle to achieve energy security and efficiency. Without underestimating that the backbone of a healthy system is conventional energy, it was emphasized that a balance between the two is the ideal course of action. It was acknowledged that the challenge rests on the implementation of a legal and regulatory regime to achieve the integration of Renewable Energy Sources in the Energy Market.

Marina Theodorou
Trainee Lawyer
Litigation
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The crisis between Russia – Ukraine

The ENERGY parameter is at the heart of the crisis between Russia and Ukraine according to international analysts, being not just a form of repetition of the continuous conflicts between the two countries in recent years, but also extending and expanding due to the energy dependence on Russia, and the surrounding territory the European Union.
Apart from the colossal politico-economic interests lurking in the wider eastern region of Ukraine, the major issue of energy and “energy dependence” seems to be once again the cause of tension which generates inherent risks and even for war.

The natural gas that Ukraine imports from Russia covers 60% of its domestic needs, inevitably is creating thereby a strong energy dependence, while at the same time constantly reinforcing the side that seeks energy independence and advocates for exploration of alternative sources for the supply of natural gas.
Despite the privileged prices for natural gas transported in Ukraine with Gazprom’s pipelines, to the Ukrainian public company Naftogaz, Kiev seems to owe up to $ 2 billion to Moscow, and the new government of Kiev, which does not recognize the Russian government, is unable to repay, at least at the moment.
The European course of Ukraine over the past twenty years, acts as a comparison to the objective reality and Ukraine’s need of maintaining its energy relations with Russia. As a result, Ukraine is transformed to a crossroad of transit gas pipelines installed in its territory from the Russian Gazprom, pushing Europe into becoming depended on Ukraine in terms of transition, but also energy dependent to Russia, importing around 30% of its natural gas and significant quantities of oil, in contrast to the downward trend of domestic gas supply from countries within Europe such as Britain and Norway.

It is calculated, that by 2020 the EU will be depended on Russia for more than 40% of its needs for natural gas supply. On the other side, at the same time, Russia is economically dependent on Europe as it is the largest energy client and wishes to ensure the transit of gas to the European Union either through Ukraine or through other channels, as a reliable energy supplier of Europe.

The EU and Russia are co-dependent in regards to energy and the efforts of Moscow so far, to bypass Ukraine in order to have direct access to European gas markets, came to an agreement with Germany in agreed in 2005 in cooperation with the German E.ON and BASF and French GDF Suez, to construct the Nord Stream pipeline, exporting Russian gas directly to Germany via the Baltic Sea. On the same basis Russia is ready to proceed with the construction of the South Stream undersea pipeline from Russia to Bulgaria and other European countries through the Turkish EEZ in the Black Sea, bypassing Ukraine, thereby serving its best customer, the European Union.
Coming back to Cyprus, it could be ascertained that it now becomes potentially one of the EU countries that may supply its European partners with energy, something which substantially enhances both its economic and political role. The estimated reserves of natural gas in the Cypriot EEZ and a potential transfer of natural gas towards Europe whatever its form (via pipeline, liquefied or compressed natural gas) could turn Cyprus into a valuable partner in the EU with a significant contribution to energy security and energy sufficiency.

An article published on Phileleftheros newspaper on 11th of March 2014, by Nasos A. Kyriakides LL.B, DI.M, LL.M, MCI Arb.
http://www.philenews.com/el-gr/f-me-apopsi-eponymes-gnomes/385/189287/i-krisi-metaxy-rosias-oukranias

Oil and Gas in Cyprus – Nasos A. Kyriakides & Partners LLC

We take this opportunity to inform you about our legal services in the Energy sector, and more specifically the Oil & Gas sector after being awarded as the “Oil & Gas Law Firm of the Year in Cyprus 2014” by Corporate Intl Magazine.
Our Firm provides a wide spectrum of legal advice on the different commercial, legal, regulatory and structural challenges related to the oil and gas developments in Cyprus. Since the early days of announcement regarding the discovery of hydrocarbon reserves in offshore Cyprus we have tailored our energy practice to fit the needs and growing demands of various international corporations for pragmatic and efficient legal advice on the legal framework in Cyprus, the EU and Internationally in respect to the development of the Oil and Gas industry.

Our Firm places strong emphasis on the advisory services on the legal aspects related to the Oil and Gas industry from the standpoint of Cyprus, including but not limited to:

  • Legal support and guidance in relation to Upstream, Midstream and Downstream procedures,
  • Governmental authorities and bodies – Their role in the activities and the extent of state participation in the activities,
  • Regulatory issues – Advice in regards to compliance with domestic, EU an International laws and regulations in the energy sector,
  • Licensing procedures for prospection, exploration and exploitation of hydrocarbons,
  • LNG Project Development – Potential in newly producing countries, risks and shipping,
  • Oil and gas commercial transactions and contracts, servicing and drilling, legal advice when it comes to negotiation and evaluation of terms of contracts.
  • Natural Gas Sales Agreements – Evaluation of terms and conditions, prospects and potentials,
  • Joint Operating Agreements and Service Contracts,
  • Corporate energy matters, such as corporate structuring, taxation and governance,
  • M&As in the Energy fields,
  • Shareholders relationships and corporate transactions – Participation in decision making, AGMs,
  • Establishment of Investment protection in the Energy sector,

The Energy Law team of our Firm possesses practical experience and extensive know how on legal matters of various aspects of natural gas exploration, exploitation and distribution, gas and oil production, allocation, storage and shipping. It has also in the past years represented before State Authorities and regulatory bodies, including the Ministry of Trade, Industry and Energy, multinational companies engaged in the Oil and Gas Sector.
Furthermore our Corporate M&A Department has provided legal support on Mergers and Acquisitions, shareholding relationships and corporate transactions and affairs on Joint Ventures in relation to operations on the energy field, as well as provided legal due diligence on obtaining financing facilities for various activities.                                                                                                                                                                                                                       

Nasos A. Kyriakides services in the oil and gas sector

We provide a wide spectrum of legal advice on the different commercial, legal, regulatory and structural challenges related to the oil and gas developments in Cyprus.  Since the early days of announcement about the discovery of hydrocarbon reserves in offshore Cyprus we have tailored our energy practice to fit the needs and growing demands of various international corporations for pragmatic and efficient legal advice on the legal framework in Cyprus, the EU and Internationally in respect to the development of the oil and gas industry.

