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1. CYPRUS COMPANIES LEGAL FRAMEWORK 17th June, 2010 Prague Your Single Professional Contact in South East Europe

2. Incorporation, duties and maintenance Directors / Secretary obligations Tax regime – corporate and personal Accounting and audit requirements Agenda Your Single Professional Contact in South East Europe

3. The Cyprus Legal System and Companies Legal Framework Cyprus Legal System Modeled after English Legal System Principles of common law Cyprus Companies Law based on UK’s Companies Act 1948 Adjusted with Cypriot reality / EU Law; Your Single Professional Contact in South East Europe

4. Regulatory framework for the Incorporation of Cyprus Companies Pre-approval of name by the Registrar of Companies required Director/s and Secretary – obligatory Private Limited Liability Company At least 1 Director and 1 Secretary Public Limited Liability Company At least 2 Directors and 1 Secretary Registered address in Cyprus Your Single Professional Contact in South East Europe

5. Share capital No min requirement Shares issued and paid upon incorporation Memorandum and Articles of Association Memorandum Specifies the objects of the Company Articles Specify the domestic regulations and administration of the Company Regulatory framework for the Incorporation of Cyprus Companies Your Single Professional Contact in South East Europe

6. Redomiciliation of a foreign company to Cyprus Foreign companies may transfer their seat in Cyprus Condition: should be permissible under the jurisdiction of incorporation of the foreign co Cost efficiency! No liquidation and re-registration costs Tax benefits Migrating company NOT deemed to be liquidated, hence no taxable disclosure of its hidden reserves where applicable. Your Single Professional Contact in South East Europe

7. Directors duties & powers Fiduciary duty: Not enter into contracts with the Co unless allowed by the articles or if approved by General meeting or when disclosed Act in good faith for the benefit of the Co Use powers and issue shares for a proper purpose Avoid conflicts of interests with their company Duty of care and skill: Does not have to demonstrate greater degree of skills than expected Not obliged to give continues attention to co’s affair Entitled to leave running of the co to the officials Your Single Professional Contact in South East Europe

8. Secretary Mandatory for all Companies Can be a legal or physical person Appointed by the Directors Duties – no specific duties Generally responsible for the administrative affairs of the company Your Single Professional Contact in South East Europe

9. Compliance requirements Keeping proper accounting books and records and preparation of financial statements Tax Compliance Preparation of audited financial statements Submission of Annual Return (Registrar of Companies) Submission of Tax Returns Submission of VAT Returns Your Single Professional Contact in South East Europe

10. Cyprus Tax Regime Simple and efficient tax regime attracting more and more foreign investments Cyprus is treated as a most favorable destination for: Holding Companies; Financing Companies; Royalty Companies; SPV Your Single Professional Contact in South East Europe

11. Cyprus tax resident companies are subject to tax on their worldwide income Corporate Income tax (CIT) is rated @ 10% The effective CIT rate is reduced even further considering the exemptions on: Gains on disposal of securities Dividend income Interest income (not in the ordinary course of business) Deductibility of expenses if incurred wholly and exclusively for the production of income Cyprus Tax Regime Your Single Professional Contact in South East Europe

12. Tax Briefing on Cyprus Lowest corporation tax in the EU (10%) Inbound dividends are generally tax free (limited requirements apply) No WHTs on payments to non-residents No capital gains tax on disposal of shares or non-Cyprus situated property Your Single Professional Contact in South East Europe

13. Immediate implementation of all EU Directives, including: Parent – Subsidiary Directive Interest & Royalty Directive Merger Directive No thin capitalization rules No inheritance tax Extensive network of Double tax treaties concluded Tax Briefing on Cyprus Your Single Professional Contact in South East Europe

14. Tax Residency A Company obtains the status of a Cyprus tax resident if: Managed and controlled in Cyprus Management is generally exercised by the board of directors of a Company Majority of local directors and meetings held in Cyprus advisable for tax purposes Registration is not sufficient for residency. Non-resident companies are taxed only on income derived from Cyprus Your Single Professional Contact in South East Europe

15. Personal tax regime Resident individuals subject to tax on worldwide income Residency established where: An individual resides in Cyprus +183 days in a year Applicable tax rates Taxable Income in EUR Tax rate 0 – 19,500 0% 19,501 – 28,000 20% 28,001 – 36,300 25% 36,301 + 30% Exemptions include: Dividend income Gains from the sale of securities Interest income (outside the ordinary course of business) Your Single Professional Contact in South East Europe

