In Cyprus, a Special contribution for defence is imposed on certain types of income. Non-residents are exempt from this contribution. Exemptions: Dividends received by a Cyprus tax resident company from a non-resident company will be subject to special contribution for defence if the non-resident company paying the dividend engages directly or indirectly more than 50% in activities leading to investment income and the foreign tax burden on the income of the dividend-paying company is substantially lower than the tax burden of the  Cyprus tax resident company. Dividends received from a resident or non-resident companies are subject to special defence contribution at 17% (15% up to 30 August 2011, 17% from 31 August 2011 to 31 December 2011, 20% for 2012 and 2013) but only on resident persons. Non-resident persons are not liable to special defence contribution. Deemed dividend distribution If a Cyprus tax resident company does not distribute by way of a dividend at least 70% of its accounting profits within two years from the end of the tax year then the company is deemed to have distributed such profits and is liable to pay 17% (15% up to 30 August 2011, 17% from 31 August 2011 to 31 December 2011, 20% for 2012 and 2013) special contribution for defence on the deemed dividend distribution applicable to its shareholders who are Cyprus tax residents. A non-Cyprus tax resident receiving dividends from profits subject to a deemed distribution is eligible to a tax refund. Interest Income Interest income which is not closely connected with its business, earned by a Cyprus tax resident company, is subject to 10% contribution up to 30 August 2011, 15% up to 28 March 2013 and 30% thereafter. Tax credit for foreign tax paid Any tax suffered abroad on income that is subject to defence contribution will be credited against any defence contribution payable on such income irrespective of the existence of a double taxation treaty.

When an individual is a resident of the Republic of Cyprus, tax is imposed on income accruing or arising from sources both within and outside the Republic. Where an individual is not resident in the Republic, tax is imposed on income accruing or arising only from sources within the Republic. An individual is considered a resident if he is present in the Republic for a period exceeding 183 days in a tax year. TAX RATES Tax is assessed on net income on a current-year basis. The income tax year in Cyprus is the calendar year. For self-employed individuals, an estimate of the tax due must be made by 31 July in the year of assessment and the estimated tax must be paid in two equal installments on the 31st July and 31 December. For employees Pay As You Earn (PAYE) income tax is deducted if applicable using the above rates on a monthly basis from his/her salary. Special Contributions by Employees, Self-Employed and Pensioners of the private sector For the years 2014 to 2016 all employees, self-employed persons, or pensioners of the private sector shall pay a special contribution on their gross earnings as shown below. Up to €1.500- no contribution Between €1.501 and €2.500- 2.5% with a minimum contribution of €10 Between €2.501 and €3.500- 3% €3.501 and over- 3.5% There is no restriction/ maximum limit on the number of earnings. For employees, the above payment is shared equally by the employer and the employee. The special contribution paid is deductible from the taxable income of the employee/ employer it relates to. No contribution is payable on the below for private-sector employees: Retirement bonus Payments from provident funds Remuneration of foreigners employed by a foreign government or by an international organization Any remuneration of foreign diplomats/ consular representatives who are not citizens of the Republic The remuneration of the crew of a Cypriot ship Allowances paid cover business expenses for the account of the employer Employees and pensioners who pay the Special Contribution under the Officers, Employees, and Pensioners of the State and Public Sector Law on their salaries or pension are exempt from the above payment. For employees and pensioners, the amount of special contribution will be withheld and paid in the same way as PAYE. For self-employed individuals, the amount of special contribution will be paid on the basis of self-assessment. More information on Non-domiciled Cyprus tax residents To be considered a tax resident of Cyprus, an individual must be 183 days or over in Cyprus during the calendar year (without any conditions), or 60 days during the calendar year according to the below conditions: Do not reside in any other single state for a period exceeding 183 days in aggregate, and Is not tax resident in any other state, and Resides in Cyprus for at least 60 days, and Fulfils the following conditions – – Carry out any business in Cyprus and/or is employed in Cyprus and/or is a director of a company tax resident in Cyprus at any time in the tax year, provided that such is not terminated during the tax year. – Maintain in the tax year a permanent residential property in Cyprus that is either owned or rented. Advantages of being a non-domiciled Cyprus tax resident Where an individual is non-domiciled in Cyprus but is a Cyprus tax resident, the following consequences arise: no Cyprus tax is payable on receipt of dividend income from any company anywhere in the world (although on foreign dividends, the source country may withhold taxes); no Cyprus tax is payable on receipt of interest income from anywhere in the world (although on foreign interest, the source country may withhold taxes); no Defence tax is payable on rental income, however it taxable under personal tax (see below rates) General Health System contributions at 2.65% will be payable on the above income (capped at €180.000). For example: Type of income – dividend income €100.000- no defence tax, no personal tax interest income from fixed deposits €30.000- no defence tax, no personal tax interest income from bonds €20.000- no defence tax, taxed under personal tax at the following rates

Our expert team of auditors, accountants, and consultants can assist and advise on your company re-organization. The transfer of assets and liabilities between companies can be effected without any tax consequences within the framework of a re-organization which includes: Mergers Demergers Transfer of activities Exchange of shares.

