Author Archive

Deputy Ministry of Shipping – Cyprus

In recent years, efforts have been made to upgrade and further develop the maritime industry of Cyprus.

When the Deputy Ministry of Shipping begun its operation, 168 companies were registered under the Cyprus tonnage tax system while today it has risen up to 191 companies in total.

The Deputy Minister of Shipping, Ms. Natasa Pilides stated that attempts are being made to simplify the procedures and modernize legislation so as to make Cyprus more competitive as a Register and as a maritime cluster. She also highlighted that attempts are being made to digitalize and modernize the Cyprus systems in order to make the Cyprus Registry even more attractive.

The budget of the Deputy Ministry for the year 2019 is 9.8 million euro compared to 8.1 million euros for the year 2018, i.e. an increase of 1.7 million euros. This is due to the large increase in the budget expenditure growth which is mainly because of the commercial shipping promotion and development activities.

The Deputy Ministry’s revenue for the year 2018 is estimated around 12 million euro while the indirect incomes of the maritime industry is estimated at 800 million euros which amounts to 7% of the GDP of the island. According to Ms. Pilidou, there are currently around 1100 seagoing ships and 600-700 small vessels under the Cypriot flag.

Based on these facts it is evident that the maritime industry of Cyprus is gradually evolving. The shipping fleet of Cyprus is the 10th largest worldwide and has 25% of the whole EU fleet. By continuously updating its services and striving for perfection in the field of shipping it will not be a surprise if Cyprus conquers the top in the near future.

Legal Update: Amendments to the Greek Tax Legislation

On 28/11/2018, the Greek Parliament voted important amendments to the Greek tax legislation such as the reduction of the property tax for the year 2019 for certain owners of real estate in Greece as well as a gradual decrease of the Greek corporate income tax.

More specifically, with a view to encourage investments and improve competitiveness of businesses, article 58 of the Greek Income Tax Code is amended so as to gradually decrease the tax rate applicable to profits from business activity of corporate entities from 29% (corporate income tax rate applicable today) to 25% for income earned as of the financial year 2022 and the following years.

As such, the Greek corporate income tax rate shall be reduced by 1% per year, applicable as of the income of the financial year 2019. Thus the income of the financial year 2019 shall be subject to a rate of 28%. Accordingly, for 2020 the tax rate shall be 27% and for 2021 the tax rate shall be 26%.

The Parliament, aiming to provide relief to the tax payers who are owners of low value real estate in Greece, further voted a decrease of the Greek property tax (ENFIA) for the year 2019.

According to the amendment introduced, specifically for the year 2019, when the total value of the real estate property held by a natural person which is subject to property tax, is up to the amount of 60 000 euros, the corresponding property tax shall be reduced by 30%. When the total value of the said real estate exceeds the amount of 60 000 euros, for the excess thereof, the amount of reduction of the tax (30%) shall be reduced by 0.7 euros per 1000 euros of the real estate and may not exceed 100 euros.

Our Yacht Registration Center provides Cyprus Leasing Structures

Our Yacht Registration Center provides Cyprus Leasing Structures, which constitute a generally acceptable ownership solution.

Owners utilizing our structures will be compliant with their obligations to the Cypriot Government/EU as VAT is paid to them over the life of the structure, albeit at a reduced rate, and the yacht is in free circulation throughout the EU. Use of our Cypriot solution scheme would allow importation and setting of the yacht in free circulation within the EU. Through the use of our Cypriot Solution, a reduced effective tax on acquisition and importation of a yacht is achieved on the basis of the provisions of the EU VAT Directive which provide that the long-term hiring of a means of transport is subject to VAT within the EU only to the extend it is used and enjoyed within the EU. Specifically, when the lessor is a company registered in Cyprus the charge to VAT for the services rendered is subject to the extent the pleasure boat is used within the European Union.  This applies irrespective of the lessee origin, i.e. whether the lessee is a Cypriot or non-Cypriot physical person or company.

Our Cyprus Leasing Solution provides owners with a complete solution due to the following:

  • The Cyprus Tax Authorities will treat the long-term hiring of means of transport on the basis of the provisions of the EU VAT Directive, which provide that the lease of a means of transport is subject to VAT within the EU only to the extend it is used and enjoyed within the EU.
  • Owners are strongly recommended to obtain an official and indemnified tax opinion on the solution from a reputable source. We, YRC as well as our affiliated partners InterTaxAudit who assisted in the development of our Cyprus Leasing Solution will gladly provide its valuable advice.
  • Every Leasing Structure requires pre-approval from the Cyprus Tax Authorities. The Tax Authorities’ intention is to examine any advance ruling applications on a case by case basis. We note that the final approval of the above scheme is upon the discretion of the Tax Authorities.