Upstream:
In relation to the upstream sector, we offer guidance in relation to natural gas bidding rounds, and applications for licenses, for granting and using authorizations for exploration and production, joint operating agreements (JOA), production sharing contracts (PSC), service contracts, as well as farm-ins and farm-outs. The upstream sector is a complex and competitive market with great risks, usually governed by extensive regulations, which require specialized advisers with knowledge and skills to propose suitable recommendations in a given situation.

Midstream:
Midstream is the essential stage between the exploration and production (upstream) and refining oil products and marketing (downstream). We offer advice in regards to the geopolitics illustrated in the Eastern Mediterranean block, including issues related to transportation with pipelines, storage and shipping. In addition to these, we offer detailed advice on capital intensive projects such as LNG, LPG and their potentials in newly producing nations.

Downstream:
In the downstream sector of refining and marketing the product whatever its composition we provide advice as to the prospects and changing demands globally. We advise on petrochemical and power, partner evaluation and selection, shareholder issues, supply and sales agreements, utility, industrial gas and logistics agreements as well as corporate and project financing arrangements.
Our thrive for excellence and innovation, and along with the structure we chose for our energy practice has classified us as an integral part of the local “magic circle” of commercial law firms in Cyprus, having been awarded as the Oil & Gas Law Firm of the Year in Cyprus 2014 by Corporate Intl Magazine.
Thus, we find ourselves in a situation where we are the leading experts for a number of key players in the industry and we are committed to provide reasonable, efficient and expert advice in different aspects.
Our range of services include, but are not limited to, areas such as:

  • Hydrocarbons prospection, exploration and exploitation licenses – Information in relation to bidding rounds, types of licenses, their duration, as well as term and conditions.
  • Regulatory issues – Advice in regards to compliance with domestic, EU an International laws and regulations in the energy sector.
  • Governmental authorities and bodies – Their role in the activities and the extent of state participation in the activities.
  • Oil and Gas commercial transactions – Legal advice when it comes to negotiation and evaluation of terms of contracts.
  • Joint Operating Agreements – Formation of Consortiums and level of participation and liabilities.
  • International Drilling and Service Contracts.
  • Natural Gas Sales Agreements – Evaluation of terms and conditions, prospects and potentials.
  • Natural Gas Pipeline Transportation – Shipping, pipelines and storage.
  • LNG Project Development – Potential in newly producing countries, risks and shipping.
  • Stock Purchase Agreements.
  • Investment protection advice, counsel and dispute resolution – Bilateral and Multilateral investment treaties dispute resolution process.
  • Corporate energy matters, such as corporate structuring, taxation and governance.
  • Shareholder relationships and corporate transactions – Participation in decision making, AGMs.
  • Energy dispute resolution and litigation – Negotiation, Mediation, International Arbitration and Litigation in Cyprus.
  • Competition issues in energy markets – Abuse of dominance and energy Mergers and Acquisitions.
  • State Immunity issues.
  • Boundary Disputes – Geopolitical risks in the Eastern Mediterranean and regional turmoil and relations.

Our Legal team shall be more than happy to deal with any request that would be able to assist any of our clients not only in relation to the above, but to any other issue which may be needed.
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Historical agreement between the republic of Cyprus and the United kingdom

An agreement of great importance for liberation and Urban Development of 198 square kilometers territory, located in the British Bases in Cyprus, was signed on January 15 in London by the Foreign Ministers of Britain and Cyprus, Mr. William Hague and Mr. Ioannis Kasoulides.
Negotiations began on 2nd of October 2013 and were completed recently in Nicosia after ten meetings of the negotiating teams of each side.
Cypriot authorities may now grant authorizations for developments with prior consent from the Authorities of the British Bases which implies to the positive financial influence to 3 municipalities and 16 communities of the whole area for the first time since the country’s independence over half a century ago. Property owners within the British bases will be able to develop their land in six month time.
Provisions of the agreement:

  • Enables the integration of a large part of the territory of the bases in urban areas, which will now be allowed to be developed. More specifically, 78% of the territory of the area of the British Bases of about 200 square kilometers and includes the total private property falls in the above setting.
  • Ensures equal rights to residents and property owners in the area of the British Bases in relation to the population of the Republic of Cyprus for the development of their property within the limits of the area of the British Bases.
  • Withdraws all existing restrictions from the beneficiaries with regards to the acquisition and development of properties within the area of the British Bases, in order to apply to the territory of the area of the British Bases, the laws that are in force in the Republic of Cyprus regarding to the acquisition and development of properties by European citizens and other third countries.
  • Coordinates the situation in the British bases in relation to what is currently in force and normalizes the situation of the people residing in the British Bases area.
  • Enables the financial growth of the areas within the area of the British Bases, with all its positive effects on the welfare of the residents of the communities, and helps boost the overall economy of Cyprus.
  • Confirms the timeless position of The Republic of Cyprus’ side that the British Bases in Cyprus are being used exclusively for military purposes.
  • In general, it ensures the vital national interests of the Republic of Cyprus in relation to the U.k’s. British Base Areas.

 

Changes of the VAT rates in Cyprus as of 13.01.2014

In December 2012, the Cyprus House of Representatives voted a number of new laws and amendments to existing legislation to comply with the Memorandum of Understanding which is signed between the Republic of Cyprus and Troika.
The amendments are intended to strengthen public finances and enhance the stability of the financial sector, while at the same time retaining the benefits that Cyprus offers to international investors who choose Cyprus as a reputable international business center.
One of the amendments is the increase of the VAT rates as of 13th of January 2014 and it is as follows:
1.  The standard rate increases from 18% to 19% and applies to the provision of all goods and services in Cyprus.
2.  Reduced rate 5% (no changes) applies to:

  • The supply of foodstuff and/or beverages (excluding alcoholic drinks, beer, wine and soft drinks) or both, irrespective of whether the goods are delivered from the supplier to the customer or taken away by the customer.
  • The supply of pharmaceutical products.
  • Newspapers, books and magazines.
  • Hairdressing services.
  • Entry fees to theaters, circus, festivals, Luna parks, concerts, museums etc.
  • Entry fees at sports events and fees for using athletic centers.
  • Renovation and repair of private households after three years of first residence.
  • Supply of catering services from school canteens.

