1. Effective structures for the Russian market Holding Financing Royalty Globalserve Moscow Seminar September 2013 By Phani Schiza Antoniou

2. FACTSCYPRUSMALTA NETHERLANDSLUXEMBOURG LOCATION EU√√√√ LEGAL SYSTEM Common Law Civil Law √√ √√ Corporate issues of companies Most frequently used forms of companiesLtd BV or NAV Stichting or foundation Soparfi in the legal form of SA and SARL CAPITAL Min capital Deposited in advance €1 NO €1165 20% in advance € 1 NO Depends on the form If SA € 31000 but 25% prepaid If SARL € 12500 all is prepaid

3. FACTSCYPRUSMALTA NETHERLANDSLUXEMBOURG DIRECTORS Minimum Legal Entities Secretary Shareholders 1 YES Compulsory Legal/ physical 1 single member co allowed 1 YES Compulsory physical only 2 but also single member co allowed but restricted to one activity 1 YES NO 1 1 for SARL 1or3 for SA YES NO 1 incorporation2-4 days 4 days7 days Shelf companies YESNot usually but we have NO TAX REGIME Corporate tax Effective tax rate lower 12,5% YES 35% 5%-10% If shareholders are foreigners through refund system 20% to € 200000 25%over€200000 28.8%

4. FACTSCYPRUSMALTA NETHERLANDSLUXEMBOURG TAX ON DIVIDEND0 without condition 0 if participation exception Participation Exception on dividendsnil 10% min shareholding or if less min equity €1,164,000 for min 1 year EU co or if non EU with min tax 15% or if not then passive income to be less than 50% 5% minimum shareholding in the subsidiary held as participation not as an investment 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% Capital Gains from sale of securities 0 without conditions 10% min shareholding or if less min equity €1,164,000 for min 1 year 5% minimum shareholding in the subsidiary held as participation not as an investment 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% Trading in secutiries 0%35% and under the tax refund system 5% 20-25%28.8%

5. FACTSCYPRUSMALTANETHERLANDSLUXEMBOURG TAX ON INTEREST 30% or 12,5% on net profit if financing co 35% but can fall to 10% as 5/7 is refunded 20-25%28.8% TAX ON ROYALTY INCOME PASSIVE ACTIVE 2,5% 10% 5% (35%-6/7 refund) 5%5.85% Withholding taxes if non EU or qualified on outbound dividend Interest Royalty 0% 15% 0% 15% 0%

6. FACTSCYPRUSMALTA NETHERLANDS LUXEMBOURG Losses carried forward5 years59 yearsindefinite CFCNO THIN CAPITALISATION RULES NO 1:3 equity /debt 15:85 equity/debt Transfer pricingNO YES DTT with Russia Interest Royalty 5*-10% *€100,000 investments 0 5*/10% *min investm. €100,000+25% 5% 5%*/15% *10% participation And € 80000 investment 0% 5%*/15% *25% participation And € 75000 investment 0%

7. FACTSCYPRUSMALTA NETHERLANDS LUXEMBOURG Exchange of informationYES Capital Gains tax in Russia if subsidiary sold has more than 50% in property in Russia YES as from 2017 YES Limitation of benefits provision Will not apply provided company not registered in one of the states Will not apply provided substansive business in one of the states

8. HOLDING COMPANY SELECTION CRITERIA Holding Company Substance Minimum Dividends 0% Capital Gains 0% Interest Deductibility Yes Thin Cap Rules No CFC No Treaty Network -yes Minimum Share Capital Yes Withholding Tax 0% Capital Duty Minimal Advance Ruling Yes Legal/ Political / Economic Stable Financial Report IFRS Legal Impediments None

9. CYPRUS THE CYPRUS HOLDING CASE Dividend participation exemption with no conditions participation exemption on disposal of shares even in trading and without min holding period Other income taxed corporate tax rate of 12,5% Low interest margins of 0,125% - 0,35% Tax regime fully complaint with the EU Tax Code of Conduct Cyprus Hold Co Investor Dividend/interest Russian Co 5% on dividends Other Treaty Co 0-10 on dividends EU Co 0% on dividends Russian Co 5% on dividends Heaven Co 0% on dividends 0% withholding tax 0% on dividend income 0% on disposal 12.5% on net profit arising from interest received based on narrow interest margin

