Author Archives: LSTS

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Cyprus Tax Resident

CYPRUS – POSITIVE AMENDMENTS IN THE TAX LEGISLATION

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TAX RESIDENT IN CYPRUS BY STAYING ONLY 60 DAYS DURING A TAX YEAR

A. INTRODUCTION

On 14 July 2017, the House of Representatives of Cyprus passed an amendment to the Cyprus Income Tax Law (2002 – 2016 as amended) (the “Cyprus Income Tax Law”) whereby an individual who spends in Cyprus 60 (sixty) or more days will be considered as a Cyprus tax resident provided that certain conditions are met.

This can be very beneficial for persons who have business ties in Cyprus since an individual who is tax resident in Cyprus and who is not domiciled in Cyprus is granted an exemption from taxes on dividends received either in Cyprus or abroad.

B. TAX RESIDENT INDIVIDUAL – NEW PROVISIONS

Under the new provisions of the Cyprus Income Tax Law, an individual will be a tax resident in Cyprus provided that all the below conditions are met:

  1. The individual stays in Cyprus for 60 (sixty) or more days in a tax year (1 January – 31 December)
  2. The individual, at any time during the tax year, exercises any business in Cyprus and/or is employed in Cyprus and/or holds a post (i.e. a director) in a company which is tax resident in Cyprus;
  3. The individual maintains a permanent home in Cyprus which can either be owned or rented.
  4. The individual does not remain in any other country for one or more periods which altogether exceed 183 (one hundred eighty three) days in the same tax year and he is not a tax resident in any other country in the same tax year.

It is clarified that an individual who meets the above conditions will not be considered a tax resident of Cyprus provided that, in the same year, he cease to i.) exercise of any business and/or employment in Cyprus and/or ii.) hold of a post in a company tax resident in Cyprus.

C. ENTRY INTO FORCE

The new provisions are effective as from 1 January 2017.


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Settlement of Taxes in Cyprus

Procedure for Settlement of Taxes in Arrears in Cyprus

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A. INTRODUCTION

In February 2017, the House of Representatives of Cyprus passed a law on the procedure for settling tax arrears, which covers the following taxes: 

(a) Income tax
(b) Special contribution for the defense
(c) Immovable property tax
(d) Capital gains tax
(e) Inheritance tax
(f) Special contribution for employed, retired and self­employed in the private sector
(g) Special contribution for refugees
(h) Stamp duties

Based on the provisions of the legislation the taxpayer shall be exempted from paying penalties, interest, charges on specified outstanding tax amounts and such exemption shall apply proportionately depending on
the number of installments that the taxpayer would agree with the Tax Department that will pay in settlement of all outstanding taxes (the “Arrangement”). Also during the Arrangement period no additional penalties, interests or charges will accrue.

An application should be submitted within a period of 3 months from the entry into force of the Law.

In terms of the procedure it should be noted as follows:

1.) The applications should be done on-line through the Ariadni Tax portal.
2.) The application is assessed by the Tax Commissioner within 15 days from the receipt of the application and the taxpayer is informed of the Tax Commissioner’s decision.
3.) If the Tax Commissioner does not respond within the 15-day period, the application is considered admissible and the applicant’s suggestions are adopted.
4.) The applicant should submit an acceptance of the Arrangement within a period of 15 days.
5.) The applicant taxpayer has the right to object to a Tax Commissioner’s decision to decline the application. The objection must be filed within a period of 15 days from the date the Tax Commissioner’s decision is
notified to the applicant. The objection must be assessed within a further period of 30 days.

Provided that the delays of fails to pay a certain number of installments then the Arrangement is cancelled and the taxpayer will need to pay all taxes, interest, penalties and charges.

The date of entry into force of the new provisions would have been specified in a notification that would have been issued by the Tax Commissioner which would have been published in the Official Gazette (the
Notification”).

Such Notification was issued on 23 June 2017.

 

B. SUBMISSION OF APPLICATION FOR THE ARRANGEMENT

The application for entering into the Arrangement must be submitted within three months from the effective date of the Notification. The effective date of the Notification is 3 July 2017 and therefore the deadline of the submission of the applications is 2 October 2017.

