Thursday, 10 November 2011
AMENDMENTS TO THE CYPRUS COMPANIES LAWS
Various amendments were made in 2011 to the companies legislation aimed at, among others, simplifying and modernizing certain formal procedures, reducing administrative burdens on companies, providing more flexibility in certain areas and imposing an annual levy on existing companies. Please send us an e-mail to: info@cyplaw.com for our newsletter analyzing these changes.
Wednesday, 7 September 2011
AMENDMENTS TO THE CYPRUS TAX AND COMPANY LAWS
Amendments to the Cyprus tax and company laws have been made in an effort to improve government finances. The changes consisted of increasing various taxes, introducing an annual levy for all companies incorporated in Cyprus, and measures in relation to the public sector For more information please contact us at info@cyplaw.com. Tax alert Eng.
Tuesday, 30 November 2010
AMENDMENTS TO THE CYPRUS COMPANIES ACT
The year 2010 saw the House of Representatives of the Republic introducing several amendments to the Cyprus Companies Act (the ‘Law’) aiming predominantly at harmonizing the Law with EU Directive 2007/36/EC on the exercise of certain rights of shareholders in Cyprus companies whose shares are admitted to trading in a regulated market in an EU member state (hereinafter “Listed Company/ies”).
The main amendments in the Cyprus Companies Act were introduced by Law 60(I) of 2010 which to begin with, imposed an obligation on Listed Companies to ensure equal treatment for all shareholders who are in the same position with regard to participation and exercise of voting rights in the general meeting.
The legislator introduced provisions aimed at enhancing the rights of shareholders of Listed Companies throughout the community, through mainly the provision of specific information prior to the general meeting by the Listed Company including by electronic means, the right of certain shareholders to put items on the agenda and to table draft resolutions, the participation of the shareholders in the general meeting by electronic means and the right to ask questions and receive answers and other related provisions. Other amendments introduced by Law 42(I) and Law 88(I) are also briefly discussed.
Law 60(I) of 2010
Information prior to the general meeting
Law 60(I) introduced provisions to regulate the notice of the general meeting which must be issued by the Listed Company without any specific cost, in a manner ensuring fast access to it on a non-discriminatory basis and using such media as may reasonably be relied upon for the effective dissemination of information to the public throughout the community. The information to be provided includes, among others, matters such as the time, place, agenda and procedures to be followed by a shareholder and rights for participation and voting (including electronically) regarding the general meeting, including the right of shareholders to put items on the agenda and to table draft resolutions, the date of record, the right to ask questions and appoint a proxy holder. It must also be indicated where and how the full documents and draft resolutions may be obtained, and on which web site the information referred to above will be made available.
The information to be included on such web site is also specified by the Law, and such must be available for a continuous period beginning not later than 21 days before the general meeting. Such information or documents include, among others, the notice of the general meeting, copies of the draft resolutions, the number of shares and votes in force at the date of such notice, the documents to be submitted to the general meeting and the forms to be used to vote by proxy and to vote by correspondence. Draft resolutions tabled by shareholders shall be added to the web site as soon as practicable.
Right to put items on the agenda of the general meeting and to table draft resolutions
New provisions now confer the right to put items on the agenda of the general meeting and to table draft resolutions (at least 42 days prior to the general meeting) to a shareholder or shareholders holding at least 5 % of the issued share capital representing at least 5% of the total voting rights of all the shareholders which have a right to vote at the general meeting. In order to better enable a member to benefit from the above provisions of the Law, the Listed Company must ensure that the date of the next annual general meeting is published on its web site at least 45 days prior to the date of such meeting or the end of the previous financial year, whichever is earlier.
Requirements for participation and voting in the general meeting
The Law also ensures that the rights of a shareholder to participate in a general meeting and to vote in respect of his shares are not subject to any requirement that his shares be deposited with, or transferred to, or registered in the name of, another person before the general meeting. Further, a shareholder is free to sell or otherwise transfer his shares anytime during the period between the record date, and the date of the relevant general meeting, so long as the right to sell would not be subject to any restriction to which it is not subject to at other times. A person may be registered in the register of members the latest until the record date so that it may be able to exercise its right to participate and vote in general meeting and any subsequent changes/entries in such register are not taken into account for determining a person’s right to vote.
