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oxford - TTN Transnational Taxation Network

CYPRUS AS AS A BASE FOR

INTERNATIONAL ACTIVITIES

TAX PLANNING

By By Athos AthosFouttis

OXFORD MANAGEMENT LTD LTD

CORPAG SERVICES (CYPRUS) LTD LTD

OXFORD

TAX SOLUTIONS


London 4 hours

Moscow 3 hours

New York 12 hours

Abu Dhabi 3 hours

Cairo 1 hour

OXFORD

TAX SOLUTIONS


500 weekly flights Telecommunication Conference facilities

OXFORD

TAX SOLUTIONS


340 sunny days

Beautiful beaches

Snow mountains

OXFORD

TAX SOLUTIONS


• Double tax treaties

• Strategic location

• Friendly relations

• Excellent telecommunications

• Bonded & warehouse facilities

• Modern banking

WHY CYPRUS

OXFORD

TAX SOLUTIONS


• “Low tax” not a tax haven

• No exchange control

• Profits after tax repatriated

• Tax sparing credits

WHY CYPRUS

OXFORD

TAX SOLUTIONS


• Duty Free items for company & employees

• Easy residence permit

• No estate duty

• No capital gains tax

• No social insurance contributions for non EU

persons

• No stamp duty

WHY CYPRUS

OXFORD

TAX SOLUTIONS


• Non discriminating legal system

• Easy accessibility by air & sea

• International agreements

• Low cost of living

• Low set up & running costs

• Qualified personnel

WHY CYPRUS

OXFORD

TAX SOLUTIONS


• English used in business

• Educated and hospitable people

• No crime

• Pleasant climate

• Confidentiality

• Nominee / Trustee functions

WHY CYPRUS

OXFORD

TAX SOLUTIONS


TAX RATE

COMPANY TAX 10%

OXFORD

TAX SOLUTIONS


SHIPOWNING COMPANIES 0%

SHIPMANAGEMENT COMPANY

- Tonnage Tax or income tax 4.25%

OXFORD

TAX SOLUTIONS


TAX EXEMPT PROFIT

NO CAPITAL GAINS TAX

•Only on sale of immovable Property situated in

Cyprus

•Sale of shares in companies which own

immovable property in Cyprus and not listed on

any recognised stock exchange.

OXFORD

TAX SOLUTIONS


TAX EXEMPT PROFIT

• Dividend • Dividend from from abroad

abroad

• Cyprus • Cyprus company company holds> holds> > 1% 1% share share capital

capital

Exemption Exemption does does not not apply apply if if foreign foreign entity

entity

> > 50% 50% of of its its income income from from investment investment activity

activity

AND

AND

Pay Pay tax tax substantially substantially lower lower than than Cyprus

Cyprus

OXFORD

TAX SOLUTIONS


TAX EXEMPT PROFIT

• Substantially • Substantially lower lower = = Less Less than than 5% 5% but but it it covers covers not

not

only only tax tax paid paid by by the the paying paying company company but but also also tax tax paid

paid

by by lower lower level level subsidiaries.

subsidiaries.

• Investment • Investment activity activity = = No No clear clear definition

definition

OXFORD

TAX SOLUTIONS


TAX EXEMPT PROFIT

• Divided

• Divided income income (if (if both both criteria criteria is is not not met.)

met.)

15% 15% --Defence DefenceTax

Tax

• Tax • Tax credit credit for for any any withholding withholding tax tax or or tax tax sparing

sparing

credit credit (where (where applicable) applicable) is is allowed.

allowed.

OXFORD

TAX SOLUTIONS


CYPRUS DOUBLE TAX TREATIES

Canada

Czech Republic

Denmark

Egypt

Germany

Greece

Ireland

Poland

Russia

TAX SPARING CREDITS

Italy

Malta

Romania

Slovakia

S. Africa

Sweden

U.K.

Yugoslavia

India

Syria

OXFORD

TAX SOLUTIONS


CYPRUS HOLDING STRUCTURES



Zero tax tax on on dividends received from overseas

(provided that that the the Cyprus company holds > 1% 1% of of the

the

shareholding of of the the paying company).



