The Future of Cyprus as an International Fiduciary Centre 31 October 2012 Theo Parperis President of ICPAC

Agenda  Cyprus position in the International Scene of Fiduciary Services  Challenges  What do International Corporations and HNWI need from an International Fiduciary Centre?  What does Cyprus need to do to maintain its competitive edge?  Conclusion 2 31 October 2012

Cyprus Position in the International Scene of Fiduciary Services a)Double Tax Treaties Network -Acknowledge as having best choice of inward/outward investment for certain countries e.g. Russia, Ukraine and many CEE countries -Very attractive treaties with India, China, etc. b) Appropriate Legal System -Flexible and workable Corporate and Trust laws based on UK legal system -Setting up and operating a company or trust is relatively quick, easy with clear responsibilities and duties of all parties such as directors, shareholders, trustees, protectors, investors, etc 3 31 October 2012

Cyprus Position in the International Scene of Fiduciary Services c) Tax Efficient System for International Business -Zero Tax on dividends income -Zero withholding tax on dividends to non-residents -Zero capital gain tax on sale of qualifying titles shares -10% tax on net interest income and/or other income d) Quality of Professional Services Accountants and lawyers, administrators are:- - mostly UK standard educated - member of self registered bodies governed by ethical codes of UK or International organisations e)Business Language – English f)Educated skill force for employment 4 31 October2012

Cyprus Position in the International Scene of Fiduciary Services g)Supporting Banking System h)Flexible Residence/Visa/Working for Executives and Key personnel i)Good climate and place to live and do business j)Final but not least: - PRICE! One of the cheaperplaces in EU for fiduciary services and maintaining international companies/trusts, especially compared to Luxembourg, Switzerland, Holland, etc) 5 31 October 2012

Challenges Economic Environment - Financing of: 1) Public Debt/Budget Deficit 2) Banking recapitalization needs 6 31 October 2012

PwC Budget performance - Cyprus 31 O31 31ctober Octob October

PwC Growth in public debt 31 October 8

Challenges (cont…) Negotiation terms with Troika Banking Sector - Problems of refinancing of local banks - Availability of international banks Statutory filing with Companies Registry house: - delays in issues of statutory documents (e.g. certificates, Memorandum and Articles of Association) Reduced hours of public sector and banks (although banks have changed) Occasional substandard service by providers of Fiduciary Services Adverse international press coverage 9 31 October 2012

What matters is what International corporate and HNWI need from an International Fiduciary Centre Business and statutory infrastructure Stability – Economic Environment - Legal/Tax system Tax-efficient local system Double Tax Treaty Network Workable and flexible legal system (corporate, trust, investments, succession, inheritance Quality professional service by Accountants/ Lawyers/Administrators October 2012

What matters is what International corporate and HNWI need from an International Fiduciary Centre Cont… Wealth Protection mechanisms (Trust/private funds/shareholders’ agreements/inheritance laws) Confidentiality safeguards vs exchange of information Strong banking system with wide range of private bank products Ease of communication and transportation (Airline connection with major business centres) Government commitment and investment in the International Business & Fiduciary sector TRUST AND CONFIDENCE (long-term viability) October 2012

PwC Growth in professional and financial services 31 October 12

What does Cyprus need to do now? Enacting Fiduciary bill regarding service providers. (To raise credibility of fiduciary sector in Cyprus) Remove UNCERTAINTY on the economy by agreeing as soon as possible measures with Troika without any effects on taxation of international businesses Enhance network of DTT especially with Africa and Asia Active and targeted marketing in new markets China, India, etc (role of CIPA) Upscale further Companies Law by enacting pending legislations such as: - Cross border mergers - Leasing - cell companies Full computerisation and serious reduction of lead time in Companies House Enrich international business and fiduciary products offered by Cyprus October 2012

Recent Products Intellectual Property tax incentives (80% automatic deduction) Financing (Double tier company structure) Private Funds (ICIS) Trust Provisions Yacht Scheme (VAT-efficient registration) BUT WE ALSO NEED:- Leasing legislation for properties and assets Cross border mergers of Pension Funds Cell companies Investment protection treaties Private jets:- legal framework such as yacht scheme October 2012

Other important issues: Enhance local social and entertaining product:- - Casinos - Theatres - Marinas - Golfs PROMOTE INVESTMENT IN PROMISING SECTORS such as solar energy, educational services, medical services, etc, through tax holidays and/or accelerated capital allowances Encourage more BOT AGREEMENTS for large infrastructure projects, to promote cooperation between public and private sector and reduce public expenditure October 2012

Conclusion Still very competitive in many areas and products Still a lot to do to stay competitive and ahead of competition We must: RESTORE TRUST & CONFIDENCE in our economy and financial fiduciary products and services October 2012

Thank you