16. Companies (Fees & Duties Payable) Regulations On the registration of a company: Flat fee of €102,52 plus 0,6% on the authorized share capital of the Company. On the increase of authorised share capital of a company: 0.6% on the amount of the increase Fees for the submission of documents at the Registrar of Companies Your Single Professional Contact in South East Europe

17. Special Contribution to the Defence Dividends received from overseas subsidiaries 15% unless: not more than 50% of the paying company’s activities result in investment income; and the foreign tax is not significantly lower than the Cyprus tax. Dividends paid 15% on dividends distributed to shareholders who are residents of Cyprus (physical persons); no tax on dividends paid to non-resident shareholders. Deemed dividend distribution provisions apply (applicable on tax residents) Your Single Professional Contact in South East Europe

18. Interest received 10% tax on interest earned by an individual or company resident in Cyprus (outside the ordinary course of business). Rental income 3% on rental income of a Cyprus resident (after deduction of 25%). Special Contribution to the Defence Your Single Professional Contact in South East Europe

19. Capital Gains Tax Imposed on gains from: the disposal of immovable property in Cyprus the disposal of shares in companies the assets of which consist of immovable property in Cyprus Unless shares are listed in a recognised stock exchange. Exemptions: the sale of shares listed in any recognised stock exchange transfer of immovable property due to death; gifts among relatives up to the third degree, to companies by members of the family of the shareholders, by a family owned company to its members donation for charity to charitable organisations or to the Republic exchange of properties of equal value expropriation of property; sale or exchange of property consistent with the provisions of the Agricultural Land (Consolidation) Laws; Gains realised from transfers arising due to re-organisation Your Single Professional Contact in South East Europe

20. Non-residents also liable Deductions extended to individuals sale of private residence €85,430.07 sale of land used by a farmer €25,629.02 for agricultural purpose other sales €17,086.01 Capital Gains Tax

21. VALUE ADDED TAX Obligation to register with the VAT department Annual turnover exceeding €15,600 Intra-community services imposes an obligation to register irrespective of turnover Maximum level not giving rise to VAT registration obligation €13,668.81 (lower T/O can be registered voluntarily). Your Single Professional Contact in South East Europe

22. VAT rates Standard 15% Reduced 8 / 5% Zero rate Exemptions include medical services, postal services, financial services, insurance services, education, rent and disposal of immovable property (licensed before 05/2004), services to mutual funds, etc. VALUE ADDED TAX Your Single Professional Contact in South East Europe

23. Other Fees & Taxes Immovable property tax Progressive rates of 0 – 0.4% depending on the value of the property Specific exemptions apply under the law Transfer fees for immovable property Progressive rates of 3 – 8% depending on the value of the property Exemption applies in cases of qualifying reorganisations Stamp duty Imposed on contracts relating to things or matters to be done in Cyprus Rates: 0.15 – 0.20% depending on the consideration amount Capped at €17,086 Exemption applies in cases of qualifying reorganisations Your Single Professional Contact in South East Europe

24. Social Security contributions EmployerEmployee Self-employed % % % Social Insurance 6.8 6.8 12.6 Redundancy fund 1.2 - - Industrial training 0.5 - - Social Cohesion Fund 2.0 0 0 Other Fees & Taxes Your Single Professional Contact in South East Europe

25. Accounting & Audit Requirements Companies Law, Cap. 113 requirement to keep proper accounting books & records Representing a true & fair view of the company’s affairs Enabling the preparation of financial statements Preserved in the registered office of the company Holding companies with 1 or more subsidiaries should prepare consolidated financial statements according with IAS Small sized groups – exempt from the obligation to prepare consolidated financial statements The financial statements, directors’ report & auditor’s report (where applicable) should be presented by the directors at the general meeting Your Single Professional Contact in South East Europe

26. Companies Law, Cap. 113 Obligation to prepare Audited Financial Statements in cases of: Companies under an obligation to prepare consolidated financial statements Public Companies Private companies other that small sized companies Small sized company (2 out of 3 requirements to co-exist): Overall assets under approx. €3.5m; and/or Net turnover under approx. €7m; and/or Number of employees under 50 Accounting & Audit Requirements Your Single Professional Contact in South East Europe

27. Income Tax Law Accounts either presented to the Commissioner of inland Revenue or accompanying a tax return to be submitted to the Commissioner of Inland Revenue must be certified by a qualified auditor Audited financial statements should follow: The International Standards of Auditing; The International Financial Reporting Standards (IFRS) Accounting & Audit Requirements Your Single Professional Contact in South East Europe

28. Thank you! Your Professional Contact in South East Europe www.euglobal.eu Your Single Professional Contact in South East Europe