The Legal 500

The long-awaited reform of the Cyprus International; Trust Law, a much needed initiative, has finally become reality with the passing by the House of representatives of the International Trust (Amending) Law of 2011.

On July 13 2012, in its judgment in Stavros Orthodoxou v Neophytos Ioannou,(1) the Supreme Court clarified the principles underlying the apportionment of negligence.

The growth measures introduced in May 2012 included a package of incentives and tax exemptions relating to income from intellectual property rights, aimed at stimulating investment in research and development. A number of other countries, including Luxembourg, the Netherlands, Ireland and the United Kingdom have already introduced such schemes, which have come to be known as an intellectual property box (“IP box”).

The strategic location of Cyprus between three continents has always been considered ideal for trading purposes.

On May 18 2012 the Merchant Shipping (Compliance with Flag State Requirements) Law (48 (I)/2012) entered into force, following publication in the Official Gazette. It transposes EU Directive 2009/21/EC into domestic law.

The Cyprus Mail, Cyprus's leading English-language daily newspaper, recently published an open letter from Andreas Neocleous, chairman of our firm, setting out his proposals on how to improve the competitiveness of the business services sector in Cyprus.

In the wake of similar moves by other European jurisdictions, Cyprus has announced plans to introduce an ‘‘IP Box’’ to protect investment in R&D. The following article considers the proposals.

Introduction 7-8

Cyprus 7

Foreign investment in immovable property 7

Price of land 8

Legal assistance 8

The Republic of Cyprus has introduced a fast track procedure allowing high net worth individuals to acquire a permanent residence permit on an accelerated basis. Third country nationals who purchase immovable property in Cyprus for €300,000 or more as their own residence and who can demonstrate an adequate secure income from abroad will be eligible to apply for a permanent residence card. Each case is examined on its own merits depending on the personal circumstances of the applicant. To be eligible for permanent residence third country nationals must demonstrate:

The double tax agreement between Cyprus and Slovenia was signed in October 2010, entered into force on September 14 2011 and applies as from January 1 2012. It replaces the 1985 agreement between Cyprus and the former Yugoslavia, which formerly applied to Slovenia and still applies to Serbia and to Montenegro.

1. What are the main authorities responsible for enforcing taxes on corporate transactions in your jurisdiction?

There are two relevant departments within the Ministry of Finance:

• The Inland Revenue Department (IRD) administers direct taxation (broadly, income tax, corporation tax, capital gains tax (CGT), special defence contribution (SDC)) and stamp duty. Tax collection is organised through district offices. 

The Cyprus Department of Merchant Shipping has issued a circular (26/2012) reminding operators, representatives and masters of foreign vessels calling at Cyprus ports of their obligations under the Merchant Shipping (Community Vessel Traffic Monitoring and Information System) Law of 2004 as amended and the Merchant Shipping (Port State Control) Law of 2011.

The Protection of Cyprus Ships against Acts of Piracy and Other Unlawful Acts Law 2012 has entered into force following publication in the Official Gazette on June 15 2012 (for further information on this topic please see "Draft law on protection of Cyprus ships from acts of piracy").

Cyprus is a former British colony that gained independence in 1960. In 1974, Cyprus was invaded by Turkey and approximately one-third of the country remains under illegal Turkish occupation. All references to Cyprus or the Cyprus government in this chapter refer to the legitimate state and the government of that state.

The Supreme Court of Cyprus is the final appellate court, with jurisdiction to hear and determine appeals in civil and criminal cases from the other courts.

When Cyprus gained independence in 1960 it retained the colonial-era Limitation of Actions Law,(1) which prescribed the time limits within which claims must be brought before a court. The Limitations Law was suspended in 1964 following inter-communal disturbances.

Law 12(I)/2006 (the Law) is the relevant legislation governing public procurement contracts in the Republic of Cyprus. The Law, which transposes EU Procurement Directives 17/2004 and 18/2004 into Cyprus’s legal system, provides for the coordination of procedures for the award of public works contracts, public supply contracts, public service contracts and related matters.

Prior to independence, Cyprus was a British colony and much of its legal system derives from English law. The Companies Law, Cap. 113, closely resembles the UK Companies Act 1948. The Companies Law has been added to and updated over the years, but most of its provisions in the fields of security and insolvency remain broadly as they were at independence.

What are the most common forms of security granted over immovable and movable property? Are there formalities that the security documents, the secured creditor or the debtor must comply with? What is the effect of non-compliance with these formalities?

New legislation on the measures to be taken to protect Cyprus ships from acts of piracy and other illegal acts is passing through Parliament.

A protocol and an additional protocol to the double taxation agreement between Austria and Cyprus were signed on behalf of the two countries on May 21 2012 (for further details please see "Cyprus-Austria double taxation avoidance agreement amended").

In a recent case(1) the claimant filed an action against the ship and its owner to recover unpaid charges for bunkering and maintenance services provided to the ship. The claimant also applied to the court for the ship to be arrested. The court arrested the ship on the basis of the claimant's application.

Parliament has approved a number of changes to the laws relating to income tax and the special defence contribution (SDC) tax aimed at stimulating the economy and attracting investment from overseas. The changes will come into force when the amending laws are published in the Official Gazette, and will have retrospective effect from January 1 2012.

What are the main statutes and regulations relating to employment?

Cyprus employment law is a mixture of statute and case law. The Constitution guarantees certain fundamental rights relating to employment, such as the rights to work, to strike and to equal treatment. 

The Cyprus Parliament has made amendments to the laws relating to VAT and transfer fees on real estate with the objective of stimulating activity in the real estate market.

An amendment to the double taxation avoidance agreement between Cyprus and Austria was signed on behalf of the two countries on May 21 2012, according to an announcement by the Austrian Federal Ministry of Finance.

The Department of Merchant Shipping has issued Circular 22/2012 clarifying the tax returns that must be submitted by companies that own or are bareboat charterers of Cyprus ships.

A Protocol and an Additional Protocol to the double taxation agreement between Austria and Cyprus were signed on behalf of the two countries on Monday 21 May 2012.

The acquisition cost of pleasure craft (private yachts or other vessels used exclusively for pleasure) is subject to VAT if the vessel is brought into the EU and used in EU waters.

The Cyprus Parliament has approved a number of changes to the laws relating to income tax and SDC tax aimed at stimulating the economy and attracting investment from overseas. The changes will come into force when the amending laws are published in the Official Gazette and will have retrospective effect from 1 January 2012.

The recent decision of the Nicosia District Court in the case of TMP v. TGSB ao, in which we successfully argued against the issuing of an injunction interfering with performance by a bank under a Letter of Credit, was reported in Documentary Credit World, the world's leading specialist publication on letters of credit. To view a copy of the report, click the link below.

In response to "Cyprus, Not WTO, May Modernize Russia," a comment by Daniel Klein on April 25.

New legislation on the measures to be taken to protect Cyprus ships from acts of piracy and other illegal acts is currently passing through the Cyprus Parliament.

In November 2011 the Cyprus Parliament enacted a law allowing for a partial write-off of interest and penalties on overdue tax liabilities of companies and individuals in respect of tax years up to and including 2008.

An amendment to the double taxation avoidance agreement between Austria and Cyprus was signed on behalf of the two countries on Monday 21 May, according to an announcement by the Austrian Federal Ministry of Finance.

The Sale of Immovable Property (Specific Performance) Law allows purchasers who deposit a stamped agreement for the sale and purchase of immovable property in Cyprus with the relevant District Land Registry within specified time limits to obtain specific performance of the contract if the seller subsequently fails to cooperate.

The Department of Merchant Shipping has published details of the amended government policy on ship registration under the Merchant Shipping (Registration of Ships, Sales and Mortgages) Laws 1963 to 2005. The amended policy has applied since October 15 2011. It simplifies, and in some cases relaxes, the earlier policy, which was in effect from July 1 2009.

The Department of Merchant Shipping has issued two new notifications under the Tonnage Tax Law (44(I)/2010).

The Taxation of Owners of Cyprus Ships Notification, published in the Official Gazette on April 6 2012, repeals and replaces an earlier notification issued in 2010. The new notification:

The island now has the most modern and favourable trust regime in Europe

The long-awaited reform of the Cyprus International Trusts Law – a much-needed initiative – finally became reality last month with the passing of the International Trust (Amending) Law of 2011 by the House of Representatives.

After years of falling behind, Cyprus has recently updated its law on international trusts to reflect changes in global investment practice. The following article examines the revisions involved from a tax perspective.

In Ngassam v Republic of Cyprus via the General Director of the Ministry of Interior and the Attorney General of the Republic the Supreme Court recently ruled on the right of an HIV-positive illegal immigrant to remain in Cyprus.(1)

Property amnesty laws amended

Two amending Laws, namely 33(I)/2012 (Town and Planning Law) and 34(I)/2012 (Streets and Buildings Law) were published in the Official Gazette on Friday 6 April 2012 which in effect extend the deadlines of the so called Property Amnesty, a series of measures to address the problems arising from delays in the issue of title deeds to property owners.  

Introduction 7-8

Cyprus 7

Foreign investment in immovable property 7

Price of land 8 Legal assistance 8

In November 2011 the Cyprus Parliament enacted a law allowing for a partial write-off of interest and penalties on overdue tax liabilities of companies and individuals in respect of tax years up to and including 2008.

The protocol amending the double taxation agreement between Cyprus and Poland has recently been signed on behalf of both countries. When ratified, the protocol will make a number of changes to the existing agreement, which dates back to 1992.

The Cyprus Department of Merchant Shipping has announced that the Merchant Shipping (Community Vessel Traffic Monitoring and Information System) Order of 2012, issued under section 351 of the Merchant Shipping (Community Vessel Traffic Monitoring and Information System) Laws of 2004 and 2010, entered into force on 16 March 2012. The Order transposes EU Directive 2011/15/EC amending Directive 2002/59/EC.