3.  The reduced rate of 8%, now increased to 9% applies to:

  • All restaurant catering services (including the supply of alcoholic drinks, beer, wine and soft drink).
  • Hotel Accommodation.
  • Transportation of passengers and their accompanying luggage within Cyprus using urban, intercity, water and rural taxis and tourist and intercity buses.

4.  Certain supplies of goods or services are Zero-Rated:

  • Supply, hiring and repair of sea-going vessels and aircrafts.
  • Supply of services to meet the direct needs of sea-going vessels.
  • Supply of goods entered into customs regime.
  • Supply of medicines and food, except the supply of food in the course of catering.
  • If the goods have been exported or supplied to a registered person in another member state.
  • Supplies of goods or services which are exempted under the VAT legislation.
  • Leasing or letting of immovable property.
  • Financial services, lotteries, medical care, social welfare, education, sports, cultural services, insurance     transactions etc.

Social Insurance Contributions (increased 1%):
Social Security Contributions that are payable by the employees and the employer are now 7, 8% from each and for self-employed persons is now 13, 6% contribution of their annual income.

Immovable property tax – Cyprus 2013

Immovable Property Tax is levied on all immovable property which is located in the Republic of Cyprus.
The calculation of tax is based on the rates stated below, on the value of the property of each owner, for each year.

  • Owner means the person who is entitled to be registered as the owner of the immovable property, whether he is registered or not.
  • Immovable property includes mainly, land and buildings or other structures or projects and trees or privileges and rights of use stated in them.
  • Value of the immovable property
    For taxation purposes, the value of the immovable property which is located in the Republic of Cyprus, is the market value as per 1st of January 1980 as this is stated on the title deed.
  • Factors of Immovable Property Tax

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In case the total amount of the value of the immovable property does not exceed the amount of €12,500, taxes are not imposed and shall not be received on the value of the immovable property.
FAQ (FREQUENTLY ASKED QUESTIONS):

  • Who is obliged to pay the Immovable Property Tax?
    Any physical or legal person who owns immovable property in the Republic of Cyprus.
  • Over what value of the immovable property is the tax calculated?
    On the market value of the property as per 1st of January 1980 as stated on the title deed.
  • If a person during the year proceeds with additions / renovations or subtractions on the property what should he do?
    There is an obligation to submit a Supplementary Statement – Form E.Pr.303 (2007), stating any changes made in real property.
  • When is a person obliged to submit the relevant documents and pay the tax?
    The tax is to paid by 30th of September of each year.
    From the year 2013, if the Immovable Property Tax is paid at least 30 days before the 30th of September, a discount of 10% is offered to the taxpayer.
  • On which properties is the immovable property tax imposed on 30 September of each year?
    On any immovable property possessed by a person on the 1st of January.
    e.g. The immovable Property Tax due on 30/09/2013 concerns property held on 01.01.2013.
  • If a person has not filled any forms or paid any tax so far, what are his/her obligations?
    Must fill the form E.Pr.303 (2007) – Additional Declaration (with reference to the additions / reductions) for each year of non-submission of the relevant declarations. The tax is calculated based on their current tax rates applicable in the period the additions / reductions were made.
  • If the title deed has more than one beneficiary, who has the obligation to pay the Immovable Property Tax?
    The immovable property tax is divided proportionately to all beneficiaries, based on their ownership share.
  • Is a person who is in possession of a property but is either a minor or a non-resident of the Republic of Cyprus, under any obligation to pay the immovable tax?
    Yes, if the property is in the Republic of Cyprus the obligation is transferred to the guardian or to the trustee.
  • If a person fails to submit a declaration and pay the tax due, would there be any additional charges and penalties?
    Yes, the following interest charges and penalties are imposed:
    – Non-submission of the declaration – € 100
    – Non-payment of the tax due – 5% of monetary charge (lump sum payment) (from 1.7.2011) and 10% (from                  1.10.2013) and 4.75% interest valid from 1.1.2013.
    The Director of the Department of Inland Revenue is entitled to issue a certificate of assessment of tax at any            point.
  • If a person owns a property in the occupied territory and / or in the buffer zone, is he obliged to pay the Immovable Property Tax?
    No, the properties in the occupied territory and the buffer zone are exempted from the Immovable Property Tax.
  • What measure can be taken, if the owner disagrees with the valuation of the property given by the Director?
    The owner can file an objection or appeal under the provisions of the Assessment and Collections of Taxes Laws.

Oil and gas in Cyprus: the legal framework

The legal framework for Oil and Gas in Cyprus is an amalgamation of European Union Law and International Law.

As a Member State of the European Union (‘EU’), since 2004 and a signatory to the United Nations Convention on the Law of the Sea (UNCLOS) since 1988, Cyprus needs to abide with all the respective obligations prescribed both in EU and International level.

Following the regulations stipulated in UNCLOS regarding the delimitation of maritime boundaries, the Republic of Cyprus in 2004 passed a law defining and regulating its Exclusive Economic Zone (‘EEZ’), with The Contiguous Zone Law 2004 and The Declaration of the EEZ Law 2004.  These provide that “the Republic has sovereign rights for the purposes of exploring and exploiting, conserving and managing the natural resources… of the waters superjacent to the seabed and of the sea bed and its subsoil”.  Furthermore, the exploration or exploitation of the non-living resources in the EEZ is subject to the permission of the Council Of Ministers or any other competent authority as designated by law.

Delimitation Agreements:
For the purpose of delineating its EEZ, the Republic of Cyprus sought to enter into a number of bilateral delimitation agreements with its neighbouring countries.
In February 2003, a delimitation agreement was signed with Egypt in accordance with the International principle of median line, as specified in UNCLOS, along with a Framework Agreement concerning development of cross median line hydrocarbon resources and a Confidentiality Agreement in May 2006.
In January 2003 the Republic of Cyprus entered into an agreement with Lebanon although this has not been ratified.
In December 2010, a delimitation agreement was concluded with Israel which was ratified and entered into force in February 2011.

