Developments in the Local and International Tax Matters

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Tax conference

A Conference on the Developments in Local and International Tax Matters was held in Cyprus this week, on the 29th of September. The event was organized by REDIMUS with Mr. Neofytos Neofytou as the main speaker. OLIESERVE team was presented at the conference by Natalia Rudakova and Peris Anastasiou.

Basic subjects covered were as follows:

  • Recent changes in the Tax Legislations of Cyprus.
  • Opportunities offered and practical implementation of these changes.
  • Double Tax Treaty Developments.
  • Transparency and Exchange of Information upon request and automatic – what lies ahead.
  • Beneficial Ownership of Income issues in Russia and elsewhere – Recent tax cases in Russia and practical solutions available to Cypriot based companies.
  • Substance and Tax Residency – how can Cyprus companies deal with the issue?
  • BEPS current position and actions to be taken by Cypriot based companies.

Important notes:

1. Changes in the income tax laws-notional interest: The main provisions of the new law are: Deemed interest deduction will be allowed on “new equity” funds introduced into a Cyprus tax resident company. It is important to note, that the funds introduced must be used for business purposes. The deemed interest will be calculated on the basis of a “reference interest rate”. This rate is equal to the yield on the 10 year government bond of the country where the new funds are invested plus 3%. New equity means any equity funds introduced into business after 1 Jan 2015. The notional interest to be deducted cannot exceed 80% of taxable income of the company for the year, before the deduction of this notional interest. Such deduction could be done only once.

2. Changes in the capital gains tax laws: Capital gains from sale of property acquired between the date the law comes into effect (17 July 2015) and 31 December 2016 is exempt from capital gains tax. This covers both land and buildings.

3. 50% exemption from salaries paid to highly paid individuals: Under current law 50% of the income from employment in Cyprus which commences after 1 January 2012 to a person who was not tax resident of Cyprus during the previous tax year is exempt from taxation for a period of five years provided the income from employment in Cyprus exceeds 100.000 per annum. The period of five years will now be extended to ten years and will also cover employments which started after 1 January 2012.

4. New double tax treaties for Cyprus as from 1 January 2015: Cyprus double tax treaty network has been extended with five new treaties: Iceland, Lithuania, Norway, Spain, UAE.

5. Substance would determine the company’s tax Residency: Substance can start from the minimum which is statutory substance. Statutory substance is to prove that the company is actually a real company and not a conduit, by paying its taxes, filing its tax returns, preparing audited financial statements and meeting all its statutory obligations. A lack of substance may be an indication that a double tax treaty and/or EU directive is being abused. Requirements for Cyprus: a company is a Cyprus tax resident if it is managed and controlled from Cyprus, if a company is a tax resident under domestic legislation in two contracting states then the place of effective management overrides, it is important to know the substance requirements of the other state involved.

6. Tax residency in Russia: Until 31 December 2014 a company was treated as tax resident of Russia only if it was incorporated in Russia. As from 1 January 2015 Russia has introduced rules on residency of foreign companies based on effective management and control.  A foreign company can be treated as tax resident of Russia if it is a tax resident of Russia under the provisions of a double tax treaty or the place of management of the foreign company is located in Russia. This will result in Russian taxes to be levied on the worldwide income of foreign company, which is effectively managed from Russia.

These are the main highlights of the conference. Of course a lot of other professional insights had been kindly shared by Mr.Neofytos Neofytou. One of the main messages to the professional audience was to be proactive, start acting and advising current and potential clients now (if not done yet) on the future development of the Cyprus and world tax systems, as it is no longer a highly-doubtful future, it is an inevitable reality, changes and restrictions are happening now and even more are scheduled for the nearest future!

OLIESERVE, as one of the market leaders and the company that always looks ahead with confidence fully supports such vision of the future of the industry. We had started to work towards the implementation of the new directives and requirements for our clients way back, and continue the same path to meet even the most sophisticated expectations of our respected clients and partners.

If You wish to work with a service provider or a partner who sensibly looks in the future, be well-informed about the latest developments and legislations, have Your business structure planned and serviced efficiently and without a hitch, work with The Best – contact OLIESERVE now and find out more information of the ways we can be of service to You!