Cyprus
Panayiotis Neocleous, Costas Stamatiou and Alexia Solomou - Andreas Neocleous & Co LLC

The Double Taxation Treaty between Russia and Cyprus, which took effect in 1998, replaced a treaty between the former Soviet Union and Cyprus dating back to 1983, but it proved inadequate with regard to information sharing between jurisdictions, to the concern of the Russian tax authorities. The forthcoming Protocol aims to resolve these concerns.

Court rules on procedure for setting aside judgments

In Fortis Bank SA v Aurum Capital Holdings Inc(1) the District Court of Nicosia ruled on the court procedure for setting aside judgments. 

Reform of the Cyprus International Trusts Law of 1992

The long-awaited reform of the Cyprus International Trusts Law, a much-needed initiative, has finally become reality with the passing by the House of Representatives of the International Trust (Amending) Law of 2011.

The protocol amending the double taxation agreement between Cyprus and Poland has been signed on behalf of both countries. The protocol makes a number of changes to the existing agreement, which dates back to 1992. The principal changes are outlined below.

The following article examines how Czech businesses can benefit from including a Cyprus holding company in their corporate structure.

By adoption of a law on criminal liability of legal entities and on proceedings against them the Czech Republic has joined the mainstream of European countries whose laws provide for corporate criminal liability.

What Regulates M & A?

When it joined the EU in 2004, Cyprus came under the obligation to align its legislation with Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids (“the Takeover Directive”). 

The Protocol to the 1998 Double Tax Agreement between Cyprus and Russia (for further information please see "New protocol added to Cyprus-Russia tax treaty") was finally ratified by Cyprus in September 2011.

The Department of Merchant Shipping has issued revised versions of Forms MSTT8 and MSTT8A (Declaration of Owner of a Cyprus Ship) for the purposes of the tonnage tax on shipping activities.

The critical role that letters of credit have played in the growth of international trade is widely acknowledged.

nears completion

The Protocol to the 1998 Double Tax Agreement between Cyprus and Russia was ratified by Cyprus in September 2011.

Overview of SEPA - The Single Euro Payments Area (SEPA) is an initiative of the European banking industry to simplify all electronic payments across the euro area by credit card, debit card, bank transfer or direct debit and to make them as easy as domestic payments within one country are now.

Geostrategic and financial interests regarding gas exploration and exploitation

by Christos Floridis

Regarding the natural Gas Production Prospects in the East Mediterranean, Cyprus, the third largest island in the Mediterranean Sea, is located at the crossroads of big international energy routes unifying Europe with the Middle East, Africa and the countries of the Gulf.

The second licensing round for offshore exploration of hydrocarbons in Cyprus's exclusive economic zone has now officially begun. The invitation to apply for licences was published in the Official Journal of the European Union on 11 February and has subsequently been published on the website of the Ministry of Commerce, Industry and Tourism of the Republic of Cyprus.

By Elias Neocleous

The Cyprus legal order reflects the cosmopolitan nature of the island and the diversity of influences on its history. Elements of Ottoman law and continental European law can still be found, particularly in its succession and constitutional law.

In December 2011 a number of amendments were made to the laws regarding income tax, special defence contribution (SDC) tax and value added tax (VAT) in order to reduce the government deficit. The main changes are as follows.

by Christos Floridis

EU leader Member States agreed on a new Treaty on Stability, Coordination and Convergence in the Economic and Monetary Union. The European Stability Mechanism (ESM) Treaty was signed by euro area Member States on 2 February 2012 and ratification is pending by the 17 euro area Member States. The target date of its operation is July 2012, a year earlier than expected.

which Cyprus

Directive 2009/109/EC of the European Parliament and of the Council of 16 September 2009, regarding the simplification of the rules on merger and divisions, has not been yet implemented in some Member States of the EU. Cyprus is one of those Member States which failed to fulfil their obligations and commitments under the relevant Directive. 

EU labor law in offshore gas-drilling operations has been recently challenged in the case of Salemink v. Raad van bestuur van het Uitvoeringsinstituut werknemersverzekeringen, in the judgment of the Court’s Grand Chamber in January, 17, 2012.

The Cyprus government has announced that the relevant documentation is being prepared for the second licensing round for the remaining blocks of Cyprus’s Exclusive Economic Zone (EEZ) and that expressions of interest will be invited shortly. The exploration area within Cyprus’s EEZ covers approximately 51,000 square kilometres and is divided into 13 blocks. An exploration licence for one block (Block 12) was awarded to Noble Energy International Limited in 2008 and initial results of test drilling are expected before the end of 2011.

Amendments announced to Cyprus-Italy agreement on maritime navigation

The Department of Merchant Shipping has announced that the 2004 agreement between Cyprus and Italy on maritime navigation has been amended by an exchange of notes between the two countries. The amendments took effect on November 23 2011. 

INTRODUCTION

COMMERCIAL ENVIRONMENT

FOREIGN INVESTMENT

BUSINESS ENTITIES

TAXATION

DOUBLE TAXATION TREATIES

The Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism has published its latest report on measures to combat money laundering and terrorist financing in Cyprus. The main conclusions of the report are as follows:

Limitation periods in Cyprus are set out in the Limitation of Actions Law, Cap 15 ("Limitations Law"), which dates back to the time when Cyprus was a British colony. The principal time limits range from two to 15 years, depending on the nature of the claim. In relation to causes of action not expressly provided for by the Limitations Law or not expressly exempted, the limitation period is six years from the date when the cause of action accrued.

Since 1995 Transparency International has published an annual Corruption Perception Index, assessing and comparing the perceived level of corruption in the public sector. The 2011 index ranks countries on a scale from 10 (very clean) to 0 (highly corrupt). Cyprus succeeded in maintaining its position as one of the countries least plagued by corruption, achieving thirtieth place out of 183 countries worldwide.

Cyprus’s basic law on trusts, the Trustee Law of 1955, closely resembles the English Trustee Act 1925. Like many laws of the colonial era, it continues in force under the Constitutional provision that preindependence laws should remain in force in the Republic until repealed or amended by its own laws.

Cyprus's Exclusive Economic Zone

Noble Energy Inc has announced a significant natural gas discovery at the Cyprus Block 12 prospect, offshore the Republic of Cyprus.  

On 2 December 2011, following publication in the official Gazette, Law 156(I)/2011, the Law to Amend the Lands and Survey Departments (Fees and Charges) Law ("the Amending Law") came into force. The Amending Law will apply for six months and will expire on 2 June 2012. Its main provisions are as follows

The Acquisition of Immovable Property (Aliens) Law, Cap. 109 has been amended to align it with articles 45, 49, 56 and 63 of the Treatyon the Functioning of the European Union, which provide for the freedom of movement of workers and capital, freedom of establishment and the freedom to provide services across the EU.

The European Commission has issued a Communication on inheritance taxes asking governments of Member States to address two issues: the potential double taxation of inheritances, where more than one Member State claims the right to tax the same inheritance; and discriminatory taxation, such as a higher tax rate being applied if the assets, the deceased or the heir are located outside the Member State.

Following the enactment in April 2011 of Law 72(I) of 2011, which made it illegal to charge interest above a specified rate (currently 12.57%) on loans, the Penal Code, Cap 154, has been further amended to introduce an exemption for corporate financial arrangements, namely:

The new Agreement between the Republic of Cyprus and the Kingdom of Denmark for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income, which was signed on 11 October 2010, entered into force on 7 September 2011. The new Agreement replaces the 1981 agreement between the two countries.

protection of EU’s financial interests

by Christos Floridis

The protection of EU’s financial interests reflect s the basic targets and objectives of the European Union to supress the illegal traffic of products as well as counterfeiting activities within EU Member States. Hercule I and II, as well as Pericles constitute the means and the tools with the aid of which, relevant European and national authorities will be empowered to take all the measures needed and execute the harmonised strategy of the Union. 

An amendment to the Czech Labour Code and Employment Law has been passed by the Parliament and approved by the President. It is expected to take effect on 1 January 2012.

The principal changes include:

insurance of shipowners for maritime claims- Harmonisation Measures

The Cyprus Department of Merchant Shipping has issued a circular to owners and operators of Cyprus-registered ships reminding them that with effect from 1 January 2012 Directive 2009/20/EC requires the owners of all types of ship of 300 gross tonnes or above to have insurance cover against maritime claims subject to limitation under the International Maritime Organisation's 1976 Convention on Limitation of Liability for Maritime Claims, as amended by the 1996 Protocol. 

The Cyprus Securities and Exchange Commission ("CYSEC") has recently issued Directive DI144-2007-11 of 2011 on "Supplementary Supervision of Investment Firms in a Financial Conglomerate". The  Directive sets out the provisions for the supplementary supervision of an investment firm which has been granted an authorisation by CYSEC and which is part of a financial conglomerate.

The twenty-seventh biennial Assembly meeting of the International Maritime Organization (“IMO”) was held in London in November 2011. During the session, the Assembly re-elected Cyprus as a member of its Council for a further two years.

The Cyprus Parliament has passed a law allowing a partial write-off of interest and penalties on overdue tax, provided that liabilities are settled by 31 March 2012.

The new package of measures adopted by the European Commission regarding the action to be followed for growth governance and stability contains four elements: the 2012 Annual Growth Survey consists of priorities for the coming year, a Green Paper on the feasibility of introducing Stability Bonds and two new Regulations to further strengthen budgetary surveillance in the Euro area. By adopting this package, the European Union focuses on the strengthening of the Eurozone governance.