Domestic Law:
The most significant domestic laws governing the area of hydrocarbon activities are the Hydrocarbons (Prospecting, Exploration and Exploitation) Law of 2007 (Law No. 4(I)/2007) (Hydrocarbons Law) and the Hydrocarbons (Prospecting, Exploration and Exploitation) Regulations of 2007 and 2009 (No. 51/2007 and No. 113/2009) (Hydrocarbons Regulations), which transpose Directive 94/22/EC into domestic law.

Types of Licenses:
The Republic maintains the sovereign rights over its resources while it can grant authorisations to Oil Companies for Prospection, Exploration and Exploitation.
A prospection licence is granted for a period not exceeding one year and it involves all activities related to locating hydrocarbons other than drilling.
An exploration licence involves any appropriate method for exploration including drilling and may be renewed for up to two terms, each term not exceeding two years, following an application submitted to the Cyprus Council of Ministers, Upon each renewal of an authorization for exploration, the holder relinquishes at least 25% of the initial surface of the area that was included in the authorization.
When a hydrocarbons discovery is made, an exploitation licence is granted for a period of 25 years which may be renewed for an additional period of ten years, after another application to the Council of Ministers.
The above authorisations are subject to different provisions including but not limited to the requirement fOR consent of the Minister for any transfer of authorisation rights, abandonment requirements and maintenance requirements.

Process of Application:
Applications are accepted after the publication regarding the commencement of a licensing round in the Official Gazette of the Republic and/or the Official Journal of the European Union at least 90 days before the closing date for applications.
The first licensing round was announced on 15 February 2007 and resulted in the granting of both an exploration licence and an exploitation licence for Block number 12 to Noble Energy International.
The discovery of hydrocarbons with an estimated gross resource range of 5–8 trillion cubic feet in Block 12 of the Cypriot EEZ opened up the prospects and motivated the government to initiate a second licensing round in the beginning of 2012 with twelve more offshore blocks made available for bids. The second licensing round received a strong and increased interest from a number of worldwide companies and consortiums and it resulted after negotiations to the award of exploration licenses for five Blocks.
On 24 January 2013, the Republic of Cyprus signed contracts granting the exploration licences for Blocks 2, 3 and 9 in a Consortium led by the Italian ENI and the South Korean KOGAS. On 6 February 2013, the contracts for the granting of licenses for the exploration of blocks 10 and 11 were signed with French TOTAL.
Transparency and non-discrimination are safeguarded through the selection process with different mechanisms specified by the EU. However, it is vital to mention that the State retains the right to make access to these activities and exercise their discretion taking into account considerations of national security, public safety, public health, security of transport, protection of the environment, protection of biological resources, the planned management of hydrocarbon resources or to the payment of a financial contribution or a contribution in hydrocarbons.
Typically, a contract is to be concluded between the Government and the successful candidate that seeks authorisation for the license award to be effective. For this purpose the Ministry of Commerce, Industry and Tourism (MCIT) has published a “Model Exploration and Production Sharing Contract” for this purpose in 2007, with an updated version in February 2012. The Contract would be subject to negotiations but the general structure including the terms would be the ones of the Model Production Sharing Contract.

Environmental considerations:
In 2008 the Energy Service prepared the Strategic Environmental Assessment (SEA) concerning the Hydrocarbon activities in the EEZ of Cyprus, in accordance with the provisions of the Assessment of Impact on the Environment from Certain Plans and/or Programmes Law, which is harmonized with Directive 2001/42/EC.  The licensees are bound to follow and comply with the results and recommendations of this assessment, which seeks to “identify, describe and evaluate the likely significant environmental effects of implementing hydrocarbon exploration and exploitation activities”.  Thus the applicants should include a brief note stating the activities of exploring hydrocarbons and their effects on the environment including ways to handle them.
An article from Ms. Marina Theodorou, LLM in Oil and Gas, Litigation.

Registration, Recognition and Enforcement of Foreign Judgments in Cyprus

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Enforcement of Foreign Judgments in Cyprus
May be enforced under European Union Regulations, Statute and Common Law.
Requirements:
– The foreign judgment has been issued by a court which has jurisdiction in accordance with Cypriot rules on conflict     of laws.
– The enforcement of foreign judgments is not contrary to Cypriot Public policy.
– The foreign judgment has been made on merit and not according to procedure.
– The foreign judgment has not been obtained by fraud and
– The proceedings which led to the issuance of the foreign judgment were not contrary to the laws of natural justice.
Procedure:
Enforcement and execution of foreign judgments in Cyprus, Law No. 121(1)/2000 in relation to the Recognition, Enforcement and Execution of Foreign Judgments applying to all cases in which recognition, registration and enforcement of decisions of foreign courts is requested.
Section 5, requires an application by summons accompanied by an affidavit to be filed at the District Court and in accordance with the applicable Civil Procedure Rules in Cyprus.

Enforcement of EU Judgments
EC Regulation No. 805/2004 – EC Regulation No. 44/2001.
The main source of law is EC Regulation No. 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.
Grounds for Refusal of recognition and enforcement of judgment under Article 34 of EC Regulation No. 44/2001:
– If contrary to the pubic policy of Cyprus.
– If given in default of appearance and the Defendant was not served with the document instituting proceedings in good   time or in a manner as to enable him to prepare his defense.
– If inconsistent with earlier judgment of the Cypriot Courts between the same parties.
– If recognition is inconsistent with earlier judgment given in another Member State or in a third State between the         same parties regarding the same cause of action.
Application of Law No. 121(1)/2000 and in the Foreign Judgment (Reciprocal Enforcement) Law.
Enforcement of non-EU Judgments
Cyprus is signatory to a number of multilateral conventions relating to the recognition and enforcement of foreign judgments including:
– The Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters and             Supplementary Protocol (Hague Convention).
– Hague Convention on the service abroad of Judicial an Extrajudicial Documents in Civil or Commercial Matters 1965.
Article 5 of Hague Convention 1965.
The Central Authority of the State addressed shall itself serve the document or shall arrange to have it served by an appropriate agency e.g. Ministry of Justice of Ukraine, either:
– By a method prescribed by its internal law for the service of documents in domestic actions.
– By a particular method requested by the applicant, unless such a method is incompatible with the law of  the State       addressed.