The submission should be done through the government internet portal Ariadni and both the Tax Commissioner’s decision and the debtor’s statement of acceptance are made through the website application.

On exceptional cases whereby there are technical issues in submitting the application on-line then such
application can be submitted in the District Tax Offices.

 

C. TAX LIABILITIES WHICH ARE COVERED BY THE ARRANGEMENT

This regulation relates to the following tax liabilities:

(a) The total amount of outstanding taxes up to and including 31 December 2015, which at the date of the application have been assessed by the Tax Department of Taxation and an assessment has been sent to the taxpayer in relation to this, irrespective whether there is already in place a lawful agreement between the Tax Office and the taxpayer for the repayment of such taxes by instalment or through a court order.

(b) Amounts which became payable through the submission of a provisional tax form which concerns the tax for the years up to 31 December 2015 and whereby the taxpayer did not pay such tax, and provided however that the taxpayer has submitted the annual tax return by 3 July 2017 in relation to these taxes.

(c) Tax liabilities which are assessed by the Tax Commissioner after the effective date of the Notification and related to tax years up to 31 December 2015. In such cases, the deadline for the application for the Arrangement shall be made within three months from the date on which the tax becomes payable, on the basis of the tax assessment which has been issued.

 

D. NUMBER OF MONTHLY INSTALLMENTS WHICH SETS THE PERCENTAGE OF EXEMPTION

Overdue taxes can be included in the Arrangement and be subject to the exemption of a percentage of penalties and interest due to non-payment of taxes due as follows:

Monthly instalments(%) of exemption
(a) one off payment 95%.
(b) from 2 to 8 90%.
(c) from 9 to 15 85%
(d) from 16 to 21 80%
(e) from 22 to 28 75%.
(f) from 29 to 35 70%
(g) from 36 to 42 65%
(h) from 43 to 49 60%
(i) from 50 to 56 55%
(j) from 57 to 60 50%

Payment of the agreed installments is made to the banks with the usage of a unique code or in certain cases to the Tax Office.

 

E. VARIOUS OTHER PROVISIONS

(a) Tax liabilities under the Arrangement will not incur additional penalties or interest for late payment, which is otherwise provided under the relevant legislation.
(b) The procedure to be followed is set in the Introduction of this Newsletter.
(c) The regulation is terminated in specific cases of non-compliance by the taxpayer with his obligations as set on the Notification these being:

  • i.) The non-timely submission of the tax returns
  • ii.) The non-settlement of the new tax obligations which arise after 31 December 2015
  • iii.) The delay in payment of the cumulative of 3 installments
  • iv.) The delay in payment of a single installment for more than 3 months including the month that the installment should have been paid

(d) Where criminal proceedings against a taxpayer are pending before the court and the taxpayer applies
for a regulation which is approved, the proceedings are suspended.

 

F. ENTRY INTO FORCE

The new provisions are effective as from 3 July 2017.


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Brexit

CYPRUS – UNIQUE TAX ADVANTAGES WITHIN EUROPE POST BREXIT

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Cyprus: Europe’s Optimal Tax Regime. The synergy created by Cyprus’ modern, simple and attractive tax regime coupled with its advanced and adaptable English Common Law legal system have created the EU’s most efficient and effective tax regime in tax planning and asset protection. Why:

0% Tax on Dividends received – Dividends received by Cypriot tax resident companies are exempt from Cyprus tax (subject to minor exceptions). The extensive network of Double Tax Treaties (“DTTs”) allows beneficial treatment in respect of withholding taxes (“WHTs”) in the source country.

0% Withholding tax on Dividend payments – Dividends paid by a Cyprus tax resident company to its non-Cyprus resident shareholder(s) are not subject to any withholding tax in Cyprus. Thus the non-Cyprus resident shareholder of a Cyprus tax resident company receives the dividends free of any WHT.