Participation in the general meeting by electronic means
An important new provision enables Listed Companies to offer to their shareholders participation in the general meeting by electronic means and may be subject only to such requirements and constraints as are necessary mainly to ensure the identification of the persons participating and the security and accuracy of the electronic communication. Such means include real-time transmission of the general meeting, real-time two-way communication enabling shareholders to address the general meeting from a remote location and a mechanism for casting votes, whether before or during the general meeting, without such shareholder being physically present at the meeting, or the need to appoint a proxy holder who is physically present at the meeting.
Right to ask questions
Another important provision gives the right to every shareholder to ask questions related to items on the agenda of the general meeting and receive answers provided such answer has not been already given on the company’s web site, subject to the measures which the Listed Company may take to ensure the identification of shareholders and matters relating to interference with the preparation and order of the general meetings or questions infringing the confidentiality, or the business interests of the company.
Proxy voting
The existing provisions of the Law were specifically extended to Listed Companies and introduced the use of electronic means. It is possible therefore, for a proxy holder to be appointed by electronic means at the given address, and such notification of appointment must be accepted by the Listed Company, and may be made subject only to such procedural requirements and constraints as are necessary to ensure the identification of shareholder of the proxy holders or the content of the voting instructions. The Listed Company must offer a shareholder at least one effective method of notification by electronic means.
The amended provisions also state that anything in the Articles of the Listed Company, apart from the requirement that the proxy holder possess legal capacity, shall be void to the extent that it affects the eligibility of persons to be appointed as proxy holders.
Removal of certain impediments to the effective exercise of voting rights.
Provisions were added in the Law for the more effective exercise of voting rights allowing a shareholder in a poll voting in a general or class meeting not to have to use all his votes or cast all the votes to be used in the same manner, and further allowing a Listed
Company in case of such voting, to include a vote cast before the meeting by correspondence. However, a Listed Company is only obligated to count the votes cast before the meeting by correspondence as above which were received before the prescribed date and time, on condition that such date and time do not exceed 24 hours before the vote.
Voting results
Further provisions were enacted regarding the information which must be announced by a Listed Company regarding the results of voting. Further, the Listed Company shall ensure that it shall announce on its web site the voting results as prescribed by the Law, not later than the end of the 14th day after the date of the meeting.
Requirement to convene extraordinary general meeting and length of notice period
The directors of a Listed Company have now the obligation to immediately convene an extra ordinary general meeting pursuant to the requisition of shareholders of the company which hold at the date of the requisition not less than the one twentieth (1/20) of the paid up capital of the company which carries voting rights at general meetings. The length of the notice period required for calling general meetings in the case of Listed Companies is prescribed by the Law.
Equal treatment of members
A general provision has been introduced on Listed Companies to ensure the equal treatment of members having the same position in relation to the exercise of voting and participation rights in general meetings.
Amendments introduced by Law 88(I) and Law 42 (I) of 2010
Provisions have been introduced by Law 88 (I) elaborating on the liability of directors for failing to comply with their obligations for ensuring that the financial statements and the directors’ report are prepared and published in accordance with the provisions of the Law. Further the financial thresholds for a group to qualify as a “small sized group” have been increased.
Amendments introduced by Law 42(I) were in relation to provisions of the Law giving rights to certain persons to request and receive certain financial information in electronic or printed form without charge.
For further information please contact us at +357 25 274050 or info@cyplaw.com.
This material has been prepared by professionals of Clerides, Anastassiou, Neophytou LLC. It is intended as a general guide only, and its application to specific situations will depend on the particular circumstances involved. Accordingly, we recommend that readers seek appropriate professional advice regarding any particular problems that they encounter. This information should not be relied upon as a substitute for such advice. While all reasonable attempts have been made to ensure that the information contained herein is accurate, Clerides, Anastassiou, Neophytou LLC accepts no responsibility for any errors or omission it may contain or any opinions contained herein whether caused by negligence or otherwise, or for any losses, however caused, sustained by any person that relies upon it.