The European Commission has recently announced that it has adopted a Communication on Double Taxation, which highlights where the main double taxation problems lie within the EU and outlines concrete measures that the Commission will take to address them. By doing so the Commission seeks to remove obstacles to a more competitive economy and make the EU easier to invest and do business in.

The financial upheavals undergone by the Cyprus economy in the first half of 2011 and the tragic explosion at Mari which destroyed half the island's electricity generating capacity and left the government in disarray have added to a risk of a new recession.

On January 11, 2007, the Republic of Cyprus announced the: ‘‘First Hydrocarbon Exploration Licensing Round Offshore Cyprus. This is scheduled to be officially opened on the 15th February 2007 and to be closed on the 16th July 2007 . . . The areas open for bidding will be chosen from 12 offshore blocks. The total area covers approximately 70,000 km2 . . .’’

by Mr. Christos Floridis

Given the new globalisation effects in modern societies and the consequences of the financial crisis, EU adopted a new approach towards immigration policy. This European policy intends to establish bilateral and multilateral agreements with EU neighbours and other countries presenting immigration flows towards the EU, in order to benefit the human capital from the countries concerned.

Environmentally sustainable management at an international level requires reliable information on the natural environment, as well as sharing of knowledge on the social, economic, legal and political systems. Environmental impacts of human activities on the deep sea floor are of increasing international concern.

of the Cyprus-Russia Double Taxation Agreement

The current double tax agreement between Cyprus and Russia provides for a reduced rate of withholding tax dividends paid by a Russian company to a Cyprus-resident  shareholder.

Cyprus has been removed from the so-called "blacklist" published by the Portuguese tax authorities. Decree 150/2004 of the Portuguese Ministry of Finance set out a list of more than 80 jurisdictions considered to have unduly favourable tax regimes. Residents of countries on the list are denied certain benefits of the Portuguese tax system, and subject to higher rates of certain taxes.

Directive 144-2007-01 issued by the Cyprus Securities and Exchange Commission (CYSEC) allows Cyprus Investment Firms to outsource portfolio management services carried out on behalf of retail clients to a service provider located outside the EU, as long as the service provider is authorised or registered in its home country to provide that service and subject to appropriate prudential supervision, and there is an appropriate cooperation agreement in place between the supervisory body concerned and CYSEC.

The Cyprus Parliament has unanimously approved amendments to the so called Property Amnesty Laws, which were introduced earlier this year in order to address the problems arising from delays in the issue of title deeds to property owners. These laws, which streamline the procedure of applying for title deeds and remove unnecessary obstacles, came into force on 8 April 2011 and set various deadlines for applicants.

At a time when politicians in the world's large economies are stigmatising legitimate tax mitigation measures and denouncing financial centres such as Cyprus as tax havens which promote secrecy and concealment of income, a recent independent study shows a different picture.

The European Commission adopted on October 2011, a plan with a huge budgetary importance of around 50 billion euro aiming at improving EU’s transport, energy and networks. In its proposal already adopted on June 19, 2011, the Commission proposes the creation of a new financial instrument, which will be completely integrated in the multi – annual financial framework of the next programming period 2014-2020 and which fully complies with the context of the Commission’s communication ‘‘A budget for Europe 2020’’.

The Department of Merchant Shipping has recently issued an updated list of countries whose certificates of competency are recognised by Cyprus under the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers 1978, as amended. The only change from the previous list, issued by the department in March 2011, is that Morocco is no longer under evaluation by the European Commission for accession to the convention.

Certification and Watchkeeping for Seafarers, STCW 78

The Cyprus Department of Merchant Shipping has issued an updated list of countries whose certificates of competency are recognised by the Republic of Cyprus under the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, STCW 78, as amended. 

The Cyprus Inland Revenue Department has issued a circular (2011/10) introducing a significant change in practice which will benefit international companies in Cyprus.

The Settlement Finality in Payment and Securities Settlements Systems Law (Amendment) Law, 99 of 2011 and the Banking Business and Securities Transfer (Amendment) Law, 103 of 2011 align Cyprus domestic banking legislation with Directive 2009/44/EC of the European Parliament and of the Council amending Directives 98/26/EC on settlement finality in payment and securities settlement systems and 2002/47/EC on financial collateral arrangements as regards linked systems and credit claims.

Advance-fee fraud is a classic form of white collar crime,(1) in which the targeted victim is persuaded to advance money to the criminal in the hope of realising a significantly larger gain.

Following the enactment of the Covered Securities Law, 130(I) of 2010, which establishes the legal framework for issuance of covered securities in Cyprus, a number of consequential amendments have been made to other legislation.

Finance ministers and Central Bank governors of European Union Member States debated during the last informal Economic and Financial ECOFIN Council of September 17, the current condition of the economy and the situation in sovereign bond markets.  The debate on the European Union’s financial stability was also attended by representatives of European financial oversight authorities.

INTRODUCTION

FORMS OF BUSINESS ENTITY

FOREIGN INVESTMENT

THE BANKING SYSTEM...

And the China Banking Regulatory Commission

The Central Bank of Cyprus has announced the signing on 15 July 2011 of a Memorandum of Understanding with the China Banking Regulatory Commission. The Memorandum of Understanding follows the basic principles of cooperation between supervisory authorities, as formulated by the Basel Committee on Banking Supervision.

Global Overview

Albania

Argentina

Austria...

In this issue

Changes to tax and company law

Protocol to the Russia-Cyprus DTT sent to Russian Duma for ratification

Deduction of SDC tax at source from rental payments...

The Cyprus Parliament has passed a series of measures to increase various taxes and impose an annual levy on companies incorporated in Cyprus. These measures form part of an austerity package aimed at reducing the budget deficit, which also includes an increase in government employees' pension contributions and a two-year special levy on salaries and pensions paid to national and local government employees.

Global Overview

Social Media and Employment

Austria

Belgium

Brazil...

INTRODUCTION

COMMERCIAL ENVIRONMENT

FOREIGN INVESTMENT

BUSINESS ENTITIES

TAXATION

DOUBLE TAXATION TREATIES

New legislation to present abuses to the disclosure of deals

New rules were adopted September 14, 2011 by the European Parliament to prevent abuses in wholesale energy trading for the final protection of consumers.  According to the legislation, wholesale trading will be monitored independently across the EU, in order to enable Member States to prevent and punish anti-competitive behaviours.

A slow recovery after the crisis

All European Union countries have been affected between 2008 and 2010 by the economic and financial crisis and after a contraction in 2009 in every EU country, except Poland, growth returned in 2010 in all but five peripheral countries. 

Following the implementation of the 6th Environment Action Programme (EAP), which was adopted on 22 July 2002 and provided the framework of EU’S  Environment legislation and extended the Natura 2000 network, the European Commission adopted on 31 August 2011 the final assessment of the 6th EAP (2002-2012).

The Cyprus Department of Merchant Shipping has announced that the Minister of Communications and Works has issued the Merchant Shipping (Marine Equipment) Order of 2011, PI 274/2011 in accordance with section 21(1) of the Merchant Shipping (Marine Equipment) Laws 2002 – 2006 (Law 55(I)/2002 as amended).

Safety rules and standards for passenger ships Marine equipment Port state control

The Department of Merchant Shipping has announced a number of legislative changes in order to update Cyprus law in line with the latest EU
directives.

On loans between connected entities

Section 33 of the Cyprus Income Tax Law allows the tax authorities to adjust a company’s taxable profit in the event that transactions between related companies are undertaken other than on an arm's length basis. 

Based on EUROSTAT’s researches, the Republic of Cyprus disposes a very promising feedback from the energy saving and the renewable energy schemes, as more and more people apply for the available funding.

The Merchant Shipping (Port State Control) Law of 2011 (Law 95(Ι)/2011) transposes Directive 2009/16/EC of the European Parliament and of the Council dated 23 April 2009 into Cyprus law. The new Port State Control Law repeals the Merchant Shipping (Port State Control) Laws of 2001 to 2009 and any Notifications issued under them.

Andreas Neocleous & Co LLC has entered into an innovative project aimed at providing advice and assistance to businesses and individuals considering relocating to Cyprus.

Until recently Russian companies have generally been successful in defending any challenges put forward by the tax authorities against the admissibility of highly-leveraged financing schemes involving finance provided by a fellow-subsidiary company or by reliance on the non-discrimination clauses included in most of Russia's double tax treaties. The courts have generally accepted these arguments, giving companies scope to used highly leveraged debt financing for group tax planning purposes.

The Cyprus Parliament has passed a series of amendments to tax and companies legislation in order to increase various taxes and impose a levy on companies incorporated in Cyprus. These measures form part of an austerity package aimed at reducing the budget deficit, which also includes an increase in government employees' pension contributions and a two-year special levy on salaries and pensions paid to national and local government employees. Further measures are expected over the next few months which will predominantly focus on the provision of tax incentives and other measures for promoting growth.

Since July 1 2011, companies, partnerships and national or local government bodies that pay rent to Cyprus-resident landlords have been required to deduct a special defence contribution tax from their rental payments and remit it to the tax authorities. The amount to be deducted and paid over to the tax authorities is 3% of 75% (ie, 2.25%) of the gross rental amount.

Tax developments in Ukraine and Russia underline the requirement for proper documentation and execution of transactions

On 2 June 2011 the Higher Administrative Court of Ukraine issued a circular to subordinate courts giving guidance on the application of the provisions of the Tax Codes in disputes coming before the courts.

Section 33 of the Income Tax Law allows the tax authorities to adjust a company's taxable profit in the event that transactions between related companies are undertaken on a non-arm's length basis.

With effect from 1 July 2011, companies, partnerships, and national or local government bodies which pay rentals to Cyprus-resident landlords are required to deduct SDC tax from rental payments and remit it to the tax authorities. The amount to be deducted and paid over to the tax authorities is 3% of 75% (i.e. 2.25%) of the gross rental amount.