0% Tax on trading/sale of titles or shares – The disposal or transfer of titles is exempt from all taxes. Titles are described as shares, bonds, debentures and similar titles as well as rights thereon (options, futures etc). Cyprus is, therefore, the jurisdiction of choice in respect to M&A transactions.

0% Capital Gains Tax is paid in Cyprus on the transfer of immovable property owned by a Cyprus tax resident company abroad (outside Cyprus).

0% Estate Duty is payable on the inheritance of shares in case of the death of a shareholder.

0% Inheritance Tax

0% Net Wealth Tax 

0% Property Tax

0% Tax on Reduction of Capital & Reduction of Share Premium Account 

0% Withholding Taxes on Interest and Royalties – There are no WHTs on interest payments made by a Cyprus tax resident company. There is also no WHT on royalties arising from sources outside Cyprus. 

Lowest uniform corporate tax rate in the EU – 12.5%

International Cyprus Trusts (CIT) may be established to hold the shares of Cyprus companies or simply used as an effective means of asset protection – CITs do not pay any taxation on their profits. Amendments to Cyprus’ Trust Law have restored the CIT as one of the most effective instruments available today.

Unilateral Tax Credit Relief – Unilateral tax credits are granted on any tax paid abroad to any foreign country, irrespective of whether Cyprus has a DTT or not. In such a case the income is not taxed twice but only once.

Double Tax Treaties – Cyprus has an impressive and continually growing network of DTTs, a Cyprus company can benefit from the EU Directives to eliminate WHTs when collecting income from the EU. Unilateral tax credit on foreign taxes withheld at source is also available.

Anonymity of the beneficial owner – Anonymity is imperative to many investors, who do not wish to have their names appear on public record at the Registrar of Companies. In such instances it is possible to appoint a shareholder provided by LSTS, who will hold the shares on trust for the beneficial owner.

Losses can be carried forward and set off against future profits for the next five years.

Group relief – setting off the loss of one company with the profit of another is allowed provided both companies of the group are tax resident in Cyprus.

No Thin Capitalisation Rules – there are no provisions in the Law requiring companies to maintain a particular debt to equity ratio. Consequently, a Cyprus holding company may be capitalised with loans without any risk that interest paid at arms’ length to the parent company will not be deductible.

0% VAT for Holding Companies – holding activities fall outside the scope of the VAT in Cyprus and the Cyprus holding company engaged exclusively in holding activities is not entitled or obliged to register for VAT purposes.

0% Tax on Liquidation – A Cypriot holding company held by non-resident shareholders can cease operations in Cyprus and distribute assets to its shareholders in any form (dividends etc.) without any tax cost to the shareholders.

Non-Domicile Cyprus Tax Resident – Foreign nationals relocating to Cyprus (minimum 183 days) will obtain the status of a Non Domiciled individual, with significant tax benefits:

  • 0% Tax on dividends received by the individual in Cyprus
  • 0% Tax on interest in fixed deposits in Cyprus
  • Individual will only be taxed in Cyprus on their worldwide income
  • Reduced tax on rental income 

 

HOW LSTS CAN ASSIST YOU

LSTS may assist in:

  1. Assessment of your current business to determine income flows, intentions and ultimately to optimise tax gains and eliminate tax leaks.
  2. The establishment of a suitable Cypriot structure for minimising tax losses/leaks.
  3. Tax / Legal / Audit / Compliance / Fiduciary / Trust / Banking Services
  4. Assistance in availing you of the numerous tax advantages of Cypriot tax legislation.
  5. Keep you updated on all developments in Cypriot legislation.

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Moscow Legal Forum

Московский юридический форум

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Ежегодный Московский юридический форум

Прошел Третий ежегодный Московский юридический форум, который является одним из крупнейших юридических форумов в России, в нем приняли участие более 1000 участников, в том числе такие известные в мире компании, как юридические фирмы “Magic Circle” и консультационная компания “Big Four”. Джон Иоанидес, начальник отдела юридического и делового развития кипрской компании LSTS был приглашен выступить на форуме для обсуждения правовых вопросов, связанных с изменениями в российском законодательстве о деофшоризации и новых договоренностей по этому вопросу с Кипром. В частности, обсуждались вопросы по статусу незарегистрированного физического лица, т.е. имеющего постоянное место проживания в другой стране, по компаниям с иностранным капиталом, по привилегированным способам получения кипрского гражданства.

