Transcript Slide 1

CYPRUS COMPANIES AS
EFFECTIVE VEHICLES
FOR INVESTMENTS
By
Marios Efthymiou
Senior Partner
Dinos Antoniou & Co Ltd
Certified Public Accountants
MAXIMISATION OF NET RETURN THROUGH
INTERNATIONAL TAX PLANNING
• GLOBALISATION OF THE WORLD ECONOMY HAS LED TO
CROSS BORDER INVESTMENTS AND HAS ENHANCED
INTERNATIONAL TRADING
• INVESTORS/BUSINESSMEN ARE INTERESTED IN MAXIMISING
NOT JUST THEIR GROSS YIELD BUT THEIR NET RETURN AFTER
TAXES
• HENCE MINIMISING THEIR TAX BURDEN THROUGH
INTERNATIONAL TAX PLANNING STRUTURES IS SOUGHT
INTERNATIONAL JURISDICTIONS
•
OFFSHORE JURISDICTIONS
( TAX HEAVENS)
– British Virgin Islands
– Belize
– Panama
– Seychelles
– Delaware
– And many others
•
ONSHORE JURISDICTIONS
(TAX BURDEN REDUCED THROUGH COMPLICATED TAX BUSINESS STRUCTURES
- HOLDING JURISDICTIONS)
– Cyprus
– United Kingdom
– Luxembourg
– Switzerland
– Netherlands
– Malta
CRITERIA FOR CHOOSING AN INTERNATIONAL
JURISDICTION
• TAX BENEFITS AND ABILITY TO APPLY AND SUSTAIN THEM
• POLITICAL STABILITY
• RESPECTABILITY OF THE HOLDING JURISDICTION
• DOUBLE TAXATION TREATIES
• HIGH LEVEL OF PROFESSIONAL SERVICES AND RELIABLE
BANKING SYSTEM
• ESTABLISHMENT AND MAINTENANCE COSTS
CYPRUS COMPANIES
•
TAX ADVANTAGES – LOWEST TAX RATE IN EUROPE
•
MEMBER OF THE EUROPEAN UNION
•
STRATEGIC LOCATION
•
HIGH STANDARD OF BUSINESS ENVIRONMENT
•
TAX SYSTEM IN FULL CONFORMITY TO EUROPEAN LAW & OECD DIRECTIVES
AGAINST HARMFUL TAX PRACTICES
•
PAYMENTS FROM CY COMPANIES TO COMPANIES ABROAD ARE NOT SUBJECT
TO ANY WITHHOLDING TAX
•
TRANSACTIONS WITH OFFSHORE COMPANIES ARE ACCEPTED
•
REPUTABLE AND LONGSTANDING INTERNATIONAL BUSINESS CENTRE WITH
STABLE AND COMMITTED POLICY TOWARDS INTERNATIONAL BUSINESS
COMPANIES
PHILOSOPHY & TAX BASE
PHYSICAL PERSONS
• CYPRUS TAX RESIDENTS ARE TAXED ON THEIR WORLDWIDE
INCOME
• NON TAX RESIDENTS ARE ONLY TAXED ON THEIR INCOME
EARNED IN CYPRUS
• TAX RESIDENT RULE
A PHYSICAL PERSON IS CONSIDERED CYPRUS TAX RESIDENT IF
HE/SHE RESIDES IN THE REPUBLIC OVER 183 DAYS IN A YEAR
PHILOSOPHY & TAX BASE
LEGAL PERSONS (COMPANIES)
• A CYPRUS TAX RESIDENT COMPANY IS TAXED IN CYPRUS
• A NON TAX RESIDENT CYPRUS COMPANY IS ONLY TAXED ON
INCOME EARNED IN CYPRUS
• TAX RESIDENT RULE
MANAGEMENT & CONTROL IN CYPRUS.
