1. CYPRUS – THE IDEAL TAX PLANNING LOCATION, ADVANTAGES OF THE CYPRUS TAX SYSTEM By Marios Efthymiou Senior Partner Dinos Antoniou & Co Ltd Certified Public Accountants

2. MAXIMISATION OF NET RETURN THROUGH INTERNATIONAL TAX PLANNING GLOBALISATION OF THE WORLD ECONOMY HAS LED TO CROSS BORDER INVESTMENTS AND HAS ENHANCED INTERNATIONAL TRADING INVESTORS/BUSINESSMEN ARE INTERESTED IN MAXIMISING NOT JUST THEIR GROSS YIELD BUT THEIR NET RETURN AFTER TAXES HENCE MINIMISING THEIR TAX BURDEN THROUGH INTERNATIONAL TAX PLANNING STRUTURES IS SOUGHT

3. JURISDICTIONS INTERNATIONAL JURISDICTIONS OFFSHORE JURISDICTIONS ( TAX HEAVENS) OFFSHORE JURISDICTIONS ( TAX HEAVENS) – British Virgin Islands – Belize – Panama – Seychelles – Delaware – And many others ONSHORE JURISDICTIONS ONSHORE JURISDICTIONS (TAX BURDEN REDUCED THROUGH COMPLICATED TAX BUSINESS STRUCTURES - HOLDING JURISDICTIONS) – Cyprus – United Kingdom – Luxembourg – Switzerland – Netherlands – Malta

4. CRITERIA FOR CHOOSING AN INTERNATIONAL JURISDICTION TAX BENEFITS AND ABILITY TO APPLY AND SUSTAIN THEM RESPECTABILITY OF THE HOLDING JURISDICTION DOUBLE TAXATION TREATIES HIGH LEVEL OF PROFESSIONAL SERVICES AND RELIABLE BANKING SYSTEM ESTABLISHMENT AND MAINTENANCE COSTS

5. CYPRUS - CHARACTERISTICS Third largest Mediterranean island Political system – Democratic presidential system Legal system – Based on English law Official language – Greek (English is widely spoken) Population – Around 850.000 Member of the E.U. since May 2004 Most important pillars of the economy –  Tourism  Financial services Location – Situated at the crossroads of 3 continents, Europe, Asia and Africa

8. CYPRUS

9. CYPRUS COMPANIES - ADVANTAGES LOWEST TAX RATE IN EUROPE LOWEST TAX RATE IN EUROPE MEMBER OF THE EUROPEAN UNION MEMBER OF THE EUROPEAN UNION STRATEGIC LOCATION STRATEGIC LOCATION HIGH STANDARD OF BUSINESS ENVIRONMENT HIGH STANDARD OF BUSINESS ENVIRONMENT TAX SYSTEM IN FULL CONFORMITY TO EUROPEAN LAW & OECD DIRECTIVES AGAINST HARMFUL TAX PRACTICES TAX SYSTEM IN FULL CONFORMITY TO EUROPEAN LAW & OECD DIRECTIVES AGAINST HARMFUL TAX PRACTICES PAYMENTS FROM CY COMPANIES TO COMPANIES ABROAD ARE NOT SUBJECT TO ANY WITHHOLDING TAX PAYMENTS FROM CY COMPANIES TO COMPANIES ABROAD ARE NOT SUBJECT TO ANY WITHHOLDING TAX TRANSACTIONS WITH OFFSHORE COMPANIES ARE ACCEPTED TRANSACTIONS WITH OFFSHORE COMPANIES ARE ACCEPTED REPUTABLE AND LONGSTANDING INTERNATIONAL BUSINESS CENTRE WITH STABLE AND COMMITTED POLICY TOWARDS INTERNATIONAL BUSINESS COMPANIES REPUTABLE AND LONGSTANDING INTERNATIONAL BUSINESS CENTRE WITH STABLE AND COMMITTED POLICY TOWARDS INTERNATIONAL BUSINESS COMPANIES SIGNIFICANT NUMBER OF DOUBLE TAX TREATIES SIGNIFICANT NUMBER OF DOUBLE TAX TREATIES

10. CYPRUS: DOUBLE TAX TREATY NETWORK Armenia Austria Belarus Belgium Bulgaria Canada China Czech Republic Denmark Egypt France Germany Greece Hungary India Serbia Seychelles Singapore Slovak Republic Slovenia South Africa Sweden Syria Tajikistan Thailand Ukraine United Kingdom United States Ireland Italy Kuwait Kyrgyzstan Lebanon Malta Mauritius Moldova Montenegro Norway Poland Qatar Romania Russian Federation San Marino Note: Treaty with Israel under negotiation

