Cyprus: Cyprus: The Recent Developments in Cyprus Legislation and their Impact on International Tax Moscow, 25 th June 2009

Agenda Understanding of the new developments in Cyprus Legislative developments in the sphere of exchanging information and the initiating of the New protocol between Cyprus and Russia Practical application of the developments and its impact on tax structuring.

New developments in Cyprus July 2008: enactment of the national Assessment and Collection Tax Law, Art.72(I) Compliance with the Exchange of Information & Transparency of the 2005 OECD model. Recognized as a tax-transparent jurisdiction. Lifting of the banking secrecy

Exchange of information Article 26 OECD: Discloses information only regarding non-tax residents of Cyprus. Applies to financial institutions, banks, corporate service provider,civil servants, welfare funds, pension funds, trustees, representatives, nominees.

Exchange of Information In order to reach disclosure, a certain procedure to be followed whereby: i) a DTT has to be in place among two countries concerned. ii) a link has to be established among non resident tax payer and a CYP Co.

Exchange of information Stage 1 : The procedure starts with an enquiry from the Russian Tax Authorities to the Cypriot Tax Authorities. Information to be submitted to Cyprus Tax Authorities to proceed further: - full name of person under investigation -the nature of the information requested -reasons as in why it is believed such info is in existence under CYP jurisdiction -the name of person that possesses such info -declaration of obtaining such info and evidence that all national means have been exhausted.

Exchange of Information CYP tax authorities under obligation to inform tax payer for existence of such request and by whom RUS authorities under mutual obligation to disclose to CYP authorities No exchange occurs without the written consent of the Attorney-General

Exchange of information Stage 2: Written consent obtained A.G. satisfied = proceed; not request declined Research to be conducted and info to be collected Nothing shall stand as an obstacle to research i.e. banking secrecy All evidence collected by CYP tax authorities

Exchange of Information Stage 3: Info collected shall remain under possession and knowledge of CYP jurisdiction Request by RUS authorities shall be answered directly without disclosing any further info which resulted from conducted search

Exchange of Information The Request: Specific and not vague/fishing expedition An offence must be in place and/or suspected. General information requests declined Supporting evidence have to accompany the request

Exchange of Info- Substance Add “substance” to minimise risk of scrutiny. Substance strengthens residence. Bank account in Cyprus. Add economic substance too:  employees, premises, equipment, etc. Cost to create substance is low in Cyprus: still among the lowest in the EU  Salaries, payroll taxes & SIF  Municipality taxes & Office space rent

Exchange of Info- Substance Example Small co. with 2 employees in Cy:  2 admin salaries avg 900 EUR/month  Payroll taxes/contributions approx. 9%  Municipal taxes 200 EUR/year  Rent 500 EUR/month Total cost EUR per year (approx)

Q & A

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