  • Subject to sub-paragraph (b) of the first paragraph of Article 5, the document may always be served by delivery to an addressee who accepts it voluntarily.
  • Cyprus is party to a number of bilateral treaties in relation to the recognition and enforcement of foreign judgments. Ukraine (Rat. Law 172/86 and 8/2005), Russia (Rat. Law 172/86), Belarus (Rat. Law172/86), Georgia (Rat. Law 172/86).

Enforcement of Foreign Arbitral Awards 
Foreign arbitral awards can be enforced in Cyprus
– By virtue of provisions stated in the Cyprus International Commercial Arbitration Law No.101/1987 and
– The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 which was ratified     by Law No. 84/1979.
Enforcement of Foreign Arbitral Awards under the 1958 New York Convention
It is obliged to enforce awards made in foreign states that are signatories to the Convention, since Convention imposes an obligation on all contracting states to recognise arbitral awards as binding and to enforce them.
Refusal for recognition and enforcement
Reasons for refusal of recognition and enforcement of foreign arbitral award under the New York Convention:
– If Arbitration agreement is invalid under the laws of Cyprus or the laws of the country which it was made,
– or the parties were incapable of entering into an arbitration agreement,
– if the party against whom the award was made was not given proper notice of the appointment of the arbitrator or       the proceedings,
– or was not able to present his case,
– if the foreign award was outside of the arbitration agreement,
– if the composition of the authority was not in line with the agreement of the parties or the applicable law where the     arbitration took place,
– if the award has not yet become binding on the parties or has been set aside or suspended.
Recognition and enforcement of an arbitral award may also be refused by Cypriot courts if the subject matter of the arbitration is not capable for settlement under Cypriot law or if the subject matter violates the public policy of Cyprus.
Enforcement procedure of arbitral award
Party seeking enforcement to submit an application by summons accompanied by an affidavit to be filed at the District Court and in accordance with the applicable Civil Procedure Rules in Cyprus.
Must also produce a duly authenticated original award with the original agreement or certified copies of aforementioned.  Official translation in Greek language also supplemented.
Application fixed within 4 weeks from filing will give the opportunity to the other party to contest application by filing written objection.
Foreign Claims Registration in Cyprus
Claim can be registered in Cyprus if the subject matter of the agreement involves the jurisdiction of Cyprus Courts.
Claim Registration Procedure 
a. Filing of an application for permission to the Court supported by an affidavit which could establish a Prima Facie Case    of Claimant.
b. Permission given if the application for summons is eligible to be delivered outside Cyprus.
c. In Court Claimant submits a request as to whether the process shall be made through the Embassy of the foreign           judicial authority with two copes official certified translations in the language the notice is intended to be given.
d. The Court Registrar will submit copy of application and certified translation into the Foreign Office of Cyprus which      then assumes responsibility to notify the relevant party through contacting the respective Foreign Office of the            Relevant Country.
When the relevant party receives notice of proceedings then the claim can be adjudicated in Cyprus.
Application of Hague Convention on the service abroad of Judicial an Extrajudicial Documents in Civil or Commercial Matters 1965.
Application of Article 5 is also possible if country has ratified Hague Convention on the service abroad of Judicial an
Extrajudicial Documents in Civil or Commercial Matters 1965.
Article 5 of Hague Convention 1965. 
The Central Authority of the State addressed shall itself serve the document or shall arrange to have it served by an
appropriate agency e.g. Ministry of Justice of Ukraine.
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New Double Taxation Treaty between Cyprus and Ukraine

Scope to promote and strengthen economic, scientific, technical and industrial cooperation of these two countries on a mutual benefit basis.
Ratification of New DTT between Cyprus and Ukraine

  • On 4 July 2013 the Verkhovna Rada of Ukraine approved the bill in Ukraine:

“On Ratification of the Convention between the Government of Ukraine and the Government of  the Republic of Cyprus for the avoidance of double taxation and the prevention of fiscal evasion on taxes on income and the Protocol thereto”
– Double Taxation Treaty and Protocol signed on 8 November 2012 in Nicosia,  during the visit of the President of             Ukraine Mr. Victor Yanukovych in Cyprus.  
– The Double Taxation Treaty and Protocol will come in force on notification of of completion of all domestic                 procedures, effectively by the 1 January 2014.
– The new Double Taxation Treaty will replace the old treaty, between USSR and Cyprus of 1982.