Mackrell International EMEA Regional Meeting

On the 16th to the 18th of November, the Mackrell International EMEA Regional Meeting took place in Brussels, Belgium.

The core meaning of this meeting was to network with other Mackrell International Members, discuss cross border matters and collaborative opportunities and to co-operate with the Business Development team so as to develop social media, practice group and promotional initiatives to which all members could contribute and as a result benefit from it collectively.

Mackrell International is an international legal network with lawyers from 60 different countries of the world, including 90 firms with 4500 lawyers in total.

Our firm, is an active member in this global network. Ms. Sanela Trzin, Barrister (England and Wales) and Cyprus Advocate in our Law Firm was invited and took part in a Business Development Panel Discussion addressing best practices in developing business for our Law Firm and how those can be applied to the network.

IELP EXPO

The International Expo Emigration and Luxury Property Conference took place in Cannes on the 9th of November until the 10th of November. Christodoulos G Vassiliades & Co LLC representatives attended the Conference and even exhibited the services they provide. Ms. Marianna Pavlides, advocate and Head of the Immigration Department of Christodoulos G Vassiliades & Co LLC was one of the speakers of the Conference with topic ‘Cyprus Citizenship and Residency Programs’.

IELP Expo covers a variety of topics including dual residency in highly developed countries, temporary and permanent residency in highly developed countries, acquisition of luxury real estate either for permanent or seasonal residence, how to gain temporary or permanent residency through investment among many others.

It is an excellent opportunity to obtain further information regarding immigration, real estate acquisition, and personal financial consulting services and is of special interest to visitors from Russia, Ukraine, Kazakhstan, Azerbaijan, and other CIS countries, China, India, UAE and other Middle East countries, South Africa, and the EU.

 

ДОМИЦИЛЬ НА КИПРЕ

Стремясь повысить конкурентоспособность, справедливость и простоту кипрской налоговой системы и сделать ее более привлекательной для иностранных инвесторов, 9 июля 2015 года правительство Кипра приняло концепцию «домициль».

Введение правил домициля направлено на привлечение высокооплачиваемых лиц на переезд на Кипр, использование Кипра в качестве делового центра и перевод головного офиса своего бизнеса, создавая тем самым фактическое присутствие.

НАЛОГООБЛОЖЕНИЕ И ОПРЕДЕЛЕНИЕ НАЛОГОВЫХ РЕЗИДЕНТОВ КИПРА

Налоговые резиденты Кипра облагаются как подоходным налогом, так и специальным взносом на оборону (СВО) на свой мировой доход.

Налоговым резидентом Кипра является:

a. Лицо, которое проводит более 183 дней в течение налогового года в Республике Кипр;

ИЛИ

б. Лицо, которое проводит 60 дней в течение налогового года в Республике Кипр и соответствует ВСЕМ нижеперечисленным критериям:

  •  Он/она не является налоговым резидентом или не является резидентом в любой другой стране в течение налогового года (более 183 дней в году);
  •  Он/она осуществляет предпринимательскую деятельность на Кипре и/или работает на Кипре и/или имеет офис в компании, являющейся налоговым резидентом на Кипре, в любое время в течение налогового года; и
  •  Он/она имеет постоянный дом на Кипре, который либо принадлежит ему/ей, либо арендуется им/ей.

Если занятость/бизнес или владение офисом по второму условию прекращаются в течение финансового года, то лицо перестает считаться налоговым резидентом Кипра в течение этого налогового года в соответствии с новыми правилами.

ПОПРАВКИ В ЗАКОН О СПЕЦИАЛЬНОМ ВЗНОСЕ НА ОБОРОНУ

В соответствии с введенными правилами домициля лицо, являющееся налоговым резидентом на Кипре в соответствии с положениями Закона о подоходном налоге («Закон»), НО «не имеющее домициль на Кипре», освобождается от уплаты СВО.

