The Swiss prestigious option: is there confidentiality Globalserve Seminar November 2013 By Phani Schiza Antoniou

Why Switzerland  One of the major and reputable international Business centers  Tax regime  Extensive Network of double Tax Treaties; 90!!  Special relationship with EU, EU directives apply  Sound and prestigious Banking system  Confidentiality  High professional standards  Excellent infrastructure  Tax Rulings possible  Pro Business environment  High standard of living and quality of life  Multicultural and multilingual society

Types of swiss legal entities There are two types of corporation at the forefront of commercial activity in Switzerland: “Corporation (SA/AG)” and “Limited Liability Company (Sàrl/GmbH)”.“Corporation (SA/AG)”“Limited Liability Company (Sàrl/GmbH)” These two kinds of legal entity offer the following main benefits: Liability and risk limited to capital Simple transferability of participation rights/shares Regulated representation rights AG is more prestigious, minimum capital CHF and confidentiality for shareholders GMBH min CHF and transfer of shares is registered Comparable with foreign legal entities such as the German GmbH, the US “Joint Stock Company”, the English “Limited Liability Company” and the French “Société Anonyme”. Besides forming a Corporation “AG” / “SA” or a “GmbH”/GmbH, it is also mainly possible to have a branch of a foreign corporation inscribed in the Commercial Register, or to establish a private company which is not a legal entity in its own right.

Summary of Swiss Tax Rates Corporate Income Tax Federal Tax = Federal+cantonal+ communal 7.8% 12-22% Tax on Dividends received0% if participation exemption applies i.e 20% minimum shareholding in the subsidiary or at least CHF 1 m Royalty income12-22 % Capital gains tax in the case of disposal of participation 0% if participation exemption applies i.e 20% minimum shareholding in the subsidiary for one year Profit from the trading in securities12-22% Withholding tax on dividends other than EU or Treaty countries 35% Withholding taxes on interest, royalties0% unless on interest earn ed from bank which is 35% or DTT applies

Main Requirements Main Relieves (exceptions can apply) Income tax Rate (Best Cantons) Holding companies Long-term management of participations No commercial activity in Switzerland 2/3 of total assets are qualifying shareholdings or 2/3 of income is derived from qualifying shareholdings Full exemption from cantonal/ communal income tax and reduced tax on equity 7.8% Mixed companies (and trading branch) Limited trading activities in Switzerland (i.e. mainly active abroad). Administrative functions and minor commercial activities may be performed in Switzerland (generally less than 20% of the company’s income and expenses) Income derived from outside of Switzerland is only partially taxable for cantonal/communal income tax purposes. Reduced tax on equity % (depending on canton) Finance companies/ Finance branches Financing function, mainly for related companies Total assets of at least CHF 100 million Loans to Swiss group companies do not exceed 10% of the total assets of the branch/company National interest deduction1.5% Company Structures (Special tax status)

Main Requirements Main Reliefs (exceptions can apply) Income tax Rate (Best Cantons) Principal companies Companies which centralize the functions and risks of an international group and do business through contract manufacturing and limited risk distributor agreements (TESCM) Reduced effective income tax, depending on the nternational income allocation 5-7% (depending on canton) Captive insurance companies Insurance companies which provide insurance services to group companies (approved by FINMA) Possible qualification as mixed/domiciliary company Minimum profit ruling % (depending on canton) on minimum profits Tax holidays / business incentives Newly established companies with an investment and headcount which is substantial for the specific region. Additional requirements apply and vary from canton to canton Up to ten years tax holiday on income tax and reduction of tax on equity (up to 100%) 0% Company Structures (Special tax status) 2010 KPMG: International corporate tax. Investment in Switzerland

Swiss Trading Branch of foreign low tax legal entity Possibility of avoiding 35% Swiss WHT if there is not a center of business decisions in Switzerland. Possibility of getting favorable tax rate according to special tax ruling to be achieved. Ex.: 6.5% in Ticino, 5% in Zug. US LLC or Cyprus Ltd. Swiss Branch Seller (non Swiss based) Buyer (non Swiss based) Invoice EUR/CHF Payment EUR/CHF Goods

Taxation of Principal companies in Switzerland Principal companies are companies which centralize the functions and risks of an international group and do business through contract manufacturing and limited risk distributor agreements: Reduced effective income tax, depending on the international income allocation up to 5-7% (depending on canton) Foreign Parent Commissionaire entities Limited risk distributors Swiss Principal (Un) related Manufacturers Client Contracts Goods 2010 KPMG: International corporate tax. Investment in Switzerland