11. PHILOSOPHY & TAX BASE PHYSICAL PERSONS CYPRUS TAX RESIDENTS ARE TAXED ON THEIR WORLDWIDE INCOME NON TAX RESIDENTS ARE ONLY TAXED ON THEIR INCOME EARNED IN CYPRUS TAX RESIDENT RULE A PHYSICAL PERSON IS CONSIDERED CYPRUS TAX RESIDENT IF HE/SHE RESIDES IN THE REPUBLIC OVER 183 DAYS IN A YEAR

12. TAX RATES FOR INDIVIDUALS TAXABLE INCOMETAX RATES €% 0 – 19.5000 19.501 – 28.00020 28.001 – 36.30025 36.300 – 60.00030 > 60.00035

13. TAX INCENTIVES FOR EMPLOYMENT IN CYPRUS INCENTIVES ARE GRANTED TO PERSONS THAT WERE RESIDENTS OUTSIDE CYPRUS AND WERE NOT CONSIDERED AS CYPRUS TAX RESIDENTS PRIOR TO THEIR EMPLOYMENT:  INCOME FROM EMPLOYMENT > €100.000 P.A.  50% DEDUCTION IS ALLOWED  DEDUCTION IS ALLOWED FOR THE FIRST 5 YRS

14. PHILOSOPHY & TAX BASE LEGAL PERSONS (COMPANIES) A CYPRUS TAX RESIDENT COMPANY IS TAXED IN CYPRUS A NON TAX RESIDENT CYPRUS COMPANY IS ONLY TAXED ON INCOME EARNED IN CYPRUS TAX RESIDENT RULE MANAGEMENT & CONTROL IN CYPRUS. IN PRACTICE IT IS CONSIDERED WHERE:  THE MAJORITY OF DIRECTORS ARE  THE PLACE WHERE THE MAJORITY OF BOARD OF DIRECTORS MEETINGS & SIGNIFICANT DECISIONS ARE TAKEN

15. TAX RATES Main rate Cyprus Tax resident Co’s10% Main rate Non - Cyprus Tax resident Co’s0% Ship owning – Cyprus flag0% Ship owning (foreign flag ships), ship management & ship chartering Tonnage tax Trusts0%

16. EXEMPTIONS FOR LEGAL ENTITIES THE FOLLOWING ARE EXEMPTED FROM INCOME TAX: PROFITS FROM THE SALE OF SHARES INCOME FROM DIVIDENDS INCOME FROM INTEREST

17. SALE OF SHARES THE SALE OF SHARES BY CYPRUS COMPANIES ARE TOTALLY EXEMPTED FROM TAX WITHOUT ANY CONDITIONS UNLIKE OTHER COMPETITIVE JURISDICTIONS WHERE THERE ARE LIMITATIONS IN:  THE PERIOD OF HOLDING  THE % OF HOLDING I.E. IN UK THERE IS NO CAPITAL GAINS TAX ON THE DISPOSAL OF SHARES IN UNDERLYING SUBSIDIARIES IF AT LEAST 10% OF THE SUBSIDIARY CO. IS HELD FOR 2 YEARS

18. DIVIDENDS RECEIVED LEGAL ENTITIES DIVIDENDS RECEIVED BY A CYPRUS RESIDENT COMPANY FROM ANOTHER CYPRUS RESIDENT COMPANY ARE EXEMPTED FROM ANY TAXATION DIVIDENDS RECEIVED BY A CYPRUS COMPANY FROM A COMPANY ABROAD IS ONLY TAXED IF BOTH OF THE BELOW CONDITIONS ARE MET (WHICH IS VERY RARE):  THE COMPANY PAYING THE DIVIDENDS ENGAGES MORE THAN 50% IN ACTIVITIES THAT LEAD TO INVESTMENT INCOME AND  THE FOREIGN TAX BURDEN ON THE INCOME OF THE COMPANY PAYING THE DIVIDENDS IS SUBSTANTIALLY LOWER THAN THE TAX BURDEN OF THE COMPANY IN CYPRUS PHYSICAL PERSONS DIVIDENDS RECEIVED BY PHYSICAL PERSONS ARE TAXED AT 17% DEFENCE TAX ONLY IF THE RECIPIENTS ARE CYPRUS TAX RESIDENTS

19. INTEREST RECEIVED NON TRADING INTEREST IS EXEMPTED FROM INCOME TAX BUT IS TAXED AT 15% DEFENCE TAX ON THE GROSS AMOUNT TRADING INTEREST IS TAXED AT 10% INCOME TAX AFTER DEDUCTING INTEREST EXPENSE AND ALL OTHER COMPANY EXPENSES