Clerides, Anastassiou, Neophytou LLC provides corporate and commercial legal services, to public and private international and local clients spanning multiple industries. Please visit our internet site at www.cyplaw.com for a full description of our services and representative transactions.
All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior permission of the publisher.
The main amendments in the Cyprus Companies Act were introduced by Law 60(I) of 2010 which to begin with, imposed an obligation on Listed Companies to ensure equal treatment for all shareholders who are in the same position with regard to participation and exercise of voting rights in the general meeting.
The legislator introduced provisions aimed at enhancing the rights of shareholders of Listed Companies throughout the community, through mainly the provision of specific information prior to the general meeting by the Listed Company including by electronic means, the right of certain shareholders to put items on the agenda and to table draft resolutions, the participation of the shareholders in the general meeting by electronic means and the right to ask questions and receive answers and other related provisions. Other amendments introduced by Law 42(I) and Law 88(I) are also briefly discussed.
Law 60(I) of 2010
Information prior to the general meeting
Law 60(I) introduced provisions to regulate the notice of the general meeting which must be issued by the Listed Company without any specific cost, in a manner ensuring fast access to it on a non-discriminatory basis and using such media as may reasonably be relied upon for the effective dissemination of information to the public throughout the community. The information to be provided includes, among others, matters such as the time, place, agenda and procedures to be followed by a shareholder and rights for participation and voting (including electronically) regarding the general meeting, including the right of shareholders to put items on the agenda and to table draft resolutions, the date of record, the right to ask questions and appoint a proxy holder. It must also be indicated where and how the full documents and draft resolutions may be obtained, and on which web site the information referred to above will be made available.
The information to be included on such web site is also specified by the Law, and such must be available for a continuous period beginning not later than 21 days before the general meeting. Such information or documents include, among others, the notice of the general meeting, copies of the draft resolutions, the number of shares and votes in force at the date of such notice, the documents to be submitted to the general meeting and the forms to be used to vote by proxy and to vote by correspondence. Draft resolutions tabled by shareholders shall be added to the web site as soon as practicable.
Right to put items on the agenda of the general meeting and to table draft resolutions
New provisions now confer the right to put items on the agenda of the general meeting and to table draft resolutions (at least 42 days prior to the general meeting) to a shareholder or shareholders holding at least 5 % of the issued share capital representing at least 5% of the total voting rights of all the shareholders which have a right to vote at the general meeting. In order to better enable a member to benefit from the above provisions of the Law, the Listed Company must ensure that the date of the next annual general meeting is published on its web site at least 45 days prior to the date of such meeting or the end of the previous financial year, whichever is earlier.
Requirements for participation and voting in the general meeting
The Law also ensures that the rights of a shareholder to participate in a general meeting and to vote in respect of his shares are not subject to any requirement that his shares be deposited with, or transferred to, or registered in the name of, another person before the general meeting. Further, a shareholder is free to sell or otherwise transfer his shares anytime during the period between the record date, and the date of the relevant general meeting, so long as the right to sell would not be subject to any restriction to which it is not subject to at other times. A person may be registered in the register of members the latest until the record date so that it may be able to exercise its right to participate and vote in general meeting and any subsequent changes/entries in such register are not taken into account for determining a person’s right to vote.
Participation in the general meeting by electronic means
An important new provision enables Listed Companies to offer to their shareholders participation in the general meeting by electronic means and may be subject only to such requirements and constraints as are necessary mainly to ensure the identification of the persons participating and the security and accuracy of the electronic communication. Such means include real-time transmission of the general meeting, real-time two-way communication enabling shareholders to address the general meeting from a remote location and a mechanism for casting votes, whether before or during the general meeting, without such shareholder being physically present at the meeting, or the need to appoint a proxy holder who is physically present at the meeting.
