Archive for December, 2015

Retail Investment Funds: How the transposition of the UCITS V Directive will impact the UCITS depositary regime.

Undertakings for Collective Investment in Transferable Securities (UCITS) are (mainly) retail investment funds regulated at European Union (EU) level. Following the adoption of the first relevant EU (European Economic Community at that time) Directive in 1985, UCITS have established themselves during the course of time, as a reputed retail investment product both within as well as outside the EU. The first UCITS Directive of 1985 (85/611/EEC) has been repealed in 2009 by the so called UCITS IV Directive (2009/65/EC), whereas amendments had taken place in the meantime, e.g. as to the eligible assets, in which a UCITS may invest.

The UCITS IV Directive has been transposed into Cypriot Law by Law 78 of 2012 on Open Ended Undertakings for Collective Investment as amended (UCI Law). As to the current state of things, the UCI Law will have to undergo significant amendments by March 2016. The reason is that an EU Directive amending the UCITS IV Directive, the so called UCITS V Directive (2014/91/EU), will be entering into effect at that time and will subsequently have to be transposed into Cypriot law by then.

Regarding regulation and supervision of UCITS in Cyprus the competent authority therefore, including the imposition of administrative sanctions, is the Cyprus Securities and Exchange Commission (CySEC).

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Cyprus -Ukraine amendment to the Double Tax Treaty – Detailed Analysis

On the 11th of December 2015, Cyprus and Ukraine signed a protocol amending the existing Convention for the Avoidance of Double Taxation (which was signed on 8th November 2012) and the prevention of fiscal evasion with respect to taxes on income and on capital. The provisions of the signed protocol will come into effect as of 1st January 2019 on the date when the existing Convention will expire.

The signed protocol is based on the OECD Model Tax Convention for the Avoidance of Double Taxation on Income and on Capital and contributes to the further development of the trade and economic links between Cyprus and Ukraine.

 

“Most favourable nation clause”
During the negotiations of the protocol the “most favourable nation clause” was granted, for taxes on interest, dividends, royalties and capital gains. This means that in case Ukraine enters into a double tax treaty agreement with another country which provides for more favourable provisions for dividends, interests, royalties and capital gains than those provided to Cyprus, the Double Tax Treaty between Cyprus and Ukraine will have to be amended to include these more favourable provisions.

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SHIPPING DEPARTMENT 2015 HIGHLIGHTS

Our highlights:

  • The launching of the Yacht Registration Centre Y.R.C
  • Provision of services
  • Awarded for professional achievements
  • New recruits to the Shipping Department

Cyprus Shipping Sector Highlights at a glance:
2015 has been a busy year regarding developments in the shipping sector, aiming towards its modernization and its further development and expansion.

  • Further revision of the Cyprus yacht leasing scheme with the lowest effective VAT rate of 2,42%, being the lowest VAT in Europe;
  • The initiation of new projects for the creation of Marinas;
  • Record breaking revenues from ship management activities;
  • The reelection of Cyprus as a Member of the IMO;
  • The holding of the Cyprus International Maritime Conference, being one of the most well respected and popular shipping conferences worldwide, in Limassol, in September 2015;
  • The application of more tax and other benefits for ship owners, having their vessels registered under the Cyprus flag.
  • The signing of Double Tax Treaties with Ukraine and Iran;

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Cyprus signed a Protocol with the Government of Ukraine that will amend the Double Tax Treaty between the two countries as of 1st January 2019, under which Cyprus ensures a most favourable nation clause.

Cyprus Ministry of Finance announced today that on the 11th of December 2015 in Kiev, the protocol amending the Convention for the Avoidance of Double Taxation and the prevention of fiscal evasion with respect to taxes on income was signed between the Republic of Cyprus and Government of Ukraine. The signing of the protocol took place in the presence of the President of the Republic of Cyprus, Mr Nicos Anastasiades and the President of Ukraine, Mr. Petro Oleksiyovych Poroshenko.

According to the announcement, the signed protocol will come into effect as of 1st January 2019, on the date when the existing Convention will expire. The existing Convention has been signed on the 8th of November 2012 and entered into force on the 1st of January 2014.

The signed protocol is based on the OECD Model Tax Convention for the Avoidance of Double Taxation on Income and on Capital. During the negotiations a most favourable nation clause has been agreed, for the taxes on interest, dividends, royalties and capital gains. This clause is considered of high importance as Cyprus will be treated equitably with other jurisdictions.

As noted, the text has been agreed between the two negotiating teams of the Contracting States and will contribute to the further development of the trade and economic links between Cyprus and the Government of Ukraine, as well as with other countries.

The announcement concludes by stating that: “Upgrading and expanding the network of Double Tax Conventions, is of high economic and political importance and aims to further strengthen and attract foreign investment in Cyprus as its standing an international business center is elevated”.

* A detailed analysis of the Protocol will be released in a forthcoming newsletter.

