Archive for November, 2015

Important Increase in Ship Management Revenues

The latest biannual Ship Management Survey released on 19 November 2015, by the Central Bank of Cyprus, displayed a considerable increase in respect of ship management revenues, during the first half of 2015. The survey, initially launched in 2009, covers residents of Cyprus who provide ship management services to shipowning companies registered either locally or abroad.

The total revenues for the period increased to €464 million, now corresponding to 5,4% of Cyprus’s GDP, being the highest reported since 2010, with Germany, despite a declination of share to 44%, remaining the leader in terms of overall revenue provision.

 A similar trend is demonstrated by Vietnam, Russia and the Marshall Islands, while Singapore has increased its share and Greece has gained a substantial share in the list of revenue contributing countries.

45% of the companies managed to generate revenues in excess of €5 million, while 9% of the companies managed to exceed the €30 million threshold.

Ship management Services:

Core ship management services, including crew, technical and full management, account for 71% of the industry’s revenues.

The share of crew management services increased marginally reaching 41%, while the share of full management contracts, comprising technical and crew management services, remained stable at 44%.

Companies managing between 1-3 ships accounted for 24% of the total population of ship management companies, companies managing between 4-10 ships accounted for 41%, companies managing between 11-40 ships, during the first half of 2015, accounted for 24% and lastly, higher numbers of ships were managed by only 11% of the companies, which accounted for 57% of the total revenues.

Ship Management expenses and fees

The level of cross-border expenses associated with the operations of the ship management industry has increased to a total of €428 million for the first half of 2015, corresponding to the 5% of the country’s GDP.

Crew expenses accounted for 66% of the total amount (51% non-EU crew and 15% EU crew), administration expenses to 18% and ship management expenses to 16%.

Since 2013, a substantial increase has been noted with respect to the transport volume departing from Cyprus, suggesting a possible increase in merchanting and other shipping related services.

Cyprus – Switzerland Double Tax Treaty comes into effect as from 1st January 2016

The ratification procedure of the Double Tax Treaty signed between Cyprus and Switzerland in 2014 has been completed and as a result the Treaty will come into effect as from 1st January 2016.

The main provisions of the Double Tax Treaty are as follow:

Permanent Establishment

The permanent establishment definition included in the treaty is in line with the meaning provided in the OECD model tax convention. In particular, any building site or construction or installation project or any supervisory activities in connection with such site or project constitutes a permanent establishment only if it lasts more than 12 months

Withholding tax rate on dividend payments –  0% withholding tax if the beneficial owner is:

  • A company (other than a partnership) the capital of which is wholly or partly divided into shares and which holds directly at least 10% of the capital of the company paying the dividends for an uninterrupted period of at least one year or;
  • A pension fund or other similar institution recognised as such for tax purposes, or
  • The government, a political subdivision, local authority or central bank of one of the two contracting states

15% withholding tax in all other cases.

Withholding tax rate on interest payments – 0% withholding tax

Withholding tax rate on royalties payments – 0% withholding tax

Capital Gains Tax
Gains from the disposal of immovable property are taxed in the country where the immovable property is situated.

Gains from the disposal of shares, deriving more than 50% of their value directly or indirectly from immovable property are taxed in the country in which the immovable property is situated, unless:

  • Shares are listed on a Stock Exchange or
  • The property is used in the company’s business or
  • The sale is as a result of corporate reorganization.

In all above cases, any gains are taxable in the country of which the seller is resident.

Retail Investment Funds: amendments to Law 78 of 2012 on open-ended undertakings for collective investment by law 88 of 2015

The concept behind the amendments brought by Law 88 of 2015

Law 78 of 2012 on Open-Ended Undertakings for Collective Investment (UCI Law) transposed into Cypriot Law the European Union (EU) UCITS IV Directive (2009/65/EC) on undertakings for collective investment in transferable securities (UCITS). The competent authority for regulation and supervision of UCITS in Cyprus is the Cyprus Securities and Exchange Commission (CySEC).

The UCI Law can be considered as the piece of legislation marking Cyprus’ efforts to emerge into an investment funds jurisdiction, having regard to the interest that the draft UCI Law had attracted during the consultation process.

The UCI Law has been amended for the first time earlier this year by Law 88 of 2015. The amendments so effected can be classified into following categories:

  • Amendments for the purpose of enhancing the competitiveness of Cypriot UCITS, e.g. by no longer requiring that all Cypriot UCITS calculate and publish their net asset value (NAV) daily without taking any distinguishing factor into consideration; or by replacing the requirement for mandatory publications in two local newspapers with the requirement to provide relevant information to investors through a durable medium and through a relevant publication on the management company’s/investment company’s website (as applicable);
  • Amendments with a view to initiating the upcoming transposition of the EU UCITS V Directive (2014/91/EU), which is due on March 2016, e.g. by aligning certain of the provisions on UCITS depositaries, within the meaning of section 10 of the UCI Law, with the provisions of the UCITS V Directive;
  • Amendments for the purposes of relativising unconditional reliance on credit ratings issued by credit rating agencies by requiring enhancement of risk management policies and procedures; and

Amendments for the purposes of alignment with the EU-wide distinction of investment funds into UCITS and non-UCITS, i.e. Alternative Investment Funds (AIFs), introduced pursuant to the EU AIFM Directive (2011/61/EU). In accordance with the aforesaid distinction any reference to non-UCITS investment funds has been removed from the UCI Law, given that there is in the meantime a dedicated legal framework for all types of non-UCITS. This way the UCI Law becomes a 100% UCITS dedicated piece of legislation.