В контексте Закона термин «домициль на Кипре» определяется как:

а. Лицо, имеющее домициль по происхождению в Республике Кипр, в соответствии с положениями Закона о завещаниях и наследовании, который является домицилем его/ее отца на момент его рождения;

ИЛИ

б. Лицо, которое считается налоговым резидентом Кипра в соответствии с Законом о подоходном налоге в течение последних 17 из 20 лет до соответствующего налогового года, независимо от места его/ее проживания.

Вышеприведенное определение НЕ БУДЕТ применяться:

a. Если лицо приобретает и поддерживает избранный домициль за пределами Республики Кипр в соответствии с Законом о завещаниях и наследовании, при условии, что это лицо не является налоговым резидентом Кипра в соответствии с Законом о подоходном налоге в течение любого периода, на протяжении 20 лет подряд до соответствующего налогового года.

Согласно Закону о завещаниях и наследовании, человек приобретает избранный домициль, предпочитая жить в любом месте за пределами Республики Кипр, с целью сделать его своим постоянным или бессрочным домом, но не иначе.

Поэтому для того, чтобы приобрести избранный домициль, лицо должно иметь:

  • намерение приобрести избранный домициль (animus); и
  • фактическое присутствие (factum),

ИЛИ

b. Когда физическое лицо не являлось налоговым резидентом Кипра в соответствии с Законом о подоходном налоге в течение последних 20 лет до вступления в силу поправки к Закону, а именно до 16 июля 2015 года.

Таким образом, даже если лицо имеет домициль по происхождению на Кипре, он  может не иметь статус домициля в Республике Кипр согласно настоящему положению Закона.

Некоторые общие понятия:

  • Лицо должно иметь домициль постоянно;
  • Лицо может иметь только один домициль на определенный момент времени;
  • Существующий домициль имеет силу до тех пор, пока не будет заменен новым;
  • Домициль не зависит от национальности, гражданства и статуса резидента.

ПРЕИМУЩЕСТВЕННЫЙ НАЛОГОВЫЙ ЭФФЕКТ

Налоговый резидент Кипра, не имеющий домициль на Кипре, облагается ТОЛЬКО Налогом на прибыль, и освобождается от СВО. Следовательно, данное лицо освобождается от СВО, в отношении дивидендного дохода, процентного дохода (который не связан с обычной деятельности) и дохода от аренды, вне зависимости от того, был ли доход получен из источников на Кипре или за его пределами.

THE CYPRUS NON-DOMICILE SCHEME

In an effort to enhance the competiveness, fairness and simplicity of the Cyprus tax system and to make it more attractive to foreign investors, the Cyprus Government passed on 9th July 2015, among others, the “Domicile” concept.

The introduction of the non-domicile rules aims to attract high-earners to relocate to Cyprus, by using Cyprus as a business centre and transferring the headquarters of their business thus creating real substance.

TAXATION AND DEFINITION OF CYPRUS TAX RESIDENTS

Cyprus Tax Residents are subject to both Income Tax and Special Defence Contribution (SDC) on their worldwide income.

A Cyprus Tax resident is EITHER:

a. An individual who spends a period or an aggregated period of more than 183 days in a tax year in the Republic of Cyprus;

OR

b. An individual who spends 60 days in a tax year in the Republic of Cyprus and satisfies ALL of the following criteria:

  • He/she is not tax resident nor resident in any other country within a tax year by spending more than 183 days in that country, that year;
  • He/she carries on business in Cyprus and/or is employed in Cyprus and/or holds an office in a Cyprus tax resident company at any time during the tax year; and
  • He/she maintains a permanent home in Cyprus that is either owned or rented.

If the employment/business or holding of an office as per the second condition is terminated during the fiscal year, then the individual shall cease to be considered a Cyprus tax resident for that tax year under these extended rules.

 

THE AMENDMENT OF THE SPECIAL DEFENCE CONTRIBUTION

According to the domicile rules introduced, an individual who is a tax resident in Cyprus under the provisions of the Income Tax Law (“the Law”) BUT is “not-domiciled” in the Republic of Cyprus, will be exempt from SDC.

For the purposes of the Law, the term “domiciled in Cyprus” is defined as EITHER:

a. An individual who has a domicile of origin in the Republic of Cyprus, according to the provisions of the Wills and Succession Law, which is the domicile of his/her father at the time of his birth;

OR

b. An individual who is considered a Cyprus tax resident, as per the Income Tax Law, for a period of at least 17 years out of the last 20 years before the relevant tax year, irrespective of his/ her domicile of origin.

