Вторая жизнь офшора /Cеntral bank of Cyprus


Источник: Бизнес-форум Financial Director, 15-17 апреля 2004 г
Опубликовано: 16 Сентября 2005


Questions about the status of the off-shore companies:

1. During the last 12 years on Cyprus have been registered a lot of off – shore companies. What will change in their status after the entry Cyprus to EU?

2. What are the requests of The Central Bank of Cyprus to companies, which owners are not the citizens of Cyprus?

3. Please, explain the procedure of giving the work-permissions for the Cypriot and foreign employees in the companies, which owners are not the Cyprus citizens.

4. How long the company have to work on the Cyprus territory to get a right of giving the work-permissions to employees?

5. What is the binding number of shares for the foreign-owners companies?

6. Which year-traffic of money for foreign-owners companies in Cyprus will be obligatory?

7. Will the tax be changed for the foreign-owners company accounts in the Cyprus banks?

8. What will change about the tax and the rates for foreigners personal accounts in the Cyprus banks?

1. As of 1 May 2004 (the date of Cyprus«s accession to the European Union), there will no longer be international business companies (or »offshore" companies as they are sometimes referred to). All companies registered in Cyprus as from that date will have the same status: there will be no distinction between IBCs and local companies. This has already happened to a large extent due to new tax legislation which came into effect on 1 January 2003. Under this legislation all companies (i.e. IBCs and local) pay the same rate of corporation tax i.e. 10%. The only companies which are exempt from this are IBCs which were registered in Cyprus prior to 2002. These companies were given the choice of either continuing to pay the old tax rate of 4,28% until the end of 2005 provided that they restrict their activities outside Cyprus or opting for the new 10% rate and acquire the right to operate in Cyprus as well. Other fiscal incentives were also abolished In 2003 (e.g. duty-free privileges and VAT exemption on telecommunications services).

Since June 2003 IBCs from European Union member states no longer require Central Bank permission to register in Cyprus. Cyprus is committed to abolishing the Exchange Control Law by the time it accedes to the EU. This will have a direct impact on the Central Bank as regards the regulation of IBCs from non-EU member states. This function will be undertaken as from 1st May, 2004, by the Ministry of Finance. As far as the promotion of Cyprus as an international business center is concerned, this has been taken over by the Ministry of Commerce, Industry and Tourism.

2. The most important item of information the Central Bank requests from foreigners wishing to register a company in Cyprus is a very good bank reference.

5. The minimum paid up capital for an IBC without a physical presence in Cyprus is CY?1.000 (US$ 2.000, approximately) whereas for IBCs with a physical presence it is CY?10-000.

8. As already mentioned in 1 above, the new rate of corporation tax which came into effect In January 20Q3 Is 10%,

Attached are two lists of questions often asked by lawyers and accountants regarding some of the changes referred to above. The replies will help you with your own questions.

The Tax Reforms And Their Repercussions
For International Business Companies (IBCs)

Following the tax reforms in July of 2002 the Central Bank has received many queries from professionals engaged In the registration of IBCa, all concerned with how the reforms will affect IBCs. Below are answers to the most commonly asked questions.

1. Question: What are the new rates of corporation tax for IBCs under the tax reforms?

The new tax law which was passed by the House of Representatives and which was published In the Official Gazette on 15 July 2002, provides for a uniform rats of corporation tax (i.e.10%) for all companies registered In Cyprus (IBCs and local). It also provides for a windfall tax of 5% for chargeable income In excess of CY?1 million, which will be collected for the years 2003 and 2004. The law thus implies the abandonment of ring fencing (i.e. the restriction that IBCs can only conduct commercial activities outside Cyprus), in other words, from 1 January 2003, the date from which the new rate of corporation tax comes into effect, there will no longer be a distinction between the tax status of IBCe and local companies. It should be stressed, however, that a) specific types of income, such as dividends from overseas as well as profits from companies deemed as permanent establishments abroad, will, under certain conditions, be exempt from taxation and b) payments made abroad either in the form of dividends, interest or royalties, will continue to be exempt from withholding tax.

2. Question: Which IBCs will continue to benefit from the existing tax regime (i.e. 4,25%) and for how long?

Those IBCs which were registered in Cyprus prior to 1 January, 2002 and which had and continue to have an income exclusively from outsade Cyprus (the sources of the income are stipulated in the new tax law), can opt to maintain their existing tax status (i.e. 4,25%) until the end of 2005, irrespective of any changes to their beneficial ownership, if, on the other hand, they decide as of 1 January, 2003 to undertake commercial transactions in Cyprus, then a) they will be taxed at 10% (plus the 5% windfall tax, if applicable) and b) they will have to apply to the Central Bank for a change in their status from an IBC to a local company. New permits will be issued in line with the policy that currently applies to direct foreign investment in Cyprus.

3. Question: What about those IBCs which register between the period 1 January-31 December, 2002?

The taxation of these IBCs will be 4,25% for the year 2002 but 10% (plus the 5% windfall tax, if applicable) from 1 January, 2003. Since the passing of the new tax legislation by the House of Representatives In July, the Central Bank has been inserting a notification in new permits bringing these changes to the attention of IBCs.

4. Question: Will those IBCs registered prior to 1 January, 2002 be allowed to undertake commercial transactions in Cyprus as of 1 January, 2003?

Yes, on condition that IBCs apply to the Central Bank for a change in their status. Revised permits will be Issued by the Central Bank under the framework of the current policy pertaining to direct foreign investment in Cyprus.

