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 The
Minister of Economics of Cyprus, Michael Sarris, announced that in February will
ask the European Central Bank to re-evaluate the economy of Cyprus as Cyprus is
now well prepared to join Euro in 1/1/2008. The assessment is expected to take
place sometime in April, at which time the exchange rate between the Cyprus
pound and Euro will be fixed. Currently the Pound is participating in the
Exchange Rate Mechanism band II with a fluctuation of
±15%, therefore
satisfying the appropriate prerequisite for interest rate convergence.
In the meantime, Government and private organizations are working during the
first 6 months of 2007 in order to prepare for the conversion. Especially the
Banks have undertaken not only to amend their IT Systems but also launch
campaigns for informing the public on the introduction of Euro.
 SEPA
(Single Euro Payment Area) is an EU Council initiative for further economic
integration of the EU for member states participating in the EU25, EEA (Norway,
Iceland and Lichtenstein) and Switzerland. The concept is that citizens of the
Euroland will have only one bank account and use that to pay any Euroland bills
at the same fee non distinguishing between domestic or crossborder payment.
The EU Council encourages use of SEPA in an effort to enhance collections while
reducing cash and cheques payments. The initiative entails the interconnection
of existing national ACH (Automated Clearing House). Currently about 7000
European banks and savings institutions use about 120 Clearing & Settlement
infrastructures for low payment, high payment and debit cards that have no
consistency in the instruments that these infrastructures support. SEPA will
only develop basic standards and services; banks can develop value added
services based on SEPA rules and regulations.
Also debit cardholders should be able to use any ATM or point of sale terminal
at “reasonable” cost without differentiation on the country of card issuance.
SEPA Action Plan (2004 -2010):
SEPA was approved through the 2000 Lisbon Program. In 2002 the EPC (European
Payments Council) was created to overlook the implementation of SEPA. In 2006,
the Regulations for 2 SEPA systems (firstly, SEPA Credit Transfer Scheme & SEPA
Direct Debits and secondly, debit/credit Cards Framework) were established. As
of 1/1/2008 three SEPA financial instruments will be available, namely,
- SEPA Credit Transfer Scheme (intended to be of unlimited in value).
- SEPA Direct Debits (intended to be of unlimited in value).
- SEPA Card Framework.
By 1/1/2008 all banks need to ensure that will be reachable by any other bank
participating in SEPA. Between 2008 and 2010 both National and SEPA payments
could coexist.
Due to SEPA, EU banks are now facing the threat of loosing a substantial income
derived from the fees from money transfers within the EU. However, some other
banks especially the hi-tech ones, are planning to capitalize on their
technology by offering low cost products that will allow them to attract
additional clients. Furthermore, all banks should realize that now the
competition is moving from a domestic level to an EU market level in which case
the increased competition will shrink fees to the minimum.
The daring banks wishing to exploit this opportunity can set up electronic
automated banks at low tax jurisdiction (e.g. Cyprus) and capitalize on this
opportunity. This can be done by attracting new customers that perform most of
their banking electronically and by adopting competitive rates for the EU
market. For further information on SEPA please contact our office.
 The
Cadbury Schweppes case on the 12th of September 2006 by the European Court
of Justice (ECJ) is bringing about changes to the CFC rules that EU
countries apply.
The
CFC rules generally apply to apportion a foreign company’s income to the
parent company and to subject it to current taxation in the parent company’s
country without reference to a dividend distribution. Some of the CFC rules
within the EU include exemptions for EU entities, with the exception of the
UK, Danish and German CFC rules which also apply to EU entities.
In
particular, 9 countries Germany, Denmark, Finland, UK, Italy, Sweden,
Portugal, France and Spain will have to amend their CFC rules.
The
broader scope of the above countries CFC
rules (as in the case of the UK)
does not conform to the ECJ decision, which provides
that the national legislation is contrary to EC law as representing a
restriction on freedom of
establishment, except where it relates only to wholly artificial
arrangements intended to escape the
national tax normally payable. The Court also indicated that CFC legislation
must not be applied where it is
proved, on the basis of objective factors that are ascertainable by third
parties, that, despite the existence
of tax motives, the CFC is actually established in another EU Member State
and carries on genuine economic activities there.
Denmark and Germany are among the first two EU countries to propose new tax
legislation to conform to the ECJ's ruling.
 People of third country nationals now may apply for long-term residency,
according to a law passed.
The new law regulates the rights of third country nationals to long-term
residency in Cyprus. The new law is now in accordance with the EU Directive
regarding long-term residency. Long-term residents from third countries will now
be able to have their rights upgraded after having spent a minimum of five years
on the island.
Long-term immigrants had claimed that the way the law was previously framed
meant that they constantly felt under threat.
The chairman of the immigrant support group, expressed his satisfaction
over the new law.
 Ocean Tankers Holdings Public Company Ltd, the first ocean-going maritime
company to list on the Cyprus Stock Exchange last December, has signed a contract valued at USD 21
mln for the delivery of a pair of newbuild chemical tankers from China’s
Yangzhou Kejin Shipyard Co Ltd.
The official signing ceremony took place at the Cyprus Marine Club in the
presence of Cyprus Communications Minister, the ambassador of China in
Cyprus
The two new chemical tankers have a cargo capacity of 4,200 tonnes dwt each and
will fly the Cyprus flag, employing a crew of 15 on each vessel, mostly
Russians. The first tanker will be delivered at the end of March and the second
at the end of June.
Ocean Tankers currently employs the 4,500 dwt Eleousa Trikoukiotissa oil and
chemical tanker built in 2000, the 7,640 dwt Timi product tanker built in 2005,
the 8,055