The Czech Republic has concluded another agreement on exchange of information on tax matters (TIEA). Following the signing of similar agreements with the British Virgin Islands on 13 June 2011 and the Isle of Man on 18 July 2011, the Czech Republic concluded and signed a TIEA with Bermuda on 15 August 2011. The TIEA with Bermuda will enter into force after both parties have completed all required ratification procedures and exchanged corresponding notifications. For criminal tax matters the treaty provisions will take effect immediately on that date.

On 19 July 2011, the European Commission issued a list of the first sustainable voluntary schemes for biofuels recognised directly in the 27 EU Member States. According to the Energy Commissioner, Günther Oettinger, the EU has to secure the entire biofuels production and supply with the highest sustainability standards in the world under a transparent and reliable system.

The Merchant Shipping (Safety Rules and Standards for Passenger Ships) Order of 2011 PI 247/2011, which took effect on 29 June 2011, transposes Commission Directive 2010/36/EU dated 1 June 2010 amending Directive 2009/45/EC of the European Parliament and of the Council on safety rules and standards for passenger ships into Cyprus law.

The Council concluded on 12 July 2011 the first European Semester which has been implemented this year, for the first time, as part of a broader reform of the EU’s economic governance.

On May 31 2011, in the Unreported Action 6598/2001 between GCC Computers Limited and European Dynamics SA, the Nicosia District Court made an absolute order for the attachment of assets in the hands of a third party. A writ of attachment - a court order to 'attach' or seize an asset - is one of the various measures that may be taken to enforce a judgment.

Introduction
The government's budget for 2011, approved by the Parliament in December 2010, introduced a number of new penalties for late payment and late filing of returns under the Income Tax Law, the Special Contribution for Defence Law, the Assessment and Collection of Taxes Law, the Capital Gains Tax Law and the Immovable Property Tax Law.

The treaty between Russia and Norway on Maritime Delimitation and Cooperation in the Barents Sea and the Arctic Ocean took effect in July 2011. The treaty ends a 40-year border dispute between the two countries, sets new fisheries rules and removes obstacles to development of oil and gas deposits in a 175,000-square-km area of the Arctic shelf.

The Partnership and Business Names (Amendment) Law (54(I)/2011) introduces new provisions to the Partnership and Business Names Law (Cap 116) to facilitate the reorganisation and merger of partnerships and extend the favourable tax treatment of qualifying corporate reorganisations to partnerships.

The Cyprus Government's budget, approved by the Cyprus Parliament in December 2010, introduced a number of new penalties for late payment and late filing of returns, which were due to take effect on 30 June 2011.

The Presidents of Cyprus and Ukraine have expressed confidence that a new double taxation agreement between the two countries will be signed shortly. Speaking during a visit to Ukraine the Cyprus President confirmed that Cyprus is ready to sign a new double tax agreement.

The Central Bank of Cyprus has issued a Directive under article 20 of the Central Bank of Cyprus Laws of 2002 to 2007 regarding the implementation of the European Central Bank's Decision dated 16 September 2010 on the authenticity and fitness checking and recirculation of euro banknote

Giving Cyprus an international trusts law for the twenty-first century

Throughout the firm's existence Andreas Neocleous & Co LLC has helped shape Cyprus's transparent and robust legal system, and promote the island as a leading international business centre offering the highest standards of integrity with smart regulation.

UK: Open for business – the start of a new era?

• Belgium: Liability of tax advisors & shareholders for tax debts of a

• hell company

• Russia: Importance of substance for structures using Cyprus

•  Luxembourg & Germany: Taxation of German cross-border workers

•  Slovak Republic: Transfer Pricing facts 2011

•  Cyprus – Germany Tax Treaty: Important changes

The Banking (Amendment) Law 2011 (Law 27(I) of 2011) came into effect in March 2011.  It harmonises legislation in the banking sector with EU legislation including:

with strategic anti-money laundering deficiencies

The Financial Action Task Force on Money Laundering (FATF) was established by the G-7 Summit held in Paris in 1989. It was given responsibility for examining money laundering techniques and trends, reviewing actions which had already been taken at a national or international level, and setting out the measures that needed to be taken to combat money laundering.

Limited liability partnerships (LLPs) are a form of hybrid entity which combines the advantages of a partnership and a limited company and are widely used for doing business around the world. India enacted legislation in 2009 allowing for LLPs to be formed. However, foreign investment in LLPs was not permitted.

The package of measures proposed by the European Commission aiming towards better regulated immigration flows from the southern Mediterranean region as well as the proposal to amend EU Regulation on visas consists of the new incentives of EU bodies for a fair, credible and effective EU immigration policy.

Energy Efficiency Plan In March 2011, the European Commission adopted a plan for saving more energy through concrete measures. Energy efficiency is a key tool to strengthen Europe’s competitiveness and reduce energy dependence, as well as the level of emissions. The measures proposed aim at creating substantial benefits for businesses and public authorities.

The Isle of Man and the Czech Republic signed a Tax Information Exchange Agreement  (TIEA) on 18 July to regulate and facilitate the exchange of tax information between them. The TIEA will enter into force after both parties have completed all required ratification procedures and exchanged corresponding notifications. Most of its provisions will then take effect immediately, with the remainder taking effect on the following 1 January.

On 19 July 2011, the European Commission issued a list of the first sustainable voluntary schemes for biofuels recognised directly in the 27 EU Member States. According to the Energy Commissioner, Günther Oettinger, the EU has to secure the entire biofuels production and supply with the highest sustainability standards in the world under a transparent and reliable system.

On 17 December 2010 the European Council agreed on the need for a Eurozone area and on the establishment of a permanent stability mechanism which will intervene by providing financial assistance to the Eurozone Member States after June 2013. 

The Council concluded on 12 July 2011 the first European Semester which has been implemented this year, for the first time, as part of a broader reform of the EU’s economic governance. 

In its policy statement of 4 August 2010 the Government of the Czech Republic pledged to "continue to prepare amendments to the Copyright Act to ensure full harmonization of the Czech copyright law with European and international copyright in which the fundamental principle is balance of holders´rights and interests on one hand and users' rights on the other."

The European Commission has faced the challenge of being able to fund a number of policy areas where the EU could be more effective, by acting at EU level, in preparing its proposals for the future budget of the European Union.

The Cyprus Department of Merchant Shipping has issued circular 21/2011 drawing attention to the "ring fencing" provisions of the Merchant Shipping (Fees and Taxing Provisions) Law of 2010 (Law 44(I)/2010) ("the Tonnage Tax Law”).

illustrates the need for careful planning and documentation of transactions.

The Partnership and Business Names (Amendment) Law, Law 54(I) of 2011 introduces new provisions to the Partnership and Business Names Law, Cap. 116 to facilitate the reorganisation and merger of partnerships and extends the favourable tax treatment of qualifying corporate reorganisations to partnerships.

The double taxation agreement between Cyprus and the United Arab Emirates, concluded in October 2010.

Although internal guidance was issued in 1993, this is the first circular published by the Cyprus VAT authorities on this matter.

ADR can provide significant savings, regard ing the time and cost needed to resolve disputes compared with traditional litigation.

What are the main authorities responsible for enforcing taxes on corporate transactions in your jurisdiction?

There are two main departments within the Ministry of Finance

In May 2011 the Department of Merchant Shipping notified its decision to authorise the use of nautical publications (eg, sailing directions, lists of lights, notices to mariners, tide tables and other publications necessary for their intended voyage)

Smart growth in Europe 2020

In the European Commission’s Communication regarding the contribution of the regional policy in the area of smart growth in the Europe 2020 strategy, the central role of European regions in this process is primarily recognised.  

Following the Justice and Home Affairs Council meeting of 9 and 10 June 2011, the Council discussed the political guidelines for the future work of the following issues:

The Central Bank of Cyprus has announced that all its licensing functions, including the licensing of banks, payment institutions, electronic money institutions and international collective investment schemes, have been consolidated under a single section, the Licensing Section.

The passage of vessels through Cyprus territorial waters has recently been regulated by the enactment of The Regulation of the Innocent Passage of Ships in the Territorial Sea Law of 2011 (Law 28(I)/2011), which entered into force on 18 March 2011.

The Russian Tax Code includes thin capitalisation rules which limit or disallow the deduction of interest paid by a Russian company which
fails to meet the prescribed debt-to-equity ratio.

In times of budgetary austerity and financial crisis it is important that the European Commission sets out new rules in order to protect the EU’s financial interests and tax payers’ money from fraud. 

The current situation

The lists of third countries whose nationals should be in possession of a visa when crossing the external borders and those whose nationals are exempt from that requirement have been amended on several occasions.

Can the right of free movement deriving from Union citizenship be invoked by EU citizens in order to regularise the residence of their non-EU spouse?

Under EU law, when a national of a Member State resides legally in another Member State, his or her spouse is allowed to remain with him or her even when the spouse is not a national of an EU Member State.

Introduction

During the ongoing crisis, the private and public sectors are under attack, often unable to react to the destructive power of evolution.  Trade transactions are hit by uncertainty due to the ongoing liquidity constraints.

The new EU directive

In the new Directive 2011/7/EU of the European Union on combating late payment in commercial transactions, published on 23 February 2011 in the Official Journal, Member States have to bring into force the laws, regulations and administrative provisions by 16 March 2013. Certain provisions of the previous Directive 2000/35/EC have been revised. 

The government of the Czech Republic has recently presented a new draft Civil Code, which forms the main component of the upcoming recodification of private law. The Chamber of Deputies is expected to complete its consideration of the draft before the end of the year. State institutions and the general and professional public will then have a period of one year to prepare for the changes before the new Civil Code takes effect. If all goes to plan, the new  Civil Code should become effective as of 1 January 2013.