Foreigners are limited in buying residential real estate in Switzerland: Secondary housing is not welcome in Switzerland… Therefore the possibility to take residence under the lump sum taxation allows foreigners to buy residential real estate without any limits. Low tax regime which allows acquisition of Swiss residential real state

DOUBLE TAX TREATY WITH UKRAINE DIVIDEND * 5% applies if at least 20% shareholding In all other cases 15% 5*%/15% INTEREST *The 0% rate applies where interest is paid in connection with the credit sale of industrial, commercial or scientific equipment, merchandise or services by one enterprise to another enterprise, and on bank loans; the 10% rate applies in all other cases. 0*/10% ROYALTY The 0% rate applies to royalties paid for a copyright of scientific works, a patent, trademark, design or model, plan, secret formula or process, or for information (know-how) concerning industrial, commercial or scientific experience. The 10% rate applies to royalties paid for the use of, or the right to use, a copyright of literary or artistic works (including cinematograph films, and films or tapes for radio or television broadcasting). 0*/10%

DOUBLE TAX TREATY WITH RUSSIA DIVIDEND * 0% applies where Dividends paid to the other contracting state, pension funds and federal reserve banks. ** 5% rate applies where the beneficial owner is a company that holds directly at least 20% of the capital of the payor and the foreign capital invested exceeds CHF 200,000 or its equivalent in another currency at the time the dividends become due; 15% in all other cases 0% */5**%/15% The 2011 protocol to the treaty entered into force on 9 November 2012 and applies as from 1 January 2013 INTEREST 0% ROYALTY 0%

& Swiss Comparison Luxembourg, Dutch & Swiss Tax Rates Luxembourg company Swiss companyDutch company CapitalIt has minimum amount and has to be paid in advance according to the type of company It has minimum amount and has to be paid in advance according to type of company No minimum Corporate tax 28.8%12-22% depending on the canton Tax= Federal+cantonal + communal 20 % upto € % above € Tax on Dividends received O% if participation exemption applies i.e 10% minimum shareholding or a minimum of € 1.2 m investment For at least 12 months EU co or if non EU to be taxed at tax rate at least equal to 10.5% 0% if participation exemption applies i.e 20% minimum participation or at least CHF 1 million investment 0% if participation exemption applies i.e 5% minimum shareholding in the subsidiary held as participation not as an investment Royalty income 5.85%5 %

D Comparison of Luxembourg, Dutch & Swiss Tax Rates . . Luxembourg companySwiss CompanyDutch company Capital gains tax in the case of disposal of participation O% if participation exemption applies i.e 10% minimum shareholding or a minimum of € 6 m investment For at least 12 months EU co or if non EU to be taxed at tax rate at least equal to 10.5% 0% if participation exemption applies i.e 20% minimum participation Held for at least 12 months 0% if participation exemption applies i.e 5% minimum shareholding in the subsidiary, held as participation not as an investment Profit trading in securities 28.8% 12-22%20-25% Thin capitalisation rules 15:85 equity /debt6:1 debt/equity financing Other cos circular 6 applies;defines the max debt level as % of fair market value of co assets 1:3 equity /debt Withholding tax on dividends other than EU or Treaty countries 15%35%15%

D Comparison of Luxembourg, Dutch & Swiss Tax Rates . . Luxembourg company Swiss companyDutch company Tax loss carried forward indefinite7 years9 years EU dividend, interest and royalty directives Yes Extensive network of DTT 6490 DTT with Russia : WHT on dividend 5%*/15% *10% participation And € investment 0*/5**/15% *If paid to state ** min 20% or at least CHF investment 5%*/15% *25% participation And € investment WHT on royalty and interest 0% Exchange of information YesyesYes

D Comparison of Luxembourg, Dutch & Swiss Tax Rates . . Luxembourg company Swiss companyDutch company DTT with Ukraine : WHT on dividend 5%*/15% *10% participation And € investment 5*/15% * min 20% 5%*/15% *25% participation And € investment WHT on royalty0%0%*/10% *If relates to industrial patent 0% WHT on interest0%0*/10% * If relates to bank loan interest or interest on credit by supplier of industrial equipment 0%