The above definition WILL NOT apply:

a. Where an individual acquires and maintains a domicile of choice outside the Republic of Cyprus as per the Wills and Succession Law, provided that this individual was not a Cyprus tax resident as per the Income Tax Law for any period of at least 20 consecutive years before the relevant tax year.

According to the Wills and Succession Law, an individual acquires a domicile of choice by choosing to live in any place outside the Republic of Cyprus, with the intention of making it his/her permanent or indefinite home, but not otherwise.

Therefore, in order for a domicile of choice to be acquired, both must exist;

  • the intention to acquire a domicile of choice (animus); and
  • residence (factum),

OR

b. Where an individual has not been a Cyprus tax resident as per Income Tax Law for a period of at least 20 consecutive years immediately before the amendment of the Law came into effect, namely on the 16th July 2015.

Thus, even if an individual has a Cypriot domicile of origin, he/she may not be considered as domiciled in the Republic of Cyprus under this provision of the Law.

Some general points are:

  • an individual cannot be without a domicile at any given time;
  • any individual can only have one domicile at each particular time;
  • the existing domicile continues until a new one is acquired;
  • domicile is distinct from nationality, citizenship and residence status.

 

ADVANTAGEOUS TAX EFFECT OF THE SCHEME

A Cyprus tax resident who is not domiciled in Cyprus would be liable ONLY to Income Tax and would be exempt from SDC. Consequently that individual would be exempt from SDC regarding income from Dividends, Interest (which is not connected to the ordinary carrying on of a business) and Rent irrespective of whether these derive from sources in Cyprus or abroad.

ИНТЕРПРЕТАЦИЯ СТАТЬИ 5(2)(G) ЗАКОНА О ПОДОХОДНОМ НАЛОГЕ 118(I)2002, С ПОПРАВКАМИ

Налоговый департамент издал циркуляр от 14 ноября 2017 года, в целях разъяснения важной части закона.

Закон предусматривает, что всякий раз, когда компания предоставляет заем или любую другую финансовую помощь своим директорам или акционерам, являющимся физическими лицами, или их супругам или родственникам до второй степени родства, то считается, что у этого лица есть ежемесячное пособие равное девяти процентам (9%) годовых от суммы займа или любой другой финансовой услуги.

Согласно письменному сообщению Налогового комитета Института сертифицированных общественных бухгалтеров Кипра (ICPAC) членам Института сертифицированных общественных бухгалтеров Кипра (ICPAC) (от 04.10.2012), положения этого закона не будут применяться в отношении лиц, не посещающих Кипр, и для тех, кто будет посещать Кипр в течение нескольких дней, пособие будет ограничено пропорционально дням их присутствия на Кипре.

С выпуском данного циркуляра (№ 14), это эта диспенсация отзывается.

По сути, пособие, которое считается предоставленным директорам или акционерам, являющимся физическими лицами, или их супругам или родственникам до второй степени родства, которые не являются налоговыми резидентами в Республике, будет начисляться на весь год, независимо от их срока пребывания в Республике Кипр.

Однако по нашим данным, это относится к отчетным периодам, начинающимся только в 2018 году.

INTERPRETATION OF ARTICLE 5(2)(G) OF INCOME TAX LAW 118(I)2002, AS AMENDED

Tax Department issued a circular on 14 November 2017 to clarify an important part of the law.

The law stipulates that whenever a company grants a loan or any other financial facility to its directors or shareholders who are individuals, or their spouses or their relatives up to the second degree of kindred, then it will be deemed that this person has a monthly benefit equal to nine per cent (9%) per annum on the balance of such loan or any other financial facility.

According to a written communication by ICPAC Tax Committee to ICPAC members (dated 4/10/2012), the provisions of this law would not be applied in respect of individuals not visiting Cyprus and for those that would be visiting for a few days, the benefit would be restricted in proportion to the days of their presence in Cyprus.

By issuing this circular (No. 14), this dispensation is withdrawn.

In effect, the benefit, which is deemed to be granted to directors or shareholders who are individuals or their spouses or their relatives up to the second degree of kindred who are not tax residents in the Republic, will be calculated on the whole year, irrespective of their period of stay in the Republic of Cyprus.

However, we now understand that will come into effect for accounting periods commencing at 2018 onwards only.