IN PRACTICE IT IS CONSIDERED WHERE:
 THE MAJORITY OF DIRECTORS ARE
 THE PLACE WHERE THE MAJORITY OF BOARD OF DIRECTORS
MEETINGS & SIGNIFICANT DECISIONS ARE TAKEN
TAX RATES
Main rate
Cyprus Tax resident Co’s
10%
Main rate
Non - Cyprus Tax resident Co’s
0%
Ship owning – Cyprus flag
0%
Ship owning (foreign flag ships), ship
management & ship chartering
Trusts
Tonnage tax
0%
EXEMPTIONS FOR LEGAL ENTITIES
THE FOLLOWING ARE EXEMPTED FROM INCOME TAX:
• PROFITS FROM THE SALE OF SHARES
• INCOME FROM DIVIDENDS
• INCOME FROM INTEREST
SALE OF SHARES
• THE SALE OF SHARES BY CYPRUS COMPANIES ARE
TOTALLY EXEMPTED FROM TAX WITHOUT ANY
CONDITIONS
UNLIKE
OTHER
COMPETITIVE
JURISDICTIONS WHERE THERE ARE LIMITATIONS IN:
 THE PERIOD OF HOLDING
THE % OF HOLDING
I.E. IN UK THERE IS NO CAPITAL GAINS TAX ON THE
DISPOSAL OF SHARES IN UNDERLYING SUBSIDIARIES IF
AT LEAST 10% OF THE SUBSIDIARY CO. IS HELD FOR 2
YEARS
DIVIDENDS RECEIVED
LEGAL ENTITIES
• DIVIDENDS RECEIVED BY A CYPRUS RESIDENT COMPANY FROM ANOTHER CYPRUS
RESIDENT COMPANY ARE EXEMPTED FROM ANY TAXATION
•
DIVIDENDS RECEIVED BY A CYPRUS COMPANY FROM A COMPANY ABROAD IS ONLY
TAXED IF BOTH OF THE BELOW CONDITIONS ARE MET (WHICH IS VERY RARE):
 THE COMPANY PAYING THE DIVIDENDS ENGAGES MORE THAN 50% IN
ACTIVITIES THAT LEAD TO INVESTMENT INCOME
AND
 THE FOREIGN TAX BURDEN ON THE INCOME OF THE COMPANY PAYING THE
DIVIDENDS IS SUBSTANTIALLY LOWER THAN THE TAX BURDEN OF THE COMPANY
IN CYPRUS
PHYSICAL PERSONS
DIVIDENDS RECEIVED BY PHYSICAL PERSONS ARE TAXED AT 15% DEFENCE TAX ONLY IF
THE RECIPIENTS ARE CYPRUS TAX RESIDENTS
INTEREST RECEIVED
• TRADING INTEREST IS TAXED AT 10% INCOME TAX
AFTER DEDUCTING INTEREST EXPENSE AND ALL
OTHER COMPANY EXPENSES
• NON TRADING INTEREST IS TAXED AT 10% DEFENCE
TAX ON THE GROSS AMOUNT
TAX ADVANTAGES IDEAL FOR HOLDING COMPANY
• EXEMPTION FROM TAX ON PROFIT GENERATED FROM THE SALE OF
SECURITIES
• EXEMPTION FROM TAX ON DIVIDEND RECEIVED WHEN CERTAIN
CONDITIONS ARE MET
• EXEMPTION FROM
TAX ON THE PROFITS THAT ARISE FROM A
PERMANENT ESTABLISHMENT ABROAD
• NO WITHHOLDING TAX ON DIVIDENDS RECEIVED FROM A EUROPEAN
SUBSIDIARY COMPANY
• LOWER WITHHOLDING TAX ON INCOMING DIVIDENDS PAID BY A NON EU
COMPANY WITH WHICH CYPRUS HAS A DOUBLE TAX TREATY
NEW SHIPPING TAX SYSTEM LAW
(ENACTED ON 29 APRIL 2010)
• THE NEW SHIPPING TAX SYSTEM LAW IS APPLICABLE RETROACTIVELY AS
FROM 1/1/2010 AND REMAINS IN FORCE UNTIL 31/12/2019
• THE NEW LAW COVERS SHIP OWNERS AND CHARTERERS, AS WELL AS SHIP
MANAGERS, AND ALLOWS COMPANIES TO OPT FOR THE TAXATION OF
INCOME RESULTING FROM A QUALIFYING SHIPPING ACTIVITY UNDER THE
TONNAGE TAX REGIME INSTEAD OF UNDER THE CORPORATE INCOME TAX
LAW
• THE NEW CYPRUS SHIPPING TAXATION SYSTEM IS OFFICIALLY APPROVED
BY THE EUROPEAN COMMISSION AND IS IN FULL COMPLIANCE WITH EU
GUIDELINES ON STATE AID TO THE MARITIME INDUSTRY
NEW SHIPPING TAX SYSTEM LAW
EXTENSION OF TAX BENEFITS
• THE NEW REGIME EXTENDS THE TAX BENEFITS PREVIOUSLY APPLICABLE
ONLY TO OWNERS OF CYPRUS FLAG VESSELS AND SHIP MANAGERS, TO
OWNERS OF FOREIGN FLAG VESSELS AND CHARTERERS
• EXTENDS THE TAX BENEFITS PREVIOUSLY ONLY APPLIED TO PROFITS FROM
THE EXPLOITATION OF VESSELS IN SHIPPING OPERATIONS TO PROFITS ON
THE DISPOSAL OF VESSELS, INTEREST EARNED ON FUNDS AND DIVIDENDS
PAID DIRECTLY OR INDIRECTLY FROM SHIPPING-RELATED PROFITS
• THE TONNAGE TAX OPTION IS NOW EXTENDED TO CREW MANAGEMENT
COMPANIES WHO OTHERWISE WOULD HAVE BEEN EXPOSED TO A 10%
CORPORATE TAX
LOSSES
• LOSSES CARRIED FORWARD CAN BE SET OFF AGAINST PROFITS
WITHOUT LIMITATION IN TIME
• LOSSES INCURRED ABROAD CAN BE SET OFF AGAINST THE
COMPANY’S PROFITS
• LOSSES OF ONE CO IN THE GROUP CAN BE SET OFF AGAINST
PROFITS OF ANOTHER CO
THANK YOU
DINOS ANTONIOU & CO LTD
9 VASSILI MICHAELIDES
3026, LIMASSOL-CYPRUS
P.O BOX 57048, 3311, LIMASSOL, CYPRUS
TEL. 00357 25 824545
FAX. 00357 25 824060
WEB SITE:www.dinoscpa.com
EMAIL: [email protected]
[email protected]
CONTACT PERSONS:
DINOS ANTONIOU, C.E.O
MARIOS EFTHIMOU, SENIOR PARTNER