Right to ask questions
Another important provision gives the right to every shareholder to ask questions related to items on the agenda of the general meeting and receive answers provided such answer has not been already given on the company’s web site, subject to the measures which the Listed Company may take to ensure the identification of shareholders and matters relating to interference with the preparation and order of the general meetings or questions infringing the confidentiality, or the business interests of the company.
Proxy voting
The existing provisions of the Law were specifically extended to Listed Companies and introduced the use of electronic means. It is possible therefore, for a proxy holder to be appointed by electronic means at the given address, and such notification of appointment must be accepted by the Listed Company, and may be made subject only to such procedural requirements and constraints as are necessary to ensure the identification of shareholder of the proxy holders or the content of the voting instructions. The Listed Company must offer a shareholder at least one effective method of notification by electronic means.
The amended provisions also state that anything in the Articles of the Listed Company, apart from the requirement that the proxy holder possess legal capacity, shall be void to the extent that it affects the eligibility of persons to be appointed as proxy holders.
Removal of certain impediments to the effective exercise of voting rights.
Provisions were added in the Law for the more effective exercise of voting rights allowing a shareholder in a poll voting in a general or class meeting not to have to use all his votes or cast all the votes to be used in the same manner, and further allowing a Listed
Company in case of such voting, to include a vote cast before the meeting by correspondence. However, a Listed Company is only obligated to count the votes cast before the meeting by correspondence as above which were received before the prescribed date and time, on condition that such date and time do not exceed 24 hours before the vote.
Voting results
Further provisions were enacted regarding the information which must be announced by a Listed Company regarding the results of voting. Further, the Listed Company shall ensure that it shall announce on its web site the voting results as prescribed by the Law, not later than the end of the 14th day after the date of the meeting.
Requirement to convene extraordinary general meeting and length of notice period
The directors of a Listed Company have now the obligation to immediately convene an extra ordinary general meeting pursuant to the requisition of shareholders of the company which hold at the date of the requisition not less than the one twentieth (1/20) of the paid up capital of the company which carries voting rights at general meetings. The length of the notice period required for calling general meetings in the case of Listed Companies is prescribed by the Law.
Equal treatment of members
A general provision has been introduced on Listed Companies to ensure the equal treatment of members having the same position in relation to the exercise of voting and participation rights in general meetings.
Amendments introduced by Law 88(I) and Law 42 (I) of 2010
Provisions have been introduced by Law 88 (I) elaborating on the liability of directors for failing to comply with their obligations for ensuring that the financial statements and the directors’ report are prepared and published in accordance with the provisions of the Law. Further the financial thresholds for a group to qualify as a “small sized group” have been increased.
Amendments introduced by Law 42(I) were in relation to provisions of the Law giving rights to certain persons to request and receive certain financial information in electronic or printed form without charge.
For further information please contact us at +357 25 274050 or info@cyplaw.com.
This material has been prepared by professionals of Clerides, Anastassiou, Neophytou LLC. It is intended as a general guide only, and its application to specific situations will depend on the particular circumstances involved. Accordingly, we recommend that readers seek appropriate professional advice regarding any particular problems that they encounter. This information should not be relied upon as a substitute for such advice. While all reasonable attempts have been made to ensure that the information contained herein is accurate, Clerides, Anastassiou, Neophytou LLC accepts no responsibility for any errors or omission it may contain or any opinions contained herein whether caused by negligence or otherwise, or for any losses, however caused, sustained by any person that relies upon it.
Clerides, Anastassiou, Neophytou LLC provides corporate and commercial legal services, to public and private international and local clients spanning multiple industries. Please visit our internet site at www.cyplaw.com for a full description of our services and representative transactions.
All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior permission of the publisher.
Thursday, 8 October 2009
AMENDMENTS TO THE CYPRUS TAX LAWS
Amendments to the Cyprus tax laws have been made aimed to improve the attractiveness of Cyprus as a jurisdiction to establish portfolio investment companies and Hedge Funds. For more information please contact us at info@cyplaw.com.