Withholding Tax Rates
The withholding tax rates (WHT) provided are:
A. Dividends (Article 10):
5% WHT, if the holding participation is at least 20% or the direct investment is 100,000 Euros.
In all other cases the WHT imposed will be 15%.
Example:
A Cyprus tax resident company receives dividends from its 100% Ukrainian subsidiary.
Dividends will be subject to 5% withholding tax in Ukraine.
In Cyprus, dividends received from a Ukrainian subsidiary will not be subject to any taxation.
B. Interest (Article 11):
2% WHT.
Example:
A Cyprus tax resident company receives interest income from its Ukrainian borrower.
– Interest income will be subject to 2% withholding tax in Ukraine.
– Interest income less any relevant expenses (i.e. interest expense) will be subject to taxation in Cyprus.
– The withholding tax paid in Ukraine can be used as a tax credit against the taxation generated in Cyprus.
C. Royalties (Article 12):
5% WHT on income from copyright of scientific work, trademarks and formulas. 10% WHT in all other cases.
Royalties arising in a contracting state and paid to a resident of the other contracting state will be subject to 5% withholding tax.
In all other cases the withholding tax rate is 10%.
Example:
A Cyprus resident company receives royalty income on patents from Ukrainian Company.
Royalty income paid in Cyprus subject to 5% withholding tax in Ukraine.
In Cyprus, 80% of the royalty profit is considered as a deemed expense, only 20% of royalty profit subject to 12.5% corporation tax in Cyprus, in effect 2,5% on income.
Since withholding tax is paid in Ukraine used as a tax credit against the tax liabilities raised in Cyprus, therefore no additional tax will be generated in Cyprus.
Permanent Establishment (Article 5) of the OECD Model Tax Convention
The “Permanent Establishment” provisions contained in the New DTT are in accordance with the OECD Model Treaty,
“A fixed place of business where the business of an enterprise is wholly or partly carried on”.
2. The term “permanent establishment” includes especially:
a) place of management;
b) a branch;
c) an office
d) a factory;
e) a workshop, and
f) a mine, an oil or gas well, a quarry or other place of extraction of natural resources.
A building site or construction or installation project constitutes a permanent
establishment only if it lasts more than twelve months.
PE will also include a warehouse or other structure that is used for the sale of goods.
PE any supervisory activities carried out in connection with a construction or installation project for a period exceeding 12 months in a year.
Director’s fees
Director’s fees received by a resident of a contracting state may be taxed in the other state where the company has its residency.
Example:
A Ukrainian individual serves on the Board of Directors of a Cyprus tax resident company and receives director’s fees.
Under the new Treaty, such director’s fees may be subject to taxation in Cyprus and not in Ukraine.
Beneficial Ownership – Right to receive income
Ukrainian legislation, Article 103 § 3 of Tax Code “Beneficial Owner is the individual person entitled to receive such income”.
Under the new DTT nominees and agents are excluded from such income, only the Beneficial Owner.
Immovable Property (article 6):
Any income generated from immovable property located in either of the Contracting States, may be subject to tax at the state where the immovable property is located.
Capital Gains (article 13):
Gains realised by Cyprus residents from the alienation of shares in Ukrainian companies of any kind as well as real estate companies will not be taxed in Ukraine.
Cyprus Resident Company having a shareholding participation in a Ukrainian Company possessing immovable property located in Ukraine, on disposal of such shares, Cyprus that has the right to impose capital gains tax.
Cyprus fully exempts Capital Gains Tax on the sale of securities (including shares), if immovable property located outside Cyprus.
Elimination of Double Taxation (article 21):
Income tax which may be payable by a resident of a Contracting State in the other Contracting State shall be tax deductible in the state of residence.
Conclusion
The Treaty allows Cyprus to remain one of the most beneficial jurisdictions for investment in Ukraine.
Removes the uncertainty and controversy created by the applicability of the old treaty with the former USSR.
Investments in Ukraine through Cyprus will continue to increase in a stable tax environment and planning of future investments.
The new Treaty in combination with the favorable tax system offering the low tax rate of 12.5%, and the legal framework in Cyprus guarantees the required stability and promotes investment, no tax on any dividend income earned, reduced tax rates on any income arising from royalties, whereas no tax is charged in Cyprus for any income relating to the sale of the shares of any company including immovable property which is situated in Ukraine.

Recapitalization of Bank of Cyprus (30.07.2013)

[su_expand height=”80″ link_color=”#9e872c” link_style=”button” link_align=”right” more_icon=”icon: angle-down” less_icon=”icon: angle-up”]As Central Bank of Cyprus stated this is a significant progress at Bank of Cyprus (BoC) with the completion of the recapitalization and the exit from resolution.

The recapitalization ensures that the BoC well exceeds its minimum capital adequacy ratio. Based on the latest financial information, BoC’s Common Equity Tier 1 ratio is estimated to stand at around 12%.
The Central Bank of Cyprus, Ministry of Finance and representatives of the Troika agreed on the BOC fully recapitalized today by the overall conversion of 47,5% of uninsured deposits into shares in the bank, thus putting an end to a period of uncertainty. This is the final stage of the bank’s resolution process and there will be no further measures under the Resolution Law.
Following the recapitalization, 12% of deposits that were previously blocked will be released (5% in total).
The share structure of BoC will be amended so that all shareholders hold ordinary shares. The new structure will be compliant with the European Capital Requirements Regulation.
The recapitalization of Bank of Cyprus and the output of the resolution regime are important milestones to strengthen the financial position of banks and stabilize Cyprus financial sector, since following such recapitalization Bank of Cyprus starts again its operations on much stronger foundations.
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Cyprus Parliament is expected to ratify the DTA Ukraine – Cyprus in September 2013

[su_expand height=”80″ link_color=”#9e872c” link_style=”button” link_align=”right” more_icon=”icon: angle-down” less_icon=”icon: angle-up”]The Double Tax Agreement Ukraine – Cyprus which was ratified by the Ukrainian Parliament on 4 July 2013 remains to be ratified by the Cyprus Parliament.  It is expected to be ratified by the Cyprus Parliament in September 2013.
The new DTA will be applied once Cyprus and Ukraine have exchanged official notices of the ratification. It is expected to be applied 1 January 2014.  Until the new DTA takes force, the 1982 double taxation agreement between Cyprus and the Union of Soviet Socialist Republics (USSR) will continue to apply.
Please follow our news link for updated news https://www.naklaw.com/category/news/
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Extension on Levy for Cyprus Company 2013

[su_expand height=”80″ link_color=”#9e872c” link_style=”button” link_align=”right” more_icon=”icon: angle-down” less_icon=”icon: angle-up”]The annual levy of €350 is obligatory for all the Cyprus Companies.  Because many professionals and the general public continue to face difficulties in paying the annual levy of three hundred and fifty euros (€350) due to the restrictive measures on banks, a further extension has been given to be paid until the 31st of July 2013.
Specifics:

  • Companies that stated dormant in 2012 have to pay €350 until 31/07/2013
  • Companies being registered in 2012 have to pay €350 until 31/07/2013
  • Companies that have not informed about dormant status in 2012 or pay the levy have to pay now €500.

