Maarten F. Koper Senior Tax Manager Ernst & Young

1. A comparative analysis of the position of Cyprus as an international business centre vis a vis other EU Member States Maarten F. Koper Senior Tax Manager Ernst & Young

2. Holding Companies Holding companies perform the following functions within a corporate group of companies: • Ownership of shares / participation interest in group companies • Accumulation of capital and shareholder value • Reinvestment of capital into new projects • Distribution of profits to shareholders • Consolidation of various business segments • Receiving dividends from operating companies • Consolidated financial IFRS financial statements • Asset protection / mitigation of risks

3. Holding Companies Cyprus as a jurisdiction for holding companies suits a number of criteria which are considered to be: • Absence (under a double tax treaty or based on EU parent-subsidiary directive) of WHT on dividends paid from subsidiary company to Cyprus holding company • Low overall tax burdenin Cyprus : • Low (corporate) income tax rates, • No tax on dividends (subject to conditions), • No CFC rules (which may tax retained earnings on foreign low-taxed subsidiary companies generating (passive) investment income) • Low duties on establishment of companies, • No tax on capital gains; • No outbound WHT on profit distributions to foreign shareholders • Reasonable establishment and operational costs.

4. (Group) Finance Companies • (Group) finance companies perform the following functions within a corporate group of companies: • Sourcing external debt finance • Redistribution of funds within the corporate group • Accumulation of interest income and tax optimization of operating companies of the group in high-tax countries.

5. (Group) Finance Companies Cyprus as a jurisdiction for finance companies suits a number of criteria which are considered to be: • Absence (under a double tax treaty or interest and royalty directive) of interest withholding tax in connection with interest on loan financing provided by group finance company • A low overall tax burden in Cyprus, including, but not limited to: • low level of taxationof interest incomeand the possibility ofdeducting interest expenses from taxable profit, • absence of thin capitalization rules or their inapplicability in the case of “back-to-back” financing. • Absence of interest withholding tax in connection with interest paid on loan financing (including to an offshore tax jurisdiction) • Reasonable level of margin required by the tax authorities.

6. IPR/Licensing Companies Licensing companies perform the following functions within a corporate group of companies: • Holding of the ownership right on: • Licenses • Trademarks • Innovations • Scientific discoveries • Other objects of intellectual property • Juridical protection of intellectual property objects / industrial property, provided by the foreign law • Granting rights to use the objects of intellectual property by the operational companies in high tax jurisdictions and their tax optimization via license fees.

7. IPR/Licensing Company Cyprus as a jurisdiction for a licensing company suits a number of criteria considered to be: • Absence or reduction of WHT on license fees (under DTT or EU Interest and royalty Directive) on license fees paid to Cyprus IPR/license company; • Low general tax burden in Cyprus, including but not limited to: • Tax deduction of license payment, • Effective depreciation of intellectual property objects in tax accounting • Absence of WHT on license fees payment (including offshore companies) • Reasonable level of margin required by the tax authorities. • Neutral VAT treatment • Existence of the legislation protecting intellectual property rights and participation of Cyprus in international agreements regarding intellectual property rights protection.

8. Tax Comparison - Matrix

9. Tax Comparison - Matrix

10. Tax Comparison - Matrix

11. Tax Comparison - Matrix

12. Cyprus in comparison + Lowest nominal corporate income tax rate of all EU Member States, no capital taxes, no withholding taxes Only EU holding company regime based on participation exemption rules with no domestic tax leakage on holding activities Tax exempt capital gain on sale of shares irrespective of holding period and shareholding percentage No thin capitalization rules No strict transfer pricing rules Expense level of (financial) service providers -/- Perceived reputation as a financial service centre (although this has changed significantly ever since EU Accession) Advance Tax Ruling (ATR) Practice not adequately developed, as compared to other EU competing member states Smallest double tax treaty network of competing EU Member States

13. ConclusionQuestions