Details are now available of the levy to be imposed from 2011 onwards on credit institutions in Cyprus. As noted in our earlier news item, credit institutions operating in Cyprus will be required to pay a levy of 0.095% on their customer deposits. For the first two years, seven-twelfths of the amounts raised by the levy will be used to reduce the government deficit and the remaining five-twelfths will be used to fund a financial stability fund. From 1 January 2013, the entire amount raised by the levy will be credited to the financial stability fund.

The enactment of Russian Federal Law 395-FZ  on “The amendment of legislative acts of the Russian Federation in respect of dividends”, together with the consequent change to the Russian Tax Code, is an important development in the Russian tax order.

Shareholders’ Contributions to Russian LLCs and JSCs now exempted: The role of Cyprus in enhancing the financial position of distressed Russian companies.

As its name indicates, Russian Federal Law No 409-FZ dated 28 December 2010 "On Making Amendments to Certain Legislative Acts of the Russian Federation in Respect of Regulation of Dividend Payouts (Profit Distribution)" is principally concerned with dividends paid by companies. However, one of its provisions creates attractive opportunities for financing Russian limited liability companies (OOOs) and joint-stock companies (AOs) on a tax-free basis.

After lengthy negotiations, Cyprus and Germany have signed a new Agreement on the Avoidance of Double Taxation, which, when ratified, will replace the existing agreement of 1974 ("the 1974 agreement").

Cyprus has enacted a new law regulating personal loans and limiting the maximum rate of interest which may be charged on them. The interest rate ceiling is calculated using a formula based on half the average bank lending rate of the previous year plus a margin of between 5 and 10 percentage points, which varies according to various risk factors. The current maximum rate under the formula is 17.4%.

The law establishing the financial stability fund and associated bank levy, described in our news item of 29 March was enacted by the Cyprus Parliament on 14 April 2011. The Parliament approved a levy on banks to be calculated at the rate of 0.095 per cent on aggregate deposits held by each bank. This is expected to raise approximately 70 million euros over two years in state revenues and a further 50 million euros that will flow to a depositor protection fund in 2013.

A Russian case on the application of the Cyprus-Russia double tax agreement highlights the need for thorough planning and careful compliance

On 8 December 2010 the Moscow State Commercial Court issued a decision in a case involving an analysis of whether the collection of information by Bloomberg LP's representative office in Moscow resulted in the creation of a permanent establishment under Russian law and the double tax treaty between Russia and the United States.

Foreign and local investors in Russia will have to wait longer than expected for new transfer pricing rules to come into effect following the State Duma’s failure to adopt the new provisions at the beginning of 2011, as had originally been anticipated.w Russian transfer pricing rules will remain in the pipeline

The Cyprus Department of Merchant Shipping has issued an updated list of countries whose certificates of competency are accepted for the issue of endorsement attesting the recognition of non Cyprus certificates of competency under the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers 1978, as amended.

The Cyprus Department of Merchant Shipping has issued Circular 11/2011 regarding the introduction of tonnage tax under the provisions of the Merchant Shipping (Fees and Taxing Provisions) Law of 2010 (the Tonnage Tax Law). Early action is required in order not to miss the deadline for submission of the necessary application.

Section 15 of the Merchant Shipping (Fees and Taxing Provisions) Law of 2010 (the Tonnage Tax Law) allows owners of mixed fleets, comprising Community-flagged ships and non-Community-flagged ships to benefit from inclusion in the tonnage tax scheme provided that:

• at least 60% of the fleet in terms of tonnage comprises Community ships; or
• part of the fleet comprises Community ships; and
• the percentage share of the fleet in tonnage terms represented by Community-flagged ships is not reduced for three years from the date of entering the tonnage tax scheme; and
• the commercial and strategic management of the fleet is carried out from the territory

The Central Bank of Cyprus has announced that it is drafting regulations to create a financial stability fund, which should be in place within six months.

The Cyprus Department of Merchant Shipping has announced that, further to its Circular 42/2010 dealing with the definition of "Community ship" for the purposes of the Merchant Shipping (Fees and Taxing Provisions) Law of 2010 ("the tonnage tax law"), it considers that the requirements and provisions with respect to the fiscal obligations of vessels registered in Germany are similar to those of the corresponding Cyprus legislation.

The Ukrainian government has published the list of designated offshore jurisdictions to be used for Ukrainian tax purposes under the Tax Code, which takes effect on 1 April 2011. Payments by Ukrainian residents for the benefit of entities registered in these jurisdictions are not fully tax-deductible.

The Russian Federation is one of the most important partners for the European Union. A key priority for the EU is to build a strong strategic partnership with Russia based on a solid foundation of mutual respect. Moreover, Russia is the largest neighbour of the EU with a dynamic market for EU goods and services and the EU’s market, on the other hand, is by far the most important destination for Russian exports.

The Hungarian Presidency adopted the decision authorising the signature for the convention on behalf of the EU on 14 April 2011 without any discussion at a meeting on the Agriculture and Fisheries Council. 

The European Commission called Cyprus to comply with EU rules which grant to nationals from the European Union as well as from Iceland, Norway and Liechtenstein, the right to purchase property in the Republic of Cyprus. Cyprus is still maintaining its restrictive measures and as a result EU and EEA nationals cannot exercise their right.

EU quality policy regarding geographical indications and traditional specialities

Background

In April 2009, the European Commission issued a Communication on “Good Governance in Tax Matters” with the intention to launch a debate about concrete actions that could be taken to better promote the principles of good governance in the tax area (transparency, exchange of information and fair tax competition).  The aim of the Commission to improve synergies between tax and development policies becomes concrete with the Council Directive 2011/16/EU of 15 February 2011. 

The presentation of a “Pact of Competitiveness” at the EU summit on 4 February by Germany and France was the plan for the Eurozone Member States to agree on a closer economic convergence in order to restore competitiveness to the euro area.

As a general rule, a charge created by a Cyprus company conferring security on the company’s property or undertaking constitutes a charge registrable under Section 90 of the Companies Law CAP 113. Following the enactment of Law N99(I)/2009 a pledge of shares of a Cyprus company is no longer required to be registered under CAP 113 for perfection purposes.

Federal law 7-FZ “On clearing and clearing activity” dated 7 February 2011 and Federal law 8-FZ “On implementation of amendments to certain Russian laws in compliance with the Federal law “On clearing and clearing activity” dated 7 February 2011 (“the new clearing legislation”) have been adopted by the State Duma, approved by the Federal Council, signed by the President and officially published. They will enter into force on 1 January 2012.

Topics: (1) Cyprus’s advantages as a shipping centre (2) The European shipping market (3) Protection of competition (4) The ISM Code and the ISPS Code (5) Registration of Cyprus ships (6) Registration procedures (7) Ship mortgages (8) Crew

In the Czech Republic, work is nearing completion on the revision of one of the most fundamental laws, namely the Civil Code.

Circulars issued by the Russian tax authorities in 2010 clarify their interpretation of certain aspects of the existing Cyprus‐Russia double taxation agreement, specifically the presence required to give rise to a permanent establishment, the deeming of excessive interest as dividends and the treatment of the proceeds of liquidation of a Cyprus company in the hans of Russian taxpayers.

Thoughts on the question whether the born-to-be European private company could potentially compete with a private limited liability company under Cyprus law

a summary and practical guidance on its impact on contractual obligations concluded by Cyprus companies

In this issue: (1) The new double tax agreement between Cyprus and Russia moves closer to ratification (2) Cyprus- Slovenia double taxation agreement (3) Cyprus- Kuwait double taxation agreement (4) Cyprus– Denmark double taxation agreement (5) Notifications under the Merchant Shipping (Fees and Taxing Provisions) Law of 2010 (6) Further suspension of limitation periods (7) News about our firm (8) Recent publications

Details of the new double tax treaty between Cyprus and Denmark have now been released. The new treaty was signed on October 11 2010 and will take effect once it has been ratified by both countries. Until then, the existing treaty, which dates back to 1981, will continue in effect

The Cyprus Department of Merchant Shipping has issued further guidance on its interpretation of the term 'Community ship' for the purposes of the Merchant Shipping (Fees and Taxing Provisions) Law 2010 (Tonnage Tax Law).

E-justice, the use of internet technology in handling various administrative procedures before, during and after the administration of justice, provides a host of possibilities throughout the legal process, from lobbying through to the provision of remote authoritative legal information and certificates. It is seen by many as the key to streamlining and expediting justice.

After the publication of the Annual Growth Survey (AGS) by the European Commission, the Hungarian Presidency undertook to implement the first ever "European Semester" a six-month period of each year in which Member States' budgetary and structural policies are reviewed to identify any inconsistencies and emerging imbalances, so as to facilitate coordination before major budgetary decisions are finalised.

Following the approval by the European Parliament of a reforms package on European financial supervision, the Council has adopted the legal texts establishing the European Systemic Risk Board and three new supervisory authorities, aimed at eliminating deficiencies in the banking sector, the stock markets and the insurance market.

The Cyprus Parliament has approved the budget for 2011, which includes measures aimed at reducing the government deficit to 4 per cent of gross domestic product, in the context of a requirement under the EU excessive deficit procedure to bring it below the Eurozone limit of 3 per cent of gross domestic product by 2012.

On 18 October 2010 the European Commission launched a consultation on electronic procurement in the public sector. In the now standard form of the Green Paper, consultation will seek to gather the views of stakeholders on how the EU can help Member States to accelerate and facilitate the procedures for issuing public tenders.

Country Q&A

Limitation periods in Cyprus are set out in the Limitation of Actions Law (Cap 15), which dates back to the time when Cyprus was a British colony. The principal limitation periods are as follows:

A draft of new Federal law 418463-5 was proposed by the Government of the Russian Federation in November 2010, significantly amending legislation concerning the procedure for the issue of securities.