Department of Merchant Shipping Circular No. 33/2015 with regards to the Calculation of the Global Share for the Owners of Foreign Ships, Charterers and Ship Managers applied for the fiscal year 2016

As per Circular No. 33/2015 published by the Department of Merchant Shipping (DMS) on the 8th of December 2015 with regards to the Calculation of the Global Share for the Owners of Foreign Ships, Charterers and Ship Managers applied for the fiscal year 2016 which has been conducted in accordance with the Cyprus Tonnage Tax System (Law 44(I)/2010 (the “Law”)), the Director of the Department has advised  that the assessment of the Community-flagged Share of each company or group of companies will be carried out by the Director of the Department upon expiry of the third year, on 31st December, as from the date of opting to be taxed under the Tonnage Tax System (TTS).   (i.e. on 31st December 2015 for the companies which entered the TTS on 01 January 2013 or during the period 02 January 2012 – 01 January 2013).  Subsequently, an additional assessment will be carried out every three years throughout the duration of validity of the Law.

With regards to  a company or group of companies whose Community-flagged Share at the time of assessment is less than its Reference Share (unless it is over 60%),  no additional non-Community ships will be allowed to enter the TTS until it raises its Community-flagged Share back to its Reference Share as minimum. Nonetheless, those companies or group of companies may take advantage of the sectoral Global Share to include additional non-Community ships in the TTS, in accordance with sections 15(3) (a), 25(3) (a) and 35(2) (a) of the Law and with paragraphs 8 and 10 of The Tonnage Tax (Special Provisions for the Calculation of the Community Flagged Share) Notification of 2010 (P.I. 536/2010- the “Notification”).  In that instance, following sections 15(4), 25(4) and 35(3) of the Law, the said owner, charterer or ship manager will be subject to an increase of ten per cent (10%) on the total amount of tonnage tax payable for all the qualifying non-Community ships in his fleet.

Additionally, the DMS relied on paragraph 10 of the Notification, and for the purposes of implementing sections 15(3) (a), 25(3) (a) and 35(2) (a) of the Law, has conducted a calculation in accordance with paragraph 11 of the Notification, on the Community-flagged Share of the relevant global tonnage eligible for tonnage tax in the Republic of Cyprus (Global Share) on a sectoral basis for 2014.  Therefore, for 2014, there has been a decrease of the Global Share in comparison to 2013 for: firstly, the Owners of foreign ships from 28.97% to 28.67%; secondly, the Charterers from 74.75% to 70.51%; and lastly, the Ship Managers from 55.62% to 54.23%.

Hence, Owners of foreign ships, Charterers and Ship Managers whose Community-flagged Share is at the time of assessment, that being on 31st December 2015, below their Reference Share (unless this is over 60%) will not be allowed to include additional non-Community ships in the TTS until they increase their Community-flagged Share back to their Reference Share as minimum. The relevant ships will not be considered as qualifying ships and will be taxed with corporate-income tax by the Department of Taxation.  In addition, following section 44 of the Law, the company has to keep separate books, records and accounts for those ships.

 

Cyprus re-election at IMO Council

Pointing out the significant presence of Cyprus in the area of international shipping, the country has been re-elected as a Member of the International Maritime Organisation (IMO) Council for the 2016-2017 biennium.

During the 29th General Assembly of the IMO which took place in London from the 23 November to the 2 December 2015, Cyprus has been re-elected in Category (c) which consists of 20 States which have special interests in maritime transport or navigation. Cyprus has been a member of the International Maritime Organization (IMO) since 1978 and a member of its Council since 1987 and its re-election is of high importance as it allows Cyprus to have an active role in the drafting of International Shipping policy.  Moreover, the country’s participation in the IMO Board enhances Cyprus’s international reputation as one of the leading international shipping powers.

Department of Merchant Shipping Circular No. 32/2015 with regards to the Cyprus Tonnage Tax System

As per Circular No. 32/2015 published by the Department of Merchant Shipping on the 25th of November 2015 with regards to the Cyprus Tonnage Tax System (Law 44(I)/2010), the Director of the Department having relied on sections 17(2), 27(2) and 40(2) of the Law and the relevant tables contained in the Annual report of the Paris MOU for the year 2014 has decided that certain flags will be included in the Grey List or the Black List of the Paris MOU for the fiscal year 2015.

Specifically, ships flagged under the flags of: Albania, Algeria, Bulgaria, Curacao, Egypt, Georgia, Jamaica, Lebanon, Libya, Lithuania, Malaysia, Mongolia, Morocco, Poland, Portugal, Slovakia, Spain, St. Kitts and Nevis, Syrian Arab Republic, Thailand, Tunisia, Tuvalu, Ukraine, Vanuatu or Vietnam, are included in the GREY list of the Paris MOU.  Moreover, The Qualifying non-Community ships that fall within this List shall have their annual tonnage tax increased by thirty per cent (30%),

Similarly, ships flagged under flags of: Azerbaijan, Belize, Bolivia, Cambodia, Comoros, Dominica, Honduras, Republic of Moldova, Montenegro, Sierra Leone, St. Vincent and the Grenadines, United Republic of Tanzania or Togo, are included in the BLACK list of the Paris MOU accordingly.  Qualifying non-Community ships that fall within this List shall have their annual tonnage tax increased by sixty per cent (60%).

In addition, Community and non-Community ships under management flying a flag of a State mentioned in the BLACK list must be deemed to comply with international and Community standards only if the technical and crew management of every such ship is entirely performed from the territory of any Member State.  In case of failure of compliance with these requirements, s 54 of the Law will apply, thus the Director may impose a fee to ensure compliance.