Джон Иоанидес опытный, квалифицированный корпоративный юрист, специализирующийся во всех направлениях корпоративного права на Кипре, в том числе реструктуризации, сделках слияния/поглощения с использованием кипрских компаний, смене юрисдикций иностранных компаний на кипрскую, правовой экспертизе и планировании юридических заключениях. Джон представлял интересы российского ЮТВ Холдинга в сделке с Disney Channel, а также работал с компаниями TATA Global Beverages и Kamis S.A. в разрекламированной продаже компании McCormick & Co.

Презентация, с которой выступил Джон Иоанидес на Форуме, приводится ниже.

РЕЗЮМЕ

Согласно нормам, предусмотренными Налоговым кодексом Российской Федерации “о деофшоризации”, физическое лицо, признанное налоговым резидентом РФ и являющееся контролирующим лицом в Контролируемой иностранной компании ( “КИК”) должно платить налоги на прибыль КИК, как если бы эти доходы были получены непосредственно налоговым резидентом РФ.

Для признания лица налоговым резидентом в России, он должен находиться на территории России не менее 183 дней подряд в предыдущие 12 месяцев.

Точно так же гражданин России будет считаться налоговым резидентом Кипра, если он проводит более 183 дней на Кипре в течение календарного года.

В соответствии с кипрским налоговым законодательством такое лицо получит статус налогового резидента Республики Кипр как Незарегистрированное физическое лицо и будет пользоваться следующими преимуществами: 

• освобождение от уплаты налога на дивиденды, полученные на Кипре или за рубежом

• освобождение от уплаты налога на процентный доход по вкладам с фиксированной ставкой в Республике Кипр

• освобождение от уплаты налога с доходов, полученных от роялти 

Гражданин России может остаться на Кипре в течение необходимого количества дней и получить статус налогового резидента как Незарегистрированного физического лица следующими способами:

i.) Натурализация в виде получения кипрского гражданства

Гражданин России может получить паспорт Кипра, инвестируя 2.5 млн евро в экономику Кипра в течение как минимум 3-х лет и покупки жилой недвижимости на сумму не менее 500 000 евро.

Инвестиции могут быть в кипрские государственные облигации, финансовые активы или участие в кипрских компаниях, недвижимость и депозиты в банках Кипра или вышеуказанные комбинированные варианты.

ii.) Постоянное проживание в Республике Кипр.

Гражданин России может постоянно проживать на Кипре на основании приобретения имущества, стоимостью не менее 300 000 евро, а также он должен показать, что имеет обеспеченный и стабильный доход за пределами Кипра. Гражданин России, получивший статус постоянного резидента Кипра, не сможет осуществлять какую либо трудовую деятельность на территории Кипра.

iii.) Трудовая деятельность в иностранной компании

Гражданин России может остаться на Кипре в качестве сотрудника Компании с иностранным капиталом и получать минимальную зарплату.

Компанией с иностранным капиталом является кипрская компания большая часть акционерного капитала которой принадлежит не гражданам Кипра (к примеру, гражданам России).

Гражданин России, который хочет приехать и остаться на Кипре, может сам открыть кипрскую компанию, зарегистрировать ее как Компанию с иностранным капиталом, получить разрешение в Миграционном органе и стать в компании сотрудником среднего управленческого звена, получать среднюю зарплату не менее 21 000 евро.

Открытие кипрской компании с иностранным капиталом – это наиболее простой способ, для того, чтобы получить возможность жить и работать на Кипре, с более низкими вложениями средств по сравнению с инвестиционными вариантами, но также и повышает сущность компании, поскольку она имеет сотрудников, которые работают с Кипра. 

Реальное присутствие является очень важным в решении вопросов со стороны иностранных налоговых органов, ставящих под сомнение статус компании.


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