Thursday, 30 July 2009
UPDATE ON COMPANY LAW CHANGES IN 2009
Significant changes were implemented into the Companies` Act with a view of simplifying certain aspects of the legislation and enriching Cyprus’ profile as a viable jurisdiction for international clients. Please contact us at info@cyplaw.com for a summary and analysis of the changes made.
Wednesday, 1 July 2009
NEW DOUBLE TAX TREATY WITH RUSSIA
In April 2009 after intensive negotiations at a high level a new protocol to the Cyprus-Russia Double Tax Treaty (“protocol”) has been signed between the two counties. As it was stated in the protocol its aim was to address speedily and effectively the issue of most concern to both countries mainly:
For Cyprus
- the removal of Cyprus from the list of countries with preferential tax regimes in the Russian Federation. Although by many the inclusion of Cyprus in the so called Russian black tax list is symbolic since it is estimated that 90% of the Cyprus – Russia business is inbound into Russia and therefore is not effected from the black list it was feared by Cyprus officials that it would lead to similar moves by other countries and therefore it was in the high interest of Cyprus that the matter be resolved speedily.
For Russia
- the exchange of information as per the latest OECD model tax convention, limitation of benefits and the disposal of shares relating to immovable property.
Overall the protocol is viewed by the financial community to be very beneficial to international business and one that should foster further the economic relations between the two countries by removing the uncertainty surrounding the future of the treaty which lasted over almost 1 year and clarifying certain matters in the existing treaty. As a result it is viewed that Cyprus shall remain as one of the most favorable routes for investments into the Russian Federation. Below we list a summary of some of the most important changes introduced by the protocol.
Dividends, Interest, Royalties:- Generally unchanged
The existing withholding taxes for dividends, interest and royalties have remained the same; the only change is the condition for eligibility for the lower 5% withholding tax rate for dividends which is now changed to Euro 100.000 from USD100.000. The nil withholding tax rates on interest and royalties remain the same.
The dividends and interest definition have been changed to align them with the latest OECD model treaty definitions. The definition of dividends now include income even paid in the form of interest and payments on shares of mutual investment funds and similar collective vehicles, as well as depositary receipts over shares.
It is perceived that the new definitions will enable the Russian tax authorities to tax excessive interest payments by reclassifying them to dividends under domestic thin capitalizations rules and tax them at source albeit at the reduced dividend treaty tax rates not previously possible as interest is subject to nil withholding tax rates.
Gains from the sale of shares: - An important change
This is one of the most important changes introduced by the protocol as a result of which gains from the sale of shares deriving more than 50% of their value from immovable property situating in the other contracting country (for example Russia) may be taxed in the country where the immovable property is situated (i.e. Russia). This amendment of course is of course of most concern to Cypriot companies selling shares in Russian property rich companies. There are certain exemptions to this new rule which include pension funds, provident funds, listed companies, corporate reorganizations and the Government of a contracting state.
Although this is a negative development for Cyprus the good news are that, as provided in the protocol, this amendment is not expected to apply until January 1st 2014.
Limitation of benefits: – of limited effect
The newly introduced limitations of benefits articles is aimed to dis-apply the benefits of the treaty in certain situations.
Although on a first reading the article appears to be very disadvantageous, the way the article has been drafted, it appears that the limitation of benefits would not apply in practice for the cases were the relevant companies seeking the benefits are incorporated or registered companies either in Russia or Cyprus i.e. the preponderance of the cases.
Further, even in the cases the article does seem to apply, its application shall not be automatic, but rather, it offers a mechanism to attack perceived treaty abuses and only as a result of prior consultations between the tax authorities.
In any event it is perceived that the limitation of benefits would apply mostly to companies incorporated outside Cyprus but which are tax resident in Cyprus because their management and control is exercised from within Cyprus and therefore we feel shall have a limited effect.
Other changes
Ship and aircraft profits
The Russian proposal to replace the residence test with the place of effective management is not unusual. Many other Cyprus bilateral treaties adopt the place of effective management. The residence test is much easier to prove. The place of effective management, if disputed, will have to be resolved through the Mutual Agreement Procedures.
Mutual Agreement Procedures
These changes (substitution of paragraphs 1 and 4) may not really affect foreign investments.