10. MALTA THE MALTA HOLDING CASE Dividend participation exemption with conditions CG tax exempted on disposal of shares if participation exemption applies; for trading in securities 35% tax which may be reduced to effective 5% Other income taxed corporate tax rate of 35% and effective5% Tax on interest 10%, WHT on interest from Russia 5% Malta Hold Co Investor Dividend/interest Russian Co 5% on dividends EU Co 0% on dividends EU Co 0% on dividends Russian Co 5% on dividends/interest Heaven Co 10% on dividends 0% withholding tax 0% on dividend income 0% on disposal If participation conditions apply 10% on net profit arising from net interest received

11. DUTCH THE DUTCH HOLDING CASE Dividend participation exemption with conditions CG Tax on on disposal of shares if participation exemption applies; for trading in securities 20-25% tax Other income taxed corporate tax rate of 20-25% Tax on interest differential 20- 25%, WHT on interest from Russia 0% WHT on outbound dividend if to non qualified 15% Dutch Hold Co Investor Dividend/interest Russian Co 5% on dividends EU Co 0% on dividends EU Co 0% on dividends Russian Co 5% on dividends/interest Heaven Co 0% on dividends 15% withholding tax on dividend if non qualified 0% on dividend income 0% on disposal If participation conditions apply 20-25% on net profit arising from net interest received

12. LUXEMBOURG THE LUXEMBOURG HOLDING CASE Dividend participation exemption with conditions CG Tax on on disposal of shares if participation exemption applies; for trading in securities 28.8% tax Other income taxed corporate tax rate of 28.8% Tax on interest differential 28.8%, WHT on interest from Russia 0% WHT on outbound dividend if to non qualified 15% LUX Hold Co Investor Dividend/interest Russian Co 5% on dividends EU Co 0% on dividends EU Co 0% on dividends Russian Co 5% on dividends/interest Heaven Co 28.8% on dividends 15% withholding tax on dividend if non qualified 0% on dividend income 0% on disposal If participation conditions apply 28.8% on net profit arising from net interest received

13. Comparison of IP regimes of Cyprus / Luxembourg and Netherlands CYPRUSNETHERLANDSLUXEMBOURG Effective tax rate Deduction rate 2.5% 80% 5% No reduced tax rate 5.8% 80% Qualifying IP assetsAll IP assets, including patents, trademarks, copyrights, know how, formulas, designs, processes Self developed IP relating to patents or approved R&D Patents, trademarks, designs, domains, models and software copyrights Ineligible IP AssetsNoneTrademarks and brands K now how, formulas, copyrights except software Internally developed or acquiredBothSelf developed only Both but not IP acquired from related party Qualifying revenueAll income and capital gains and compensation s Net income from qualifying assets Royalties net of costs

14. CYPRUS IP COMPANY Achieves offshoring of royalties with no WHT Uses Cyprus treaty network and EU royalties directive (12,5%) corporation tax on 20% of profits from IP income – effective tax (2,5%) No tax in Cyprus on dividend flows No WHT on dividends from Cyprus Company If Cyprus Company owns IP outright, amortization available over 5 years Cy IP Co Parent Co Dividends 0% EU Op Co 0% WHT Russia 0% WHT (2,5%)Royalties

15. DUTCH/ LUX IP COMPANY Uses treaty network and EU royalties directive to minimise WHT (28.8%) corporation tax on 20% of profits from IP income – effective tax (5.85%) For NL 5% Tax on dividend flows may be zero if participation exemption NL/LUX IP Co Parent Co Dividends EU Op Co 0%WHT Russia 0% WHT (5% NL 5.85% LUX)Royalties

16. AS A FINANCE COMPANY for Russia AS A FINANCE COMPANY for Russia OPERATING CO OFFSHORE COMPANY CYPRUS FINANCING PROFITS REDUCED IN OPERATING COUNTRY DUE TO THE INTEREST PAID TO FINANCING CY CO SMALL MARGIN TAXABLE AT 12.5% IN CYPRUS ON NET PROFIT MADE OF SMALL INTEREST DIFFERENTIAL VARYING FROM 0.325%-0.125% NO WITHHOLDING TAX WHEN INTEREST IS PAID TO OFFSHORE LENDER THE FINANCING CO SHOULD BE DIFFERENT FROM THE HOLDING CO IN THE RUSSIAN OPERATING CO TO AVOID CFC RULES THE CY FINANCING CO SHOULD NOT HAVE SUBSTANTIAL INCOME FROM OTHER OPERATIONS TO AVOID DEFENCE TAX TAXATION ON INTEREST AT 30% IN THE CASE OF LUX AND NL THE TAX ON INTEREST MARGIN IS 28.8%AND 20-25% RESPECTIVELY