A case in progress in the Limassol District Court gives useful guidance on the issue of urgency as it affects the courts' readiness to issue interim orders on an ex parte basis, without giving notice to the respondents.

Country Q&A

The Limitation of Actions Law, Cap. 15, sets out the time limits within which claims must be brought before a court. However, the Limitations Law was suspended in 1964 following inter-communal disturbances and has remained suspended ever since.

Speaking at a meeting with the President of the Cyprus House of Representatives, Ukrainian Prime Minister Mykola Azarov has stated that he is hopeful that a new agreement for the avoidance of double taxation between Ukraine and Cyprus will be signed soon.

New opportunities for shipping under new tax measures

Following the visit of Russian President Medvedev to Cyprus and the signing of the Protocol to the double taxation agreement on behalf of the governments of both countries, it is expected that the amended treaty will be ratified by the Parliaments of the two countries and will become effective from 1 January 2011.

Cyprus has always been an excellent location for holding companies for a host of reasons, including its transparent legal system, excellent communications and world-class professional and banking services. It is an EU member state with an open market economy and no restrictions on capital movements

In Cyprus, mergers are regulated by the Control of Concentrations Between Enterprises Law of 1999 (‘the Merger Law’) as amended. This law was enacted to regulate and promote the competitive market in Cyprus, and to bring Cyprus into line with the merger regime in the EU. The Law is implemented alongside the P rotection of Competition Law 13(I) of 2008, which replaces the old 1989 competition law and harmonises Cyprus competition law with the acquis communautaire.

The first months of 2010 have shown signs of recovery of the international real economy in many countries, but nevertheless financial stability in the international financial environment remains vulnerable.

Negotiations are underway to update the double taxation treaty between Cyprus and Ukraine. The existing treaty dates back to the Soviet era and is extremely favourable, as it eliminates withholding taxes (usually charged at 15%) on payments from Ukraine to Cyprus. Furthermore, the treaty contains no anti-avoidance rules or restrictions on thin capitalisation.

The power of Cyprus courts to grant interlocutory relief pending determination of the main trial is well established within Cyprus law.

The Department of Merchant Shipping has issued The Taxation of Owners of Cyprus Ships Notification of 2010 explaining the detailed operation of certain provisions of the Merchant Shipping (Fees and Taxing Provisions) Law of 2010 (the Tonnage Tax Law).

The Merchant Shipping (Fees and Taxing Provisions) Law of 2010 (the Tonnage Tax Law) left certain issues of detail to be determined by the Department of Merchant Shipping, including precisely which towage and dredging activities would qualify for taxation under the tonnage tax regime. The Department of Merchant Shipping has now issued a Notification clarifying this issue.

The Cyprus Department of Merchant Shipping has published an updated list of countries whose certificates of seamen’s competency are recognised by Cyprus. Algeria has been added to the list, which is now as follows:

The additional protocol to the Cyprus – Italy agreement on the avoidance of double taxation, which was signed on 28 May 2009, has now been ratified by both countries and has come into effect. The additional protocol provides for the exchange of bank and other information based on the OECD Model Tax Convention.

"Arbitration constitutes an alternative dispute resolution method…It constitutes a characteristic supplement of every modern legal system. The method survives without judicial means. Only in specified instances may [judicial means] be used against an arbitration award. In our internal legal system, these rules, as well as the wider rules on arbitration, are stipulated within specialised legislation namely, the Arbitration Law, Cap.4

Tax on Transactions 2010/11 Country Q&A Cyprus: What are the main authorities responsible for enforcing taxes on corporate transactions in your jurisdiction?

Please give a brief overview of the main dispute resolution methods used in your jurisdiction to settle large commercial disputes, identifying any recent trends.

What are the most common forms of security granted in relation to immovable and movable property? Are any specific formalities required for their creation and perfection (that is, made valid and enforceable)?

The government's proposal to reduce the tax burden on companies that engage in international maritime transport through the introduction of a special tax regime has received approval from the European Commission.

This Overview provides a brief outline of the primary characteristics that litigants may encounter in civil actions initiated before courts in Cyprus. Although arbitration is becoming more popular - particularly in disputes relating to construction, insurance, shipping and trade - it is still in its infancy and litigation is the predominant method for resolving disputes.

Law 12(I)/2006 (the Law) is the relevant legislation governing public procurement contracts in the Republic of Cyprus. The Law, which transposes EU Procurement Directives 17/2004 and 18/2004 into Cyprus’s legal system, provides for the coordination of procedures for the award of public works contracts, public supply contracts, public service contracts and related matters

Country Q&A Cyprus -  In Cyprus there is a well-established insurance industry, with all types of risk accepted. All insurance business, except for the Social Insurance Scheme which is operated by the state, is written in the private sector.

The European Commission has adopted a new Regulation that affords block exemption to certain types of agreements in the insurance sector from the EU's general prohibition of practices which restrict competition. The new Block Exemption Regulation, which will take effect on 1 April 2010 renews (with only minor changes) two of the four categories of agreements currently exempted, namely joint compilations, tables and studies (typically agreements among companies to share access to statistical data) and co and re-insurance pools.

The European Commission has given its approval under EU state aid rules of the Cyprus government’s proposal to reduce the tax burden on companies engaged in international maritime transport by introducing a special tax regime for them.

The Amending Law 100(Ι) of 2009 makes a number of important changes to Cyprus’s Banking Law.

At the recent General Assembly of the International Maritime Organisation Cyprus was re-elected to the IMO Council for the next two years. With the support of 134 member states, Cyprus secured the second highest vote in the election.

The international business environment is ever changing and is becoming one. Various restrictions between countries in the global level are being abolished revealing a new globalised market.

Cyprus has made a number of important changes to its tax laws relating to the participation exemption, the taxation of mutual funds and the taxation of interest. The changes were made by Laws 110(I)/2009 and 111 (I)/2009, amending the Income Tax Law and the Special Contribution for Defence Law respectively.

Cyprus tax legislation does not contain specific provisions relating to the thin capitalization of companies, such as limits on debt-to-equity ratios. Therefore, a Cyprus holding company may be financed by loans without the risk of interest that is paid at arm's length to its parent company being disallowed for tax. However, in order to demonstrate that interest is charged on an arm's-length basis, it is important to have an adequate margin between the rate charged to the recipients of the funds on the one hand and the rate paid to the provider of the finance on the other.

The European Commission has approved the Cyprus government’s plan to use special government bonds to reinforce stability in financial markets and mitigate the effects of the current financial downturn under EC Treaty state aid rules. The Commission found the measure to be in line with its Guidance Communication on state aid.

The Cyprus Department of Merchant Shipping has recently issued a circular reminding shipmanagers operating in Cyprus of the arrangements for assessment and payment of their tax liabilities for the fiscal year 2009.

Cyprus employment law is a mixture of statute and case law. The Constitution guarantees certain fundamental rights relating to employment, such as the rights to work, to strike and to equal treatment. The main statutes which relate to employment include the Termination of Employment Law of 1967, Social Insurance Law of 1980, Annual Paid Leave Law of 1967, Protection of Maternity Law of 1997, Minimum Salaries Law Cap 183, Equal Treatment at Work and Employment Law of 2004 and the Health and Safety at Work Law of 1996, as amended. Each is supplemented by relevant Regulations and Decrees. There is also a considerable amount of case law on all employment related laws.

Litigation is the predominant method for resolving disputes. Arbitration, although at an infant stage, is becoming more popular, particularly in disputes relating to construction, insurance, shipping and trade.

A practical insight to cross-border Product Liability work

Loyens & Loeff is an independent full service law firm with integrated corporate law and tax practices. The firm has a strong international and EU focus with over 900 lawyers working across its 7 home offices in the Netherlands, Belgium and Luxembourg and 11 offices in the world’s major financial centers. Loyens & Loeff is a firm where tax lawyers on the one hand and lawyers and civil law notaries on the other hand are equally divided. The collaboration between the various specialists within one office works to the client’s advantage.

Country Q&A: Cyprus

Law 12(I)/2006 (the Law) is the relevant legislation governing public procurement contracts in the Republic of Cyprus. The Law, which transposes EU Procurement Directives 17/2004 and 18/2004 into Cyprus’s legal system, provides for the coordination of procedures for the award of public works contracts, public supply contracts, public service contracts and related matters.

12.04.2009 - “The future of Cyprus as an International Business Centre” Elias Neocleous offers his views on the way forward for Cyprus. IMH has organized and held a conference on 9 April 2009 at the Hilton Park hotel in Nicosia with subject “The future of Cyprus as an International Business Centre”.

For many years, the shipping industry has been resting in the wide arms of Regulation 4056/86 and the block exemption provided therein without being required to consider in much regard the EC rules on the preotection of competition.

Cyprus is the top country in a league table of European tax systems, compiled by KPMG International, in which major business organizations across Europe were asked to assess the attractiveness of their domestic tax regimes.

The latest edition of the “Internal Market Scoreboard” released by the European Commission in February 2009 shows that Cyprus has made progress in reducing its “transposition deficit” – the number of European Directives yet to be transposed into national law.

The Cyprus Department of Merchant Shipping has recently issued a circular reminding shipmanagers of the arrangements for assessment and payment of their liabilities for 2008.

The Republic of Cyprus and the Russian Federation have signed a Protocol on Economic Cooperation to enhance cooperation and to further the existing ties of friendship between the two countries.

The latest edition of the “Internal Market Scoreboard” released by the European Commission in February 2009 shows that Cyprus has made progress in reducing its “transposition deficit” – the number of European Directives yet to be transposed into national law. At December 2008 the number of outstanding Directives had been reduced to 27, compared with 29 six months earlier. Furthermore the number of long overdue directives was reduced from three to zero during the second half of 2008.