20. NON TRADING INTEREST - EXAMPLE A company is involved in the trading of securities and it also gave out a loan to a third party. Profit from the trading of securities - €1.225.000 Interest on loan receivable (€100.000 @ 5%) - €5.000 Corporation tax computation Defence tax computaion € Accounting profit for the year1.230.000 Less: Income not taxable(1.230.000) Taxable profit 0 Interest on loan5.000 Defence tax on interest @ 15%750

21. TRADING INTEREST - EXAMPLE A company is involved in financing activities. Loans receivable (€5.000.000 @ 5.5% interest rate) - €275.000 Loans payable (€5.000.000 @ 4.75% interest rate) - €237.500 Corporation tax computation € Accounting profit37.500 Taxable profit37.500 Tax for the year @ 10%3.750

22. PROFIT MARGINS FOR RAISING AND GRANTING LOANS FROM AND TO ASSOCIATED COMPANIES LEVEL OF LOANPROFIT MARGIN €% < 50 M0,35 50 – 200 M0,25 > 200 M0,125

23. TAX ADVANTAGES IDEAL FOR HOLDING COMPANY EXEMPTION FROM TAX ON PROFIT GENERATED FROM THE SALE OF SECURITIES EXEMPTION FROM TAX ON DIVIDEND RECEIVED WHEN CERTAIN CONDITIONS ARE MET EXEMPTION FROM TAX ON THE PROFITS THAT ARISE FROM A PERMANENT ESTABLISHMENT ABROAD NO WITHHOLDING TAX ON DIVIDENDS RECEIVED FROM A EUROPEAN SUBSIDIARY COMPANY LOWER WITHHOLDING TAX ON INCOMING DIVIDENDS PAID BY A NON EU COMPANY WITH WHICH CYPRUS HAS A DOUBLE TAX TREATY

24. LOSSES LOSSES CARRIED FORWARD CAN BE SET OFF AGAINST PROFITS WITHOUT LIMITATION IN TIME LOSSES INCURRED ABROAD CAN BE SET OFF AGAINST THE COMPANY’S PROFITS LOSSES OF ONE CO IN THE GROUP CAN BE SET OFF AGAINST PROFITS OF ANOTHER CO

25. DTT CYPRUS-POLAND WITHHOLDING TAX * EU PARENT-SUBSIDIARY DIRECTIVE ** 0% IF PAID TO THE GOVERNMENT, BANK OR ANY FINANCIAL INSTITUTION % DIVIDENDS10* INTEREST 10** ROYALTIES5

26. DTT BENEFITS POLANDDTT % DIVIDENDS199 SALE OF SHARES190 DIRECTOR’S FEES18 & 32 EXEMPT IN POLAND

27. DTT DIVIDENDS UNDER THE DTT PROVISIONS ANY DIVIDENDS PAID BY A CYPRUS COMPANY TO A POLISH SHAREHOLDER IN POLAND ARE TAXED WITH EFFECTIVE TAX RATE 9%. THIS REDUCES SIGNIFICANTLY THE POLISH TAX THAT WOULD HAVE BEEN PAID ON DIVIDENDS RECEIVED BY A POLISH SHAREHOLDER IN POLAND (IF RECEIVED FROM A POLISH CO.) BY 10% (FROM 19% TO 9%).

28. CYPRUS CO’S – A POWERFUL VEHICLE FOR MAXIMIZATION OF NET RETURN YOU ARE AN ENTERPRENEUR TRYING TO MAXIMIZE NET RETURN? THEN COMBINE THE LOWEST INCOME TAX RATE IN EUROPE AND ALL THE OTHER TAX ADVANTAGES OF THE CYPRUS TAX SYSTEM, THAT A CYPRUS COMPANY CAN OFFER YOU, AND YOU HAVE ONE OF THE MOST POWERFUL VEHICLES IN THE WORLD TO ACHIVE IT.

29. ADD TO ALL THE TAX ADVANTAGES THE BEAUTIFUL WEATHER OF CYPRUS AND YOU ARE IN PARADISE

30. THANK YOU Dinos Antoniou & Co Ltd 9 VASSILI MICHAELIDES 3026, LIMASSOL-CYPRUS P.O BOX 57048, 3311, LIMASSOL, CYPRUS TEL. 00357 25 824545 FAX. 00357 25 824060 WEB SITE:www.dinoscpa.com.cywww.dinoscpa.com EMAIL: marioseft@cytanet.com.cy@cytanet.com CONTACT PERSONS: DINOS ANTONIOU, C.E.O. MARIOS EFTHYMIOU, Senior Partner