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Ukraine adopted Double Tax Agreement with Cyprus

[su_expand height=”80″ link_color=”#9e872c” link_style=”button” link_align=”right” more_icon=”icon: angle-down” less_icon=”icon: angle-up”]The preferred tool of Ukrainian business (The convention of the former Soviet Union and Cyprus on the avoidance of double taxation of October 29, 1982) became the legend.
4 July 2013, the Ukrainian Parliament ratified convention between the governments of Ukraine and Cyprus on avoiding double taxation and preventing income tax evasion and its protocol, which were signed in Nicosia, Cyprus, on November 8, 2012. 244 Members of the Parliament supported the decision.
The New DTA will be applicable for taxation of the income beginning from 2014.
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Cyprus Investment Sector Remains Strong

No matter what attacks Cyprus is dealing with from the Euro Group, the island remains well on its feet and is turning into a model of new progressive projects that attract sophisticated investors, visitors and tourists.  Such projects are:

These projects boost the economy and create new jobs at a time of a global financial recession.  There is no reason why Cyprus cannot take a giant leap forward to a new economic model and reshape its destiny as progressive, prosperous and secure European nation.

There are a number of factors which need to be considered when choosing the appropriate tax jurisdiction. Our law firm will assist in making the proper decision as we have the expertise and qualified professional legal consultants who are always updated with the latest global economic situations to consult you in developing the proper tax structure.

Tax rate

To choose a specific jurisdiction, the most essential factor to consider is the corporate tax rate. Other than the tax rate, further examination needs to be done to determine what the effective tax rate is after considering aspects such as double-tax treaties between countries, tax exemptions, tax structuring and more in order to reach the actual rate of tax which will apply under a specific tax structure.

  • Cyprus companies are taxed at the rate of 12.5% on profits generated in Cyprus and on worldwide basis.  One of the lowest tax rates in Europe.
  • A Cyprus Holding Company is widely used as an ultimate or intermediate holding company to minimise or eliminate taxes arising on dividend income or gains from the disposal of shares.

Geographic location

Even though technology has advanced and it is possible to operate business remotely using online tools, geographical location is essential when choosing a tax jurisdiction. Certain tax jurisdictions require clients to conduct in-country annual board meetings so it is important to understand the frequency and costs of travel and accommodations expenses.

  • Cyprus is in the center of the Mediterranean Sea located between Europe, Asia and Africa.  Strategic location at the crossroads of three continents which make the country the perfect location and easy access. 

Costs – setup and fees

The formation of a company of a specific jurisdiction and the operation of a tax structure is an essential factor in establishing whether the tax savings achieved are suitable the costs incurred. Service providers in various jurisdictions tend to charge different levels of fees since it depends on the cost of operation in their particular country as well as the range of expertise on offer.

  • Setting up a Cyprus Company costs less than setting up any other company in Europe.
  • Cyprus currently has the highest percentage of citizens of working age who have higher-level education in the EU, therefore, the service is professional.
  • Our firm has qualified lawyers that can assist quickly, efficiently and professionally.

Efficiency and promptness

The ability to quickly establish an operational structure is determined not only by the service provider but it is often an issue of local legislation as well as efficiency of government departments. Especially for a private equity fund which is looking to execute a particular transaction within a short period of time.

  • There are always Cyprus Shelf Companies that you can operate the same day.

Quality of service (tax, legal, fiduciary, banking)

The international tax planning sector is jagged and combines both local performance as well as a number of increasingly international performances. It is often the case that the complexity of a transaction or structure will determine how sophisticated a service provider you need to engage.

  • Our firm provides international fiduciary services, from simple asset protection to complex structures.  Our firm can assist in setting up trust structures for various purposes considering local legislation and international legal aspects.
  • Advising and assisting in the formation of an appropriate business vehicle
  • Acting as Nominee Director and/or Shareholders
  • Acting as Local Non-Executive Directors
  • Providing Registered office address and all related company activities
  • Acting as Company Corporate Secretary

Purpose of tax structure

When a tax structure is established for single investment into a specific jurisdiction, the process for choosing a tax jurisdiction is not the same compared to a tax structure where a long-term personal wealth vehicle is being formed and this will depend on other aspects such as the provision of Private Banking services in a particular jurisdiction as well as confidentiality, and of course double-tax treaties.

  • The Eurozone political economic decisions regarding Marfin Bank (Laiki Bank) was made by Eurogroup and it was politically inevitable.
  • Cyprus has a variety of banks other than Laiki that remain healthy, such as Hellenic Bank, Alpha Bank, Piraeus Bank, National Bank of Greece, Emporiki Bank, FBME Bank, and of course there are many foreign banks in Cyprus as well.
  • You can also open a bank account outside of Cyprus in foreign banks such as: CIM Banque SA, Baltic International Bank, Banque Internationale a Luxembourg SA, Danske Bank, HSBC, UBS, Emirates NBD, ABLV, Maybank International, Rietumu Bank, BOV Bank, Emirates NBD Bank.   Our firm can open a bank account for you anywhere in the world with any bank you prefer that is not listed here.
  • When forming a Cyprus Company there is confidentiality.  The BO can remain fully anonymous by appointing nominee shareholders, directors and a secretary. The interest of the beneficial shareholder can be safeguarded by the issue of a declaration of trust by the nominee in favour of the beneficial shareholder or shareholders. Where nominees are used, the disclosure of the beneficial shareholders or real directors is not a matter of public record, and the names do not need to be disclosed.
  • Cyprus has double tax treaty agreements with more than 47 countries.

Reputation (whitelisted / blacklisted)

The reputation of the specific tax jurisdiction is mandatory. There are various “white-lists” and “black-lists”, depending on your particular viewpoint and it’s a good idea to consider the clarity of the structure.

  •  Cyprus is “white listed” in all the countries it has double tax treaty with.