Payments of of dividends, interest and and royalties to to non

non

residents are are not not subject to to any any withholding tax.

tax.



Large network of of tax tax treaties including USA



Parent subsidiary directives.

OXFORD

TAX SOLUTIONS


PARENT SUBSIDIARY DIRECTIVE

• Dividends

• Dividends –– Nil

Nil

Associated Associated = = > > 20% 20% shareholding

shareholding

From From 1/1/07 1/1/07 > > 15%

15%

1/1/09 1/1/09 > > 10%

10%


PARENT SUBSIDIARY DIRECTIVE

Interest/ Interest/ Royalties Royalties –– Nil

Nil

Associated Associated = = > > 25% 25% Shareholding

Shareholding


INDIRECT TAX

VAT 15%

OXFORD

TAX SOLUTIONS


INCOME TAX ON INDIVIDUALS

0 0 CY CY 1000 1000 0%

0%

10001 10001 15000 15000 20%

20%

15001 15001 20000 20000 25%

25%

20001 20001 And And over over 30%

30%

OXFORD

TAX SOLUTIONS


BENEFITS FOR USING THE TAX

TREATIES



Avoid double taxation



Reduce withholding tax

tax



Structure legal operations to to minimize taxation



International law law to to protect you you (treaty above local

law law in in case case of of conflict)

OXFORD

TAX SOLUTIONS


BENEFITS FOR USING THE CYPRUS

TREATIES

• Very favourable terms. Usually very low or nil

withholding tax

•Large selection of treaties

•Treaties with most Central & Eastern European

countries. (The developing Countries)

OXFORD

TAX SOLUTIONS


CYPRUS DOUBLE TAX TREATIES

OXFORD

TAX SOLUTIONS

Austria Austria

Belgium Belgium

Belarus Belarus

Bulgaria Bulgaria

Canada Canada

China China

Czech Czech Republic Republic

Denmark Denmark

Egypt Egypt

France France

Germany Germany

Greece Greece

Hungary Hungary

India India

Ireland Ireland

Italy Italy

Kuwait Kuwait

Mauritius Mauritius

Malta Malta

Norway Norway

Poland Poland

Romania Romania

Russia Russia

Slovakia Slovakia

South South Africa Africa

Singapore Singapore

Sweden Sweden

Syria Syria

Thailand Thailand

United United Kingdom Kingdom

U.S.A U.S.A

U.S.S.R U.S.S.R

Yugoslavia Yugoslavia


PROPOSED AGREEMENTS

UNDER NEGOTIATION

Algeria Kazakhstan Singapore

Armenia

Malaysia

Slovenia

Baltic States Moldova

Spain

Bangladesh Portugal

Sri Lanka

Georgia

Qatar Turkmenistan

Vietnam Seychelles Indonesia

OXFORD

TAX SOLUTIONS


D.T.T. - CYPRUS AND RUSSIA

OLD OLD

NEW

CYPRUS

D.T.T.

D.T.T.

LAW.

DIVIDENDS 0% 0% 5%* 5%* 0% 0%

ROYALTIES 0% 0% 0% 0% 0% 0%

INTEREST 0% 0% 0% 0% 0% 0%

MANAGEMENT FEES FEES 0% 0% 0% 0% 0% 0%

* 10% 10% If If capital < US$100.000


D.T.T. - CYPRUS AND USA

D.T.T.

CYPRUS

LAW.

DIVIDENDS 15/5 15/5 * 0% 0%

ROYALTIES 0% 0% 0% 0%

INTEREST 10% 10% 0% 0%

* Holding conditions apply

OXFORD

TAX SOLUTIONS


Holding conditions

• During the part of the paying corporation’s s taxable year which

precedes the date of payment of the dividend and during the whole

of its prior taxable year (if any), at least 10% of the out-standing

shares of the voting stock of the paying corporation was owned by b

the recipient corporation; and

• Not more than 25% of the gross income of the paying corporation

for such prior taxable year (if any) consists of interest or dividends

idends

(other than interest derived from the conduct of banking, insurance

nce

or financing business and dividends or interest received from

subsidiary corporations, 50 % or more of the outstanding shares of

the voting stock of which is owned by the paying corporation at the

time such dividends or interest is received)