The Central Bank of Cyprus has given further details of the Memorandum of Understanding it concluded in November with the Qatar Central Bank, regarding the supervision of credit institutions. The Qatar Central Bank is the competent authority for the licensing and supervision of credit institutions operating in Qatar.

An extremely attractive feature of the Cyprus tax system is the exemption from tax of profits from the sale of securities under the Income Tax Law of 2002. In December 2008 the Inland Revenue Department issued a long-awaited circular clarifying the definition of “security” qualifying for exemption.

The Cyprus Commissioner for Income Tax has recently clarified his department’s policy on acceptable margin parameters for taxable interest in transactions involving Cyprus resident companies used as intermediary financing vehicles in back-to-back financing arrangements. The minimum margin which the Inland Revenue Department will accept varies according to the amount of the advance, as follows.

Despite having complied with all relevant information exchange requirements Cyprus continued to be included in the Spanish tax authorities “blacklist” of tax havens. Tax benefits and exemptions under the rules on participation exemption, controlled foreign companies and valuation of shares were not available to entities that were tax resident in any of the countries or territories included in the “blacklist”.

Realising the importance of immovable property matters for Cypriot and foreign clients dealing in land, Andreas Neocleous & Co has LLC established a specialist Real Estate and Property Department, in order to provide tailored services and achieve rapid and efficient results.

Cyprus is intent on meeting its obligations regarding information exchange and transparency, and has recently passed a new law (Law 72(I) of 2008) amending the Assessment and Collection of Taxes Law to incorporate the exchange of information provisions of Article 26 of the OECD Model Tax Convention of 2005 in double taxation agreements which have been concluded between Cyprus and other jurisdictions.

Taxation

Personal bankruptcy is governed by the Bankruptcy Law, Cap 5, and the Bankruptcy Rules, Cap 6. Corporate insolvencies and reorganisations are governed by the Companies Law, Cap 113. Section 203 of the Companies Law provides two methods of winding up, namely: compulsory winding-up by the court; and voluntary winding-up, which may be either a members’ winding up or a creditors’ winding up.

30.12.2008 - The Central Bank of Cyprus (“CBC”) is responsible for the licensing and supervision of banks and for safeguarding the stability of the financial system in Cyprus. In this connection it pursues an active policy of signing Memoranda of Understanding for cooperation in the field of banking supervision and exchange of information with competent overseas authorities, particularly those whose banks operate in Cyprus.

29.12.2008 - A draft bill has been submitted to the Cyprus parliament reducing the rate of corporation tax paid by semi-governmental agencies such as the Electricity Authority of Cyprus, the Cyprus Telecommunications Authority and the Cyprus Ports Authority with effect from 1 January 2009.

10.12.2008 - The Central Bank of Cyprus has given further details of the Memorandum of Understanding it concluded in November with the Qatar Central Bank, regarding the supervision of credit institutions. The Qatar Central Bank is the competent authority for the licensing and supervision of credit institutions operating in Qatar.

The Cyprus Investment Promotion Agency (CIPA) has announced that Cyprus attracted €1.6 billion in direct foreign investment in 2007, a ten percent increase on the previous year. Approximately sixty percent was from fellow EU member states.

AND PROCEDURE FOR THE ISSUING OF BUNKERS CONVENTION CERTIFICATES.

The International Convention on Civil Liability for Bunker Oil Pollution Damage 2001 (the "Bunkers Convention") was ratified by the Republic of Cyprus in 2004. The Bunkers Convention provides a liability, compensation and compulsory insurance system in respect of pollution caused by spillages of bunker oil from ships. Shipowners are liable to pay compensation for pollution damage caused by spillages, and are required to maintain insurance or other financial security to cover the potential liability calculated in accordance with the Convention on Limitation of Liability for Maritime Claims, 1976, as amended.

SOLAS Regulation XI-3-1 requires certificates issued after 1 January 2009 under regulation IX/4 and section A/19.2 or A/19.4 of the ISPS Code to show the IMO Unique Company and Registered Owner Identification Number of the owner of the vessel concerned.

(ISSUE AND RECOGNITION OF CERTIFICATES AND MARINE TRAINING) LAW OF 2008

In line with its policy of developing bilateral ties in the domain of supervision of credit institutions the Central Bank of Cyprus has signed a Memorandum of Understanding with the Malta Financial Services Authority, the body responsible for licensing and supervision of credit institutions operating in Malta.

The Central Bank of Cyprus has relaxed the minimum liquidity reserve requirement in foreign currencies for commercial banks operating in Cyprus. A directive issued in August reduces the reserve requirement in foreign currencies from 75% of total foreign deposits to 70%. The minimum liquidity reserve requirement in euro is unchanged at 20%.

Cyprus is intent on meeting its obligations regarding information exchange and transparency, and has recently passed a new law (Law 72(I) of 2008) amending the Assessment and Collection of Taxes Law to incorporate the exchange of information provisions of Article 26 of the OECD Model Tax Convention of 2005 in double taxation agreements which have been concluded between Cyprus and other jurisdictions

Article 18 of the Euro Adoption Law of 2007 sets out the provisions for the conversion of companies’ capital from Cyprus pounds into euro following Cyprus’s adoption of the euro as its national currency with effect from 1 January 2008. It requires shareholders in all Cyprus-registered companies to pass a resolution to redenominate the company’s capital at a general meeting, and requires the resolution to be registered with the Department of the Official Receiver and Registrar of Companies

The International Convention on Civil Liability for Bunker Oil Pollution Damage 2001 (the “Bunkers Convention”) was ratified by the Republic of Cyprus in 2004. The Bunkers Convention provides a liability, compensation and compulsory insurance system in respect of pollution caused by spillages of bunker oil from ships.

SOLAS Regulation XI-3-1 requires certificates issued after 1 January 2009 under regulation IX/4 and section A/19.2 or A/19.4 of the ISPS Code to show the IMO Unique Company and Registered Owner Identification Number of the owner of the vessel concerned.

The Merchant Shipping (Issue and Recognition of Certificates and Marine Training) Law of 2008 (Law 27(I)/2008) came into effect on 30 May 2008. The law, which repeals and replaces the Merchant Shipping (Issue and Recognition of Certificates and Marine Training) Laws of 2000 to 2005, transposes Directive 2005/45/EC of the European Parliament and of the Council of 7th September 2005, (amending the basic Directive 2001/25/EC on the minimum level of training of seafarers) and implements the 1978 International Convention on Standards of Training, Certification and Watchkeeping for Seafarers into national legislation.

In line with its policy of developing bilateral ties in the domain of supervision of credit institutions the Central Bank of Cyprus has signed a Memorandum of Understanding with the Malta Financial Services Authority, the body responsible for licensing and supervision of credit institutions operating in Malta.

The Central Bank of Cyprus has relaxed the minimum liquidity reserve requirement in foreign currencies for commercial banks operating in Cyprus.

Cyprus is intent on meeting its obligations regarding information exchange and transparency, and has recently passed a new law (Law 72(I) of 2008) amending the Assessment and Collection of Taxes Law to incorporate the exchange of information provisions of Article 26 of the OECD Model Tax Convention of 2005 in double taxation agreements which have been concluded between Cyprus and other jurisdictions.

Article 18 of the Euro Adoption Law of 2007 sets out the provisions for the conversion of companies’ capital from Cyprus pounds into euro following Cyprus’s adoption of the euro as its national currency with effect from 1 January 2008. 

The Cyprus Department of Merchant Shipping has issued a new Codification and Updating of the current procedure of issuing Civil Liability Certificates pursuant to the laws ratifying the International Convention on Civil Liability for Oil Pollution Damage of 1969 and of its Protocols of 1976 and 1992.

The Transparency Requirements Law, Law 190(I)/2007 took effect on 1 January 2008. It transposes into domestic legislation the European Parliament and Council Directive 2004/109/EC on transparency requirements of listed transferable securities, and in part the European Commission Directive 2007/14/EC, which sets out detailed rules for the implementation of certain provisions of Directive 2004/109/EC.

In 2007 the Central Bank of Cyprus reduced the amount that commercial banks in Cyprus were permitted to lend against the security of second homes to 60% of the property value. This step was taken in order to prevent commercial banks becoming over-exposed to the sector, following what the Central Bank saw as speculative demand. It was unpopular with commercial banks in Cyprus, who saw it as a restriction on their ability to compete against overseas banks.

The Third EU anti-money laundering Directive extends Member States’ anti-money laundering and antiterrorist financing obligations to cover life insurance intermediaries and trust and company service providers. In order to implement the Directive Cyprus is introducing a new regulatory regime for professional trustees and providers of company management services.

Reorganisations legislation was introduced into Cyprus tax law in 2003 to align it with the EU Mergers Directive (90/434/EEC). Any profits or gains resulting from transactions effecting a qualifying reorganisation are exempt from income tax, capital gains tax and stamp duty. Furthermore, if the reorganisation involves the liquidation of a company, there is no liability to special defence contribution tax under the deemed dividends provisions. Land transfers within a reorganisation are exempt from land transfer fees.

Recent publicity regarding the United Kingdom and German revenue authorities’ purchase of confidential details of Liechtenstein bank accounts has re-focussed attention on tax havens and on how far the authorities may go to prevent their misuse.

This chapter is set out in a Q&A format and covers areas such as tangible movable property, intellectual property, commercial security, crossborder issues and much more.  It is reproduced with the kind permission of the publisher. 

The Cyprus government has passed new legislation capping the amount of stamp duty payable. This will result in a significant reduction in the amount of stamp duty payable on large transactions.