Re-domiciliation

[su_expand height=”80″ link_color=”#9e872c” link_style=”button” link_align=”right” more_icon=”icon: angle-down” less_icon=”icon: angle-up”]Corporate re-domiciliation is the process by which a company moves its domicile from one jurisdiction to another by changing the country under whose laws it is registered or incorporated, while maintaining the same legal identity.
Companies’ re-domicile for a variety of reasons including to take advantage of more favourable tax laws or less stringent regulatory provisions; to align their place of registration with their shareholder base; or to access specialist capital markets.
Up until the 28/07/2006 the Cyprus Companies Act (Cap.113) did not provide for companies to Re-domicile to Cyprus or from Cyprus to another jurisdiction. The enactment of Law 124(I)/2006 on the 28/07/2006, amended Companies Law Cap. 113, and theoretically the re-domiciliation of companies to and from Cyprus were made possible from this date. However, in practice only recently have regulations been issued by the Council of Ministers which provided details of the procedure to be followed, the forms to be filed and the fees payable
Application for re-domiciliation in Cyprus
A foreign company registered in a country which allows re-domiciliation and whose’ Memorandum and Articles of Association (M&A) allow for the possibility of re-domiciliation, may apply to the Registrar of Companies in Cyprus to be registered as a continuing legal body.
Steps to take for filing with the Cyprus Registrar:
Step 1. The application ME1 and MEA must be submitted together first with the relevant original apostilled documents.
Step 2. Once the Cyprus Registrar is satisfied that the documents submitted are in accordance with the relevant provisions of the law, the foreign company will be temporarily registered as a continuing entity in Cyprus and will be issued with a Temporary Certificate of Continuation.
Step 3. The application ME4 must be submitted together with the supporting relevant documents within (6) six months from the issuance of the Temporary Certificate of Continuation, the foreign company must present to the Cyprus Registrar evidence that it has ceased from being a company registered in the country of initial incorporation and that its registration in the foreign country has been cancelled. Usually this document is called Certificate of Discontinuance which must be duly apostilled.
Providing a false declaration as to the solvency of the foreign company is a criminal offence which carries a penalty of imprisonment for up to one year and a fine of up to Euro 34,172.
Important Note
The company must not be removed or cancelled from the foreign registry before Cyprus Registrar issues the Temporary Certificate of Continuation.
The application to cancel its registration in the foreign registry must be made after the Temporary Certificate of Continuation is issued in Cyprus.
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Recent changes in Cyprus tax laws

On the 18th of April, the Cyprus Parliament voted for new tax laws which are in accordance with the provisions of the loan agreement between EU lenders and Cyprus.

  • Cyprus Corporate Tax Rate increased from 10% to 12.5% effective for the tax year 2013.
  • Defense Contributions on interest income derived from deposits will increase from 15% to 30%.  This will take effect from the announcement in the official gazette of the Republic of Cyprus.
  • Increase on the special bank levy from 0.11% to 0.15%.  This measure will be effective from the tax year 2013.

Even with the small increase of 2.5%, Cyprus remains one of the lowest tax jurisdictions in the EU and the increase does not affect holding companies. Additionally, Cyprus holding company regime such as the tax free flow of dividends through Cyprus and the beneficial exit opportunities offered by Cyprus’s favourable national tax legislation and wide network of double tax agreements remain. Cyprus does not impose capital gains tax, except on gains deriving from real estate in Cyprus.

 

Мы переехали в новый офис

Мы рады сообщить Вам о том, что наша фирма переехала в новый офис в Лимассоле.

Точный адрес нашего нового офиса следующий:

Nasos A. Kyriakides & Partners LLC

Kyriakides Business Center

67 Spyrou Kyprianou Avenue

4003, Limassol, Cyprus

P.O.Box 53636, 3317, Limassol, Cyprus

Tel:  +357 25 352 352

Fax: +357 25 352 353

Пожалуйста, запишите и сохраните наш новый адрес. Пожалуйста, обращайтесь к нам по телефону или посредством электронной почты info@naklaw.com за разъяснениями или для получения дальнейшей информации касательно нашего нового месторасположения.
Спасибо Вам всем за сотрудничество.

Cyprus Fiduciary Law – protection to the clients and strengthening the professional sector

The New Legislation on the Regulation of Fiduciaries, Administration Businesses and Role of Company Directors incorporates the provisions of Directive 2005/60/EC into national law, which was passed on the 22 December 2012 and sets a border for the fiduciary industry, as well as the administration of businesses and the role of company directors.
The legislation relates to persons and companies, providing relevant fiduciary and other corporate services relating to the administration and management of trusts and companies in or from Cyprus, including:

  • Directorship and secretarial services provided by a legal person, including acting as an alternative director or secretary;
  • services such as holding of shares of legal persons in a nominee or trustee capacity;
  • provision of  registered office;
  • related to the opening and operating of bank accounts; and
  • Services related to the ownership of financial assets on behalf of third parties.

The crucial objectives of the new legislation are to control the provision of relevant services, to establish and enforce licensing procedures for control and supervision of such services.
The new legislation clearly indicates that relevant services may be offered only by persons which are legal entities that hold a license from Cyprus Securities and Exchange Committee (“CySEC”) on registered law firms, audit firms (and any of their subsidiaries) and licensed financial services institutions who are all exempted from the necessity to obtain such license, the aforementioned exempted are regulated by the Cyprus Bar Association or the ICPAC.  CySEC will maintain a register of license holders and licenses may be issued on such terms and conditions as CySEC considers appropriate.
Criteria to obtain a CySEC licence:

  • Head office must be based in Cyprus;
  • The private individuals, ultimate owners of the company must be fully disclosed and such persons must be considered “fit and proper” by CySEC.
  • It must be represented, administered and managed in Cyprus by at least two qualified capable persons to sensibly manage it.
  • It must employ an in-house legal lawyer or maintain a regular professional relationship with an external lawyer.
  • It must employ a compliance officer, who is approved by CySEC.
  • Regulated service providers must ensure the existence of appropriate internal control procedures in order to ensure that they have accurate, “up to date” information at all times, in compliance with the law.
  • It must employ qualified employees.

CySEC may request at any time that a licence holder should provide any information or documentation that it considers reasonably required for conducting its supervisory role, and in the event of non-cooperation on the part of the licence holder, CySEC may remove and hold any registers, accounts, books, documentation or electronic devices used for the transmission of data for a term of up to 45 days.
Violation of the Law is a criminal offence punishable on conviction by imprisonment of up to five years, or a fine of up to €350,000 or both.  If the offence is committed by a legal entity, then any of its directors, managers or responsible auditors may be personally liable if it is proven that he or she agreed or assisted in the commission of the offence.  CySEC may also impose an administrative fine of up to €500.000 (or up to €1 million for repeat offences), depending on the severity of the offence.
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