Shipping Companies in Cyprus and abroad No tax is payable on the profits from the operation of a vessel registered in Cyprus or on the dividends received from a ship owning company flying the Cyprus flag and operating in international waters. No tax is payable on the emoluments of the captain, the officer, and the crew of a Cyprus ship. Local companies/individuals or International Business Companies that carry out ship management and crew management from an office in Cyprus have the choice for the financial year ended 31 December 2000 onwards to be taxed at the rate of 4.25% or rates equal to 25% of the rates applicable to the tonnage tax for foreign vessels under their management that are registered outside Cyprus. This special tax regime for ship owning and ship management companies applies until the year 2020.

Information about Insurance Companies Life business losses can be offset against profits of the general business Losses of the life business can be offset against profits from other sources Any Losses of the life business can be carried forward indefinitely.

The pension income of any individual residing in the Republic, which arises from services rendered abroad, is taxed at: a rate of 5% for amounts exceeding €3.420 per annum or Normal rates. Once the selection is made it is irrevocable.

The gross income arising from intellectual property rights, other exploitation rights, compensations, or other similar income arising from sources within the Republic of Cyprus, of a person who is not resident in the Republic, is subject to withholding tax at a rate of 10%. Note that, Rights granted for use outside the Republic of Cyprus are not subject to any withholding tax.

Firm Royalties, incentives, and opportunities The gross income derived by a non-resident person in respect of royalties arising from film projection in the Republic is subject to withholding tax at a rate of 5%. Royalties received by a connected company registered in a European Union Member State are exempt from tax (subject to conditions). Our expert team of auditors, accountants, and other professionals can advise you on the best structure and options available, in Cyprus, EU, or worldwide.

Full capital gains tax exemption on capital gains, except on sale of immovable property situated in Cyprus Capital Gains Tax is imposed on gains from the disposal of immovable property situated in the Republic including shares of companies not listed on a recognized Stock Exchange which own immovable property situated in the Republic, at the rate of 20%. In computing the capital gain the value of the immovable property as at 1 January 1980 (or cost if the date of acquisition is later), the value of any additions as at 1 January 1980 (or cost if the date of the addition is later), any expenditure incurred for the production of the gain and the indexation allowance, are deducted from the sale proceeds.

In Cyprus, Immovable Property Tax is payable on 30 September each year It is imposed on the market value of the property as of 1 January 1980 and is calculated on the immovable property owned by the taxpayer on 1 January of each year. Both physical and legal persons are liable for this tax. Applicable Rates up to 31/12/2011 Applicable Rates from 1/1/2012

As from 2011 an annual levy of €350 payable to the Registrar of companies is introduced for all companies incorporated in Cyprus For groups of companies, the maximum levy is fixed at €20.000. For 2011, the levy is payable by 31 December 2011. The levy for 2012 onwards is payable by the 30 June of each year. In case the levy is not paid within the prescribed period, if the levy is then paid within two months from the due date, a penalty of 10% is payable which is increased to 30% if the levy is paid within five months from the due date. If the levy is not paid within five months, the Registrar of Companies will remove the company from the registry (something which is expected to restrict the company from filing documents or requesting the certificate from the Registrar’s Office). For reinstatement of the company to the registry the following are due: €500 if the reinstatement is within two years from the strike-off date, or €750 if two years have elapsed from the strike-off date.

The law in Cyprus governing companies is the Companies Law, Chapter 113 of the Statute Laws of Cyprus, which is based on the Companies Act 1948 of the United Kingdom. The constitution of a registered company consists of two documents, the Memorandum of Association and the Articles of Association. Requirements to set up a Cyprus Company: Company name: The name of a company must be approved by the registrar of companies and official receiver in Cyprus before applying to incorporate the company. No identical or similar names to existing companies are permitted as this may cause confusion. Activities of the Company: The main objects/ purpose of the company must be stated in the proposed company’s Memorandum of Association. Share capital: The Cyprus Companies Law provides for a minimum of one share and at least one registered shareholder. The minimum required share capital for a company is €1 which may conveniently be divided into 1 share of €1 each – issued and fully paid upon incorporation. Shareholders: The minimum number of “registered” and/ or “beneficial” shareholders could be one and can either be an individual or a legal corporate entity. Trusts may also be shareholders in a Cyprus company. Trustee shareholders will frequently hold the shares allowing the beneficial owner to retain anonymity. Directors: At least one director is necessary and can be a Cypriot resident individual, a corporate entity, or a non-resident (foreign) individual. It is advisable to appoint local directors if one wishes to have effective management and control in Cyprus rendering the company resident in Cyprus for tax purposes. Secretary: The Company Secretary may be a physical person or corporate entity and is responsible for the preparation and submission of the Annual Returns of the company, to keep the Minute Book and Register of Members, etc. Registered Office: Every company must have a registered office in the country of incorporation. It is the official address of the company where the statutory books, registers, and the seal of the company are kept. Annual Reporting: Companies need to comply with the following filings annually: Submission of the company annual return (HE32 form) to the Registrar of Companies. Submission of audited financial statements to the Income Tax Authorities and to the Registrar of Companies. Submission of provisional tax returns on 31 July in the tax year and final tax returns on 31 December of the year following the end of the tax year to the Income Tax Authorities. Cyprus Companies: Registration Period The affidavit for the formation of a name into a limited liability company in Cyprus is carried out through a lawyer and under normal circumstances the whole procedure, including the approval of the Company’s name, the printing of the Memorandum and Articles of Association, the opening of a bank account up to the time the certificate of incorporation is issued, is completed within 5-10 working days.