OXFORD

TAX SOLUTIONS


WITHOLDING TAX

NIL- NIL Tax -- payments payments out out of of out Cyprus

of Cyprus

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TAX SOLUTIONS


NOT TREATY RATES IMPOSED

BY VARIOUS COUNTRIES

Country Dividends Interest Royalties

% % %

UK 23 20 33

USA 30 30 30

Canada 25 25 25

Australia 30 10 30

Germany 25 35 25

France 33.33 15 25

Japan 20 20 20

Russia 20 15 15

China 20 20 20

Spain 25 25 25

OXFORD

TAX SOLUTIONS


EXAMPLE – ROYALTIES FROM GERMANY

AUSTRALIAN CO.

LICENCING

CYPRUS

SUB LICENCING

GERMANY

OXFORD

TAX SOLUTIONS

DIRECT VIA CYPRUS

Royalties received 900.00 900.00

Dividends received (95.75)

900.00 995.75

====== ======

Royalties paid 1.000.00

Sub royalty paid (900.00)

Net profits 100.00

Tax (4.25)

Net profit/dividends 95.75

=======

Royalties Paid 1.000.00 1.000.00

Withholding Tax (100.000) (NIL)

900.00 1.0000.00


DOUBLE TAX TREATIES

BUSINESS PROFITS

An enterprise of country “A” can carry

business in country “B”

No tax will be payable in country “B” unless

a “permanent establishment” is being

established.

OXFORD

TAX SOLUTIONS


OXFORD

TAX SOLUTIONS

PERMANENT ESTABLISHMENT

INCLUDES:

A place of management

a branch

an office

a factory

a workshop

a mine, an oil or gas well, a quarry or any

other place of extraction of natural

resources


PERMANENT ESTABLISHMENT

Does NOT include:

• Facilities for storage, display, delivery of

goods

•Other exemptions

OXFORD

TAX SOLUTIONS


D.T.T –CYPRUS AND RUSSIA

Tax at 10% in CYPRUS

Display shop

No Russian Tax

OXFORD

TAX SOLUTIONS


D.T.T. – CYPRUS AND POLAND

PERMANENT ESTABLISHMENT

Construction, assembly 12 months

building site etc.

OXFORD

TAX SOLUTIONS


CONSTRUCTION / ASSEMBLY

PERMANENT ESTABLISHMENT

NON TREATY

CYPRUS

IBC

POLAND

TAXED FROM

DAY 1

POLAND

TAXED IF EXCEEDS

12 MONTHS

OXFORD

TAX SOLUTIONS


• For Polish Tax purposes – No tax in

Poland as no “permanent establishment”.

As per treaty ( < 12 months)

• For Cyprus tax purposes – No tax in

Cyprus on profit generated from

“permanent establishment” overseas. As

per domestic law definition. (>(

> 3 months)

OXFORD

TAX SOLUTIONS


CONSTRUCTION AND ASSEMBLY PROJECTS

PERMANENT ESTABLISHMENT

No No time time

period period

66 Months Months 12 12 Months Months

18 18 Months Months 24 24 Months Months

Greece

Norway

Ireland

Canada

Czechia

Slovakia

Denmark

Egypt

Germany

Malta

Italy

Sweden

U.K.

U.S.A

France

Hungary

Kuwait

India

Poland

Romania

Syria

S. Africa

Yugoslavia

CIS Countries

Bulgaria

Austria

China

OXFORD

TAX SOLUTIONS


TREATY APPLY TO RESIDENTS

Resident “any person who, under the laws of that

state, is liable to tax therein by reason of

his domicile, residence, place of management

or any other criterion of a similar nature.”

OXFORD

TAX SOLUTIONS


“TIE BREAKER”

“PLACE OF EFFECTIVE

MANAGEMENT”

OXFORD

TAX SOLUTIONS


“TIE BREAKER” Clause

U.K. REGISTERED

COMPANY

NO U.K. TAX

SHIFT PLACE OF MANAGEMENT

CYPRUS

BRANCH

TAX AT 10%

Operations in Europe and elsewhere (not in U.K.)

Invoice through Cyprus

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