This is a chapter regarding restructuring and insolvency in Cyprus and covers areas such as legislation, excluded entities, secured lending and credit, liquidation, reorganisations, bankruptcy processes and much more. This chapter was published as part of Getting the Deal Through - Restructuring and Insolvency 2008 and is reproduced by kind permission of the publishers.

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Cyprus has now passed the necessary legislation to implement Directive 2004/391 and Directive 2006/31.2 Together, these Directives establish a comprehensive regulatory framework for the execution of transactions on behalf of investors by stock markets, alternative trading systems and investment firms, with the objective of protecting investors, developing a single market in investment services across the European Union, and promoting fair and transparent integrated financial markets.

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On January 11, 2007, the Republic of Cyprus announced the:

“First Hydrocarbon Exploration Licensing Round Offshore Cyprus. This is scheduled to be officially opened on the 15th February 2007 and to be closed on the 16th July 2007 . . . The areas open for bidding will be chosen from 12 offshore blocks. The total area covers approximately 70,000 km2 . . .”

The announcement follows the introduction of modern legislation to regulate the oil and gas sectors and to claim the Exclusive Economic Zone of the island in accordance with the United Nations Law of the Sea Convention.

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Despite being among the world’s smallest countries, Cyprus has developed into one of the world’s major financial and business centres. The island continues to be the largest source of investment into Russia, ahead of Luxembourg,the Netherlands, Germany, Great Britain, the US and France.  Read more...

Cyprus is a well-established shipping centre in a strategic geographical location at the crossroads of three continents close to the Suez Canal.

The shipping industry has  developed in line with the island’s growth as an international business and financial centre, and Cyprus is now the world’s third largest shipmanagement centre and home to the ninth largest merchant fleet in the world in tonnage terms. This article appeared in the September 2007 issue of "Offshore Investment" and is reproduced by kind permission of the publisher.  

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Cyprus’s succession law reflects the cosmopolitan nature of the island itself. While the wording of the law and many of its provisions are unmistakably English, Cyprus succession law also enshrines the concept of forced heirship, usually associated with civil law and Islamic countries, and recognises the rights of widows of polygamous marriages. This article provides an outline of the law and the forced heirship provisions and suggests planning techniques that can be used to avoid any restriction on testamentary freedom.  This article appeared in the September 2007 issue of "Offshore Investment" and is reproduced by kind permission of the publisher.  Read more ...

This is a Q&A article regarding the merger control issues in Cyprus and is reproduced with the kind permission of Law Business Research.  The article covers areas such as legislation and jurisdiction, notification and clearance timetable, remedies, involvement of others parties, future developments and more. Read more ...

Q&A article covering security and priorities; rescue and insolvency procedures; liability and transactions; international cases and proposed reforms.  Read more...

Litigation is the predominant method for resolving disputes.  Arbitration and other forms of alternative dispute resolution (ADR), although at an infant stage, are becoming more popular, particularly in disputes relating to construction, insurance and trade.  Read more...

Liability for payment of social insurance contributions in Cyprus is governed by the Social Insurance Laws, which require everyone who is in employment in Cyprus (including the self-employed) to pay a percentage of their gross income to the Department of Social Insurance.

Cyprus has enacted legislation transposing the European Takeover Bids Directive (Directive 2004/25/EC) into domestic law. 

Cyprus has introduced draft legislation to implement Directive 2004/39/EC of the European Parliament and of the Council on Markets in Financial Instruments and Directive 2000/12/EC of the European Parliament.  Together, these establish a comprehensive regulatory framework for the execution of transactions on behalf of investors by stock markets, alternative trading systems and investment firms, with the objective of protecting investors, developing a single market in investment services across the EU, and promoting fair and transparent integrated financial markets.

The Euro Law does not include any provision for the share capital of existing companies, which is generally expressed in Cyprus pounds, to be automatically converted to euro.  Instead, all companies whose share capital is denominated in Cyprus pounds will be required to pass a resolution in a general meeting to change their share capital and amend their memorandum and articles of association. Notice of the change must be filed with the Registrar of Companies, who will not charge any fee for registration.

The Cyprus House of Representatives has approved Cyprus's entry into the Eurozone on 1 January 2008 and has passed the necessary legislation to amend the law on the Central Bank to satisfy EU requirements and to establish the legal framework for the transition to the euro. 

A new government service has been established by the Ministry of Commerce, Industry and Tourism to encourage investment and new business ventures by facilitating the completion of registration formalities for new companies.

Cyprus is an island in the eastern Mediterranean Sea. Situated at the crossroads of Europe, Africa and Asia, it is easily accessible to overseas clients. It is two hours ahead of London, seven hours ahead of New York, and seven hours behind Tokyo. The administrative capital is Nicosia, with most international enterprises based in the island’s second city, Limassol, which is also the financial capital and major port. Reproduced with the kind permission of Tottel Publishing.  Read more . . .

The ability of the Cypriot courts to grant interim orders for the protection of assets that may be in jeopardy of alienation or in order to preserve a particular status quo pending the final outcome of the action, is well-rooted in the Cypriot legal system.  Read more... 

In preparation for accession to the European Union in 2004, Cyprus thoroughly overhauled its legislation around the turn of the millennium. All of the country's laws were reviewed and updated and brought into line with the EU's acquis communautaire.  Read more...

The regulation of trustee and company service providers has long been a topic for debate in Cyprus.  However, membership of the European Union, coupled with the introduction of the third EU anti-money laundering Directive in 2005, has provided the impetus required for legislation to furnish a regulatory framework for suppliers of fiduciary services.  Read more...

Legislation

1   What legislation is applicable to bankruptcies and reorganisations?

Personal bankruptcy is governed by the Bankruptcy Law, Cap 5 and the Bankruptcy Rules, Cap 6. Corporate insolvencies and reorganisations are governed by the Companies Law, Cap 113.  Section 203 of the Companies Law provides two methods of winding up, namely:

• compulsory windingup by the court; and
• voluntary windingup, which may be either a members' windingup or a creditors' windingup.

Sections 198 to 201 of the Companies Law set out procedures for compromises with members and creditors, either within or outside insolvency, and for mergers and divisions of public companies.

  The European market

Two decades ago, EC Regulation 4055/86 established the freedom of EU nationals to provide maritime transport services of goods and passengers between Member States and between Member States and third countries with only very minor limitations still remaining.

EC Regulation 3577/92 granted Community shipowners operating ships registered in one Member State and flying the flag of that Member State and complying with all the conditions for carrying out cabotage within that Member State the freedom to provide maritime transport services within another Member State (maritime cabotage).

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The European Union, in a continuous effort to reduce road traffic congestion and enhance multimodal transport, encourages and helps finance modal shifts from road freight transport to rail, waterway and short sea transport. The Marco Polo programme was established through EC Regulation 1382/2003 to promote this.

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A. INTRODUCTION

Cyprus, as a result of having been a British colony for approximately eighty years has, amongst other things, inherited and further developed a legal system that is closely modelled on the English common law system, with perhaps its dominant feature being the fact that it enables English cases to be cited in Cypriot courts. Presently, all efforts are being directed to developing Cyprus' legal system in a manner compatible with the acquis communautaire of the EU.

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A. INTRODUCTION
Already a well-established international business and shipping centre, Cyprus is now ready to become a popular venue for international arbitrations. Its prompt ratification of the Uncitral Model Law on International Commercial Arbitration (the second country to do so after Canada) has added to the Republic's existing advantages and gone a long way towards establishing it as an extremely suitable location.

Cyprus law distinguishes a contract of service from a contract of services. This distinction is important for determining payment of taxes and social insurances, and application of statutory employment and other rights.

The reported existence of oil and natural gas reserves off the coast of Cyprus has prompted the Republic of Cyprus to introduce modern legislation to regulate the oil and gas sectors and to claim the Exclusive Economic Zone of the island in accordance with the United Nations Law of the Sea Convention which was ratified by Cyprus in 1988 (the UN Convention).

Cyprus is an island of 9,251 square kilometres in the Eastern Mediterranean at the crossroads of Europe, Asia, the Middle East and Africa. It has a population of about 760,000 of whom 80 per cent are Greek Cypriots, 18 per cent Turkish Cypriots and Turks and the remaining 2 per cent foreign residents and workers. The official languages are Greek and Turkish, and English is also widely used, especially in business.

Cyprus is nowadays considered to be one of the most favourable jurisdictions in the European Union and the whole world in which to do business. It is a well-established shipping centre in a strategic geographical location at the crossroads of prosperous financial regions of three continents and next to the Suez Canal.

Intellectual property (IP) is an evolving field that affects the functioning of the world at large. Its range of influence in this world of evolution is immense, since it dominates areas of technology, social development and economic growth. It encapsulates a number of separate areas of creation. Article 2 of the World Intellectual Property Convention of 1968 defines IP as including:

Nowadays the world population is growing rapidly and so is the demand for land. Land is a finite resource and therefore its value worldwide is constantly increasing.

Increases in value are exacerbated by inflation and by the instability of the monetary systems and fiscal policies of advanced economies, making investment in immovable property more attractive. The great technological advances in communication, transportation and international trade has made investment in this field easier and more accessible than in the past.

When one thinks about the most attractive holding company jurisdiction, Cyprus may not come immediately to mind. This article will argue that Cyprus, with its extensive double taxation treaty network as well as its stable social and economic environment will be widely recognized in the very near future as the ideal location for setting up a European holding company.

Cypriot trusts are effective vehicles for channeling income to and from companies in different jurisdictions. Recent corporation tax changes have placed Cyprus in a good position to use companies in conjunction with Cypriot offshore trusts.

1. INTRODUCTION
The new Income Tax Law1 (the Law), which came into force on 1 January 2003, has brought about some major changes to the Cypriot tax system as it affects companies.