Transcript CPM and South Africa

Cyprus remains the ideal hub for
international business
South Africa
September 2006
1
Why Cyprus
INTRODUCTION
Strategic geographic location
Middle of three continents: Asia, Europe, Africa
Natural gateway to the Middle East
Facts about Cyprus
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Surface: 9.251 square kilometers
Population: approx. 850.000
Time Zone GMT+2
EU / Eurozone Member State
Low corporate tax rate at 12,5%
Significant economic memberships such as WTO, World
Bank, IBRD, and IMF; EBRD present in the island
Financial Action Task Force compliant
Legal framework based on British law
Financial framework based on IFRS
Regulatory framework aligned with EU
More than 30 years experience as an International Business
Centre; credible, reputable, competitive, modern
International Banking Units and multinational companies
have been operating from Cyprus for years
Low set-up costs
Highly skilled, educated and multilingual workforce at highly
competitive fees
Excellent telecommunications systems
Why Cyprus
• Tremendous economic and tax advantages
• Extremely attractive lifestyle
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Family security and safety
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Excellent public and private international schools
 Exclusive golf resorts
 Fabulous weather
 High quality tourist facilities
 Culture, history, art and gastronomy
Cyprus 5th Best Country to Relocate
Growth Drivers
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Gas Exploration and Exploitation
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Tourism
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EU Funds
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Cyprus Shipping Industry
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International Business
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Construction Industry
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Farming and Agriculture
Cyprus as an international business hub
All advantages of the Cyprus tax regime remain intact
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Over the last 30 years, Cyprus has become the jurisdiction of choice for structuring
of international operations
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Historical, cultural and religious ties with main markets
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Strong legal framework fully harmonized with the European Union Directives
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Cyprus is commonly used as a secure jurisdiction amongst investors setting up joint
ventures due to its developed legal regulation system based on the UK law system;
investors from different countries can utilize a wide variety of legal instruments
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Cyprus is used in tax planning for Holding, Financing and IP Companies, as an
intermediary jurisdiction for structuring activities in Europe, Asia and Middle East
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Foreign investors structure their operations safely due to:
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Extensive and expanding double tax treaty network (Spain, Finland,
Estonia, UAE, Portugal, Ukraine)
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Application of EU Directives
New tax incentives provided by domestic tax laws
Tourism
Sector has proved resilient to
the economic challenges Cyprus faces
• Cyprus has an open skies policy that will boost the
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tourism industry in Cyprus.
Specific foreign investments were recently directed
to the tourism industry
A casino development license as been proposed.
And tender process is underway; license expected
to be granted within 2016
Golf resorts, exclusive hotels and wellness tourism
products and services are growing
Strong links with major tour operators, a significant
expansion in flight destinations and the
development of niche tourism all indicate the
sector will continue to flourish;
Substantial foreign investments have been
attracted during the last two years
Huge prospects for medical and sport tourism
Shipping
More than 140 ship owning and ship management
companies are operating in Cyprus
• Cyprus has the 10th largest merchant fleet globally and the 3rd largest in the EU,
with about 1.022 vessels under the Cyprus flag
• Cyprus Tonnage Tax System (TTS) offers numerous advantages to ship operators,
owners and charterers
• The TTS is unique as it facilitates ship owning, ship management and ship
chartering at the same time
The Cyprus Tax System
MAIN FEATURES AND STRUCTURES
The Cyprus Tax System at a Glance
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Taxation is based on residency status
12,5% corporate tax on trading profits
Notional Interest Deduction
Interest expense on 100% corporate acquisitions permitted
Fully reformed Intangible Property (IP) Regime
Capital gains on sale of securities: 100% exemption
Capital gains from sale of immovable property situated
outside Cyprus is tax free
Capital gains on real estate acquired by 31.12.2016 exempt
irrespective of date of sale
The Cyprus Tax System at a Glance (cont’d)
• No withholding tax on outgoing payments (dividends-interestroyalties)
• Tax free Re-Organisations (cross border permitted)
• Foreign PE profits exempt
• No Controlled Foreign Company (CFC) rules
• No thin capitalization rules (no debt to equity ratio)
• Applicability of all EU directives
• Advance ruling practice exists
• Extensive and constantly expanding network of attractive
Double Tax Treaty network
Tax Considerations
Tax on the disposal/redemption of units
0%
Tax on the profits arising from the trading
of securities
0%
Tax on interest income
Withholding tax on payments of
dividend/interest
Corporation tax
Capital gains for non resident
shareholders
Personal income tax progresses up to
12,5%
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12,5%
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35% but there is a 50% exemption for
income over €100.000 for a 5 year period
from date of first employment in Cyprus
Cyprus Double Tax Treaty Network
Armenia
Greece
Poland
Syria
Austria
Hungary
Portugal
Thailand
Belarus
Iceland
Qatar
Ukraine
Belgium
India
Romania
U.A.E
Bulgaria
Ireland
Russia
United Kingdom
Canada
Italy
San Marino
U.S.A
China
Kuwait
Serbia
Iran
Czech Republic
Lebanon
Seychelles
Denmark
Lithuania
Singapore
Egypt
Malta
Slovakia
Estonia
Mauritius
Slovenia
Finland
Moldova
South Africa
France
Montenegro
Spain
Germany
Norway
Sweden
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Cyprus South Africa Double Tax Treaty
New Protocol 2015
Treaty Rate *
Cyprus Tax Law
South Africa Tax
Law
Dividends
10% or 5% **
0%
15%
Interest
0%
0%
15%
Royalties
0%
0%
15%
Capital Gains Capita gains from the sale of shares will be taxed in Cyprus
where the seller is a Cyprus tax resident. The treaty does
not contain a property rich clause.