Exchange of information
This is based on the 2005 OECD update of the Model Tax Convention. Cyprus has already taken legislative steps to be in a position to be able to satisfy the Russian side in the field of the supply of information. By taking theses steps, Cyprus has been put in the list of countries which are in line with the exchange of information requirements of the OECD. On the other hand, both the protocol and Cyprus domestic legislation provide certain safeguards for the correct application of the exchange of information.
Assistance in Collection
This is an OECD Article. The Cyprus side agreed to take steps in enacting the necessary legislation in order to enable the competent authority to provide assistance in the collection of taxes.
Duel resident companies
Under the existing treaty, for the purpose of the definition of “resident” (other than an individual), residence is determined by the entity’s place of effective management. A new paragraph is added by the Protocol with the objective of making the ‘tie-breaker test’ more effective so that where the place of effective management of such a person cannot be determined, the Russian and Cypriot tax authorities shall endeavor to determine this by mutual agreement.
Permanent establishment
The meaning of permanent establishment is extended to allow for the taxation of profits from services performed in one country by an entity of the other country through and individual or individuals present in the other country for more than 183 days in a 12-month period in certain circumstances.
For further information please contact us at +357 25 274050 or info@cyplaw.com.
This material has been prepared by professionals of Clerides, Anastassiou, Neophytou LLC. It is intended as a general guide only, and its application to specific situations will depend on the particular circumstances involved. Accordingly, we recommend that readers seek appropriate professional advice regarding any particular problems that they encounter. This information should not be relied upon as a substitute for such advice. While all reasonable attempts have been made to ensure that the information contained herein is accurate, Clerides, Anastassiou, Neophytou LLC accepts no responsibility for any errors or omission it may contain or any opinions contained herein whether caused by negligence or otherwise, or for any losses, however caused, sustained by any person that relies upon it.
Clerides, Anastassiou, Neophytou LLC provides corporate and commercial legal services, to public and private international and local clients spanning multiple industries. Please visit our internet site at www.cyplaw.com for a full description of our services and representative transactions.
All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior permission of the publisher.
For Cyprus
- the removal of Cyprus from the list of countries with preferential tax regimes in the Russian Federation. Although by many the inclusion of Cyprus in the so called Russian black tax list is symbolic since it is estimated that 90% of the Cyprus – Russia business is inbound into Russia and therefore is not effected from the black list it was feared by Cyprus officials that it would lead to similar moves by other countries and therefore it was in the high interest of Cyprus that the matter be resolved speedily.
For Russia
- the exchange of information as per the latest OECD model tax convention, limitation of benefits and the disposal of shares relating to immovable property.
Overall the protocol is viewed by the financial community to be very beneficial to international business and one that should foster further the economic relations between the two countries by removing the uncertainty surrounding the future of the treaty which lasted over almost 1 year and clarifying certain matters in the existing treaty. As a result it is viewed that Cyprus shall remain as one of the most favorable routes for investments into the Russian Federation. Below we list a summary of some of the most important changes introduced by the protocol.
Dividends, Interest, Royalties:- Generally unchanged
The existing withholding taxes for dividends, interest and royalties have remained the same; the only change is the condition for eligibility for the lower 5% withholding tax rate for dividends which is now changed to Euro 100.000 from USD100.000. The nil withholding tax rates on interest and royalties remain the same.
The dividends and interest definition have been changed to align them with the latest OECD model treaty definitions. The definition of dividends now include income even paid in the form of interest and payments on shares of mutual investment funds and similar collective vehicles, as well as depositary receipts over shares.
It is perceived that the new definitions will enable the Russian tax authorities to tax excessive interest payments by reclassifying them to dividends under domestic thin capitalizations rules and tax them at source albeit at the reduced dividend treaty tax rates not previously possible as interest is subject to nil withholding tax rates.