5. Question: Will Cypriot residents be allowed to participate as shareholders in IBCs?

Until 31 December, 2002 Cypriot residents will be strictly prohibited from participating as shareholders in IBCs. As of 1 January 2003, the distinction between IBCs and local companies will cease to exist hence Cypriote and foreigners wishing to participate as shareholders in a particular venture will be allowed to do so under the framework of the current policy applicable to direct foreign investment.

6. Question: Given that under the new tax legislation all companies will be liable for the same rate of corporation tax, what procedures will the Central Bank follow with regard to applications for the registration of companies with foreign participation?

Applications for the registration of IBCs will continue to be processed using the current procedures until 31 December, 2002. As of 1 January 2003, those companies with foreign ownership wishing to be active in the Cypriot as well as, foreign markets will be subject to the same procedures currently pertaining to direct foreign investment. For companies whose foreign owners are Interested only In conducting their business activities outside Cyprus, they will be subject to self-regulation In the form of appropriate clauses in their memorandum and articles of association.

7. Question: Will a special permit be issued to companies with foreign participation wishing to undertake local commercial activities in Cyprus?

For IBCs registered prior to 1 January 2003, the criteria used will be the same as those currently in use.

Re: The Exchange Control (Exclusion of European Union Member States) Decree of May 20003

Following the Central Bank circular dated 30 May 2003 concerning the captioned matter, we have compiled below a list of questions, with answers, which have arisen from the said circular.

Question 1: Does the abolition of the requirement for a Central Bank permit apply to International business companies (IBCs) only or does It also apply to foreign Investors wishing to undertake a direct Investment In Cyprus (i.e. «local company»)?

The decree abolishing the need for a Central Bank permit applies to both IBCs and local companies.

Question 2: Does the decree apply to the existing member states of the EU only or does it also apply to those countries due to Join the EU in May2004?

The decree applies only to natural or legal persons from the 16 member states of the EU. Consequently, it does not apply to those countries due to join the EU In May 2004.

Question 3: Does the decree apply to companies from EU member states with shareholders who are natural or legal persons from non-EU countries?

The decree stipulates that the legal persons who are exempt are those who were incorporated in EU member states and, consequently, it applies to all such legal persons.

Question 4: Does the decree apply to legal persons registered in British crown dependencies (e.g. Guernsey, Jersey, Isle of Man and Gibraltar)?

Given that these crown dependencies are not considered to be full members of the EU, the decree does not apply to legal persons registered in these jurisdictions.

Question 5: Will the obligation to submit a statistical declaration form to the Central Bank in the case of a direct inward investment, still be a requirement prior to legally registering a company or transferring shares?

The submission of e statistical declaration form in the case of direct Inward Investments doe«s not constitute a legal requirement for the establishment of a company or for the transfer of shares. It does, however, constitute an obligation based on article 64 of the Central Bank of Cyprus Law 2002, which provides for financial penalties In the event of failure to respond, The requirement for the submission of statistical information for the Balance of Payments data, will be explained in detail in a latter to be sent by the Central Bank»s Statistics Department.

Question 6: Will a Central Bank permit be required for the opening of a foreign currency bank account by companies from EU member states?

A Central Bank permit will not be required because commercial banks are already allowed to open foreign currency accounts for companies whose shareholders are non-resident natural persons. It should be stressed, however, that if the shareholders of a company include legal persona, then a commercial bank is obliged to request additional information prior to the opening of the account. This is in order to ascertain that the ultimate beneficial shareholders of the company acting as a shareholder are also non-residents.

Question 7: What are the precise administrative procedure to be adopted by the Registrar of Companies for the registration of companies which belong to natural or legal persons from EU member states?

This question should be addressed directly to the Registrar of Companies. However, following a meeting with the Registrar, we understand that copies of passports or certificates of incorporation, depending on whether the applicant is a natural or legal person, will be requested.

Question 8: In those cases where Cypriot residents act as nominee shareholders on behalf of non-residents, how will the Department of Inland Revenue know that the ultimate beneficial shareholders are non-residents so that a deemed dividend distribution tax of 15% is not imposed on profits.

This question should be addressed directly to the Department of Inland Revenue.

Question 9: Does the decree nullify restrictions on all Inward Investment activities, especially as regards the acquisition or development of real estate?

The decree does not nullify those restrictions which are based on legislation other than the Exchange Control Law. As far as the purchase and development of real estate by residents of the EU Is concerned, this is a policy matter which concerns the Government and not the Central Bank. Issues concerning real estate are covered by the Immovable property legislation which is administered by the Ministry of Interior, interested parties should address their queries to the Ministry.

Question 10: Will new companies whose shareholders consist partly of EU natural or legal persons and partly of non-EU natural or legal persons be required to obtain a Central Bank permit?

Yes, but only for the issue or transfer of shares to natural or legal persons of countries which are not .part of the EU.

Question 11: Will the requirement of a minimum paid up capital of ?10,000 for IBCs with a physical presence in Cyprus and ?1.000 for IBCs without a physical presence, continue?

This requirement will no longer be applicable.

Question 12: Will there be restrictions concerning the employment of expatriate staff from member countries of the European Union?

As regards IBCs registered after 2 June 2003 by EU nationals, the Central Bank will no longer be involved in the process of issuing TRE permits. Thus we would advise interested parties to contact the Immigration Department for clarification of the exact procedures. Ac regards existing IBCs, the Central Bank will continue with the currant procedures forth® issue of TRE permits,

Question 13: Will companies whose shareholders are from EU member states be required to continue submitting audited annual accounts to the Central Bank?

Only those companies which obtained a Central Bank permit will need to continue submitting accounts.

Question 14: Will those IBCs with EU shareholders that wish to undertake local activities be required to deal with the Central Bank after 2 June 2003?

For the purposes of the Bank's records, the IBCs described above should inform us of their intention to undertake local activities.