*The new protocol has been ratified on 18 September 2015 and it shall be
applied retroactively as from 1st April 2012.
** 5% withholding tax on dividends provided that the receiving company holds
at least 10% of the share capital in the distributing company, otherwise 10%.
Cyprus Tax Residency
• Management and Control of companies must be exercised in Cyprus.
Relevant criteria for consideration are:
– The structure of the Board of directors
– Place of the Board meetings
– Major decisions and contracts to be concluded and signed in Cyprus
and detailed board minutes must exist
– The place where the discussion and approval of accounts takes place
must be Cyprus
– Personnel and office space can strengthen substance and are
recommended
• Note: Place of business not relevant for determining residence
The Cyprus Holding Company
Inbound Investment to South Africa
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Dividends paid from South Africa to
Cyprus Holding Co are subject to 10%
withholding tax which is reduced to
5% provided that Cyprus Holding Co
holds at least 10% of the share
capital in the distributing company
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Incoming Dividends are exempt from
taxation in Cyprus (subject to relaxed
conditions)
10% or 5% •
WHT on
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dividends
Corporate tax rate in Cyprus at 12,5%
Foreign Co
0% WHT
Cyprus Holding
Co
Max reinvestment
INVESTMENT
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No Capital Gains tax upon exit and
disposal of investments
No Cyprus Dividend withholding tax
The Cyprus Holding Company
Outbound Investment to South Africa
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Shareholder
Shareholder
– Zero withholding tax using the
EU P/S Directive or
0% WHT
– Low withholding tax using the
Tax Treaty Network of Cyprus
Cyprus Holding
Co
Max reinvestment
EU / NON EU
investment
Dividends paid from overseas
investments to the Cyprus Holding
Co are subject to:
Dividends
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Incoming Dividends are exempt from
taxation in Cyprus (subject to relaxed
conditions)
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Corporate tax rate at 12,5%
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No Capital Gains tax upon exit and
disposal of investments
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No Cyprus Dividend withholding tax
The Cyprus Holding Company
Financing Company
Shareholder
Bank Loan
Interest Payment
to the Bank
Cyprus Holding
Co
Interest without WHT
No thin capitalization rules
Thin margin left only to be
taxed at low 12,5%
Interest plus mark-up
EU / NON EU
investment
Loan
Margin
Up to €50m
0,35%
Up to €200m
0,25%
Over €200m
0,125%
Risk free/interest
free loans
0,35%
IP Tax Regime – General Provisions
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Income eligible to benefit from IP tax regime:
– Royalty Income
– Gains from the disposal of an IP
– Compensation received for an illegal use of such IP rights
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Qualifying IP assets include amongst others :
• Patents
• Trademarks/service marks
• Designs/models
• Copyrights
• Know-how
• Work in process, R&D
• Client rights related to scientific literary or artistic work
• The above is a non-exhaustive list / tax rulings can be obtained easily in
cases of doubt
IP Tax Regime – General Provisions
1.Cyprus IP Tax Regime – 80% tax
exemption on income and disposal gains
Overseas Parent
2. Expenses incurred for the production of
such income also allowable
3. Amortization over current and
following four years
4. Effective Tax Rate of 2.5% or less
Licence Agreement
Operating Co
Cyprus IP Co
Royalty Payment
IP Tax Regime – Practical Example
Tax on Royalties from Lease of an IP right
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Cyprus Company acquires a qualified IP during 2015 for € 1m
Cyprus Company enters into a license agreement earning €400k per annum as royalty income
Cyprus Company suffers € 50k as interest expense on loan to acquire the IP
Amortization is calculated as 20%* € 1m = € 200k per annum
Description
2015 Income Statement in €
Gross Royalty Income Received
400.000
Less Direct Costs – Interest and
amortisation
(250.000)
Net Profit from IP operations
150.000
Less 80% notional expense
(120.000)
Taxable Income
30.000
Tax Liability (30.000@12,5%)
3.750
Effective Tax Rate
0.94%
Real Estate Holding Company
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Sale of the “Asset Rich” South African
company by the Cyprus company is
taxable only in Cyprus as per the
Double Tax Treaty
Gains from disposal of shares
connected to immovable property
situated outside Cyprus are exempt
from tax in Cyprus as per local tax
laws
Therefore, no capital gains tax on the
sale
EU / NON EU
investment
Cyprus Holding Co
Asset Rich
South African Co
Cyproman Services Ltd
Corporate Presentation
Cyproman Services Ltd
Corporate Presentation
About CPM
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CPM is an Administrative Service Provider authorized by the Cyprus Securities and
Exchange Commission with registration number 56/196
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Global administrator to Private, Corporate and Institutional Clients
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Established in 1996; serving clients internationally for 20 years
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We provide multi-jurisdictional legal, corporate, fiduciary, investment and fund
administration services through regulated entities
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We maintain a client-centric approach offering tailored solutions
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We employ 100 multilingual persons in four full-fledged offices and includes best of
breed lawyers, tax experts, accountants and professionals
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We are the preferred corporate service provider of KPMG in Cyprus
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We maintain our independent compliance framework
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CPM members of top management are member of Society of Trust and Estate
Practitioners (STEP)
Major Services
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Company Registration
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Formation of International Trusts and Trustee Services
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Fiduciary Services
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Company Administration and Secretarial Services
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Fund Administration
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Escrow Services
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Accounting and Bookkeeping, Payroll
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Banking
Cyprus Citizenship and Residency by Investment
Thank you!
RODOULA DEMETRIADES
Manager Business Development
Tel: +357 22 474 000
Direct: +357 22 474 814
email: [email protected]
www.cpm.com.cy
©2016 Cyproman Services Limited, a Cyprus limited liability. All rights reserved. Printed in Cyprus.
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