Gains from the sale of shares: - An important change
This is one of the most important changes introduced by the protocol as a result of which gains from the sale of shares deriving more than 50% of their value from immovable property situating in the other contracting country (for example Russia) may be taxed in the country where the immovable property is situated (i.e. Russia). This amendment of course is of course of most concern to Cypriot companies selling shares in Russian property rich companies. There are certain exemptions to this new rule which include pension funds, provident funds, listed companies, corporate reorganizations and the Government of a contracting state.
Although this is a negative development for Cyprus the good news are that, as provided in the protocol, this amendment is not expected to apply until January 1st 2014.
Limitation of benefits: – of limited effect
The newly introduced limitations of benefits articles is aimed to dis-apply the benefits of the treaty in certain situations.
Although on a first reading the article appears to be very disadvantageous, the way the article has been drafted, it appears that the limitation of benefits would not apply in practice for the cases were the relevant companies seeking the benefits are incorporated or registered companies either in Russia or Cyprus i.e. the preponderance of the cases.
Further, even in the cases the article does seem to apply, its application shall not be automatic, but rather, it offers a mechanism to attack perceived treaty abuses and only as a result of prior consultations between the tax authorities.
In any event it is perceived that the limitation of benefits would apply mostly to companies incorporated outside Cyprus but which are tax resident in Cyprus because their management and control is exercised from within Cyprus and therefore we feel shall have a limited effect.
Other changes
Ship and aircraft profits
The Russian proposal to replace the residence test with the place of effective management is not unusual. Many other Cyprus bilateral treaties adopt the place of effective management. The residence test is much easier to prove. The place of effective management, if disputed, will have to be resolved through the Mutual Agreement Procedures.
Mutual Agreement Procedures
These changes (substitution of paragraphs 1 and 4) may not really affect foreign investments.
Exchange of information
This is based on the 2005 OECD update of the Model Tax Convention. Cyprus has already taken legislative steps to be in a position to be able to satisfy the Russian side in the field of the supply of information. By taking theses steps, Cyprus has been put in the list of countries which are in line with the exchange of information requirements of the OECD. On the other hand, both the protocol and Cyprus domestic legislation provide certain safeguards for the correct application of the exchange of information.
Assistance in Collection
This is an OECD Article. The Cyprus side agreed to take steps in enacting the necessary legislation in order to enable the competent authority to provide assistance in the collection of taxes.
Duel resident companies
Under the existing treaty, for the purpose of the definition of “resident” (other than an individual), residence is determined by the entity’s place of effective management. A new paragraph is added by the Protocol with the objective of making the ‘tie-breaker test’ more effective so that where the place of effective management of such a person cannot be determined, the Russian and Cypriot tax authorities shall endeavor to determine this by mutual agreement.
Permanent establishment
The meaning of permanent establishment is extended to allow for the taxation of profits from services performed in one country by an entity of the other country through and individual or individuals present in the other country for more than 183 days in a 12-month period in certain circumstances.
For further information please contact us at +357 25 274050 or info@cyplaw.com.
This material has been prepared by professionals of Clerides, Anastassiou, Neophytou LLC. It is intended as a general guide only, and its application to specific situations will depend on the particular circumstances involved. Accordingly, we recommend that readers seek appropriate professional advice regarding any particular problems that they encounter. This information should not be relied upon as a substitute for such advice. While all reasonable attempts have been made to ensure that the information contained herein is accurate, Clerides, Anastassiou, Neophytou LLC accepts no responsibility for any errors or omission it may contain or any opinions contained herein whether caused by negligence or otherwise, or for any losses, however caused, sustained by any person that relies upon it.
Clerides, Anastassiou, Neophytou LLC provides corporate and commercial legal services, to public and private international and local clients spanning multiple industries. Please visit our internet site at www.cyplaw.com for a full description of our services and representative transactions.
All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior permission of the publisher.
Wednesday, 8 April 2009
IMPORTANT DEVELOPMENTS AFFECTING INVESTMENT IN RUSSIA THROUGH CYPRUS:
Important developments affecting investment in Russia through Cyprus: Cyprus signed a new protocol to the Cyprus - Russia Double Tax Treaty. For an analysis of the protocol please send us an e-mail to info@cyplaw.com.
Download the PDF here
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