The present note undertakes to briefly inform on the rationale motivating the amendments to the UCI Law provisions and on their current content following the amendment.

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Promoting the Cyprus Shipping Sector

As part of the ongoing promotion of the Cyprus shipping sector, the Minister of Transport, Communications and Works of Cyprus, Mr. Demetriades, recently visited the USA for the purpose of attracting shipping investments from the US to Cyprus.  The trip was highly successful in creating industry awareness.

Locally, as part of the promotion of Shipping in Cyprus, and apart from the existing tax benefits applicable to ship owners of Cyprus vessels, the Council of Ministers of Cyprus has also approved a new measure which concerns foreign ship-owners and their family members.  Specifically, Article 18 of the National Guard Law provides for obligatory national service for all male citizens of the Republic of Cyprus on the completion of their 18th year of age and up to the age of 50.  Since the law applies to all male residents of Cyprus, it operates as a disincentive for foreign ship-owners for migrating to Cyprus.   Bearing in mind the difficult financial position Cyprus has been in, following the financial crisis, the Minister of Defense exercised the powers vested in him under Article 28 of the National Guard Law, and proceeded to discharge all the male ship-owners and the male members of their family over the age of 18,  who move to Cyprus and who either own Cyprus-flagged ships or Shipping companies with registered office in Cyprus,  from the relevant duties.

The Shipping Industry in Cyprus constitutes an essential source of financial income to the Island,  hence any measures taken in an attempt to promote the industry  are always welcome.

Cyprus & Iran:The gateway to Iranian business

Our long lasting and vast experience in international business consulting enables us to fully understand the needs of your business and contribute towards its success.

This publication concentrates on the business development between Cyprus and Iran in the context of the Double Tax Treaty Agreement signed between the Government of the Republic of Cyprus and the Government of the Islamic Republic of Iran on 4 August 2015.

This, along with strong incentives given by the Cyprus Government with regards to “Cyprus citizenship by investment” scheme is expected to further develop the cooperation potentials of the two contracting states in the upcoming years. Furthermore, we will endeavor to explain the benefits offered by Cyprus and the purposes served by Cypriot companies as Holding, Financing and Intellectual Property companies, as well as the benefits secured through the establishment of an International Cyprus Trust.

This Country Report addresses the following:

  1. Cyprus Tax Benefits
  2. New Treaty between Cyprus and Iran
  3. Cyprus Holding Company
  4. Cyprus Holding Company in International Investment
  5. Cyprus Back -to- Back Financing
  6. National Interest in Cyprus Financing Structures
  7. Cyprus IP Box Regime
  8. Capitals Gains Treatment
  9. Cyprus Shipping: Tonnage Tax Scheme
  10. Cyprus International Trust

For our full report please click Cyprus & Iran Country Report

CGV is proud to be a contributor to the Association of Certified Anti-Money Laundering Specialists (ACAMS) Cyprus Chapter.

Louisa Massonidou, Deputy Managing Director and Compliance Officer of CGV, has become a member of the Association of Certified Anti-Money Laundering Specialists (ACAMS) as well as founding member and Board member of the recently launched ACAMS Cyprus Chapter.

4th November 2015 marked the official launch of the ACAMS Cyprus Chapter. We marked this occasion with an evening reception in Nicosia, which CGV were proud to be sponsors of.

Pursuant to their mission and vision, ACAMS Cyprus Chapter aims to provide a platform for AML and general compliance professionals in Cyprus by:

  • enhancing knowledge, personal development and promoting the exchange of experiences and expertise;
  • providing an environment that facilitates networking amongst members;
  • utilising the implementation of the various provisions of the relevant regulations an related directives.

All of the above stated goals will be achieved by organising specialised training events which will focus on advancing the knowledge and skills of the Cyprus AML and financial compliance community.

CGV is proud to be a contributor to the ACAMS Cyprus Chapter.

For more details please visit ACAMS

ACAMS-CYPRUS

Cyprus has been classified by the OECD Global Forum on Transparency and Exchange of Information as ‘ Largely Compliant’

The Global Forum on Transparency and Exchange of Information for Tax Purposes approved, at its meeting that took place in Barbados on 30th of October 2015, Cyprus’ supplementary report on the additional changes of its legal framework and practises and classified Cyprus as ‘Largely Compliant’.

This was the result of Cyprus Tax Authorities working closely with the accounting and legal professionals to amend the spotted gaps of the system and gain confidence back at an international level as far as the exchange of information on tax matters is concerned. Cyprus was previously evaluated in 2013 by the Global Forum for its interpretation of the standard in practise and rated as ‘Non-Compliant’.

Cyprus’ reputation has been restored and it is in this way re-ensured that it is still a reputable financial centre. The island’s infrastructure, dynamic legal framework, coherent tax system and high standard of professional services that can be provided create the perfect business atmosphere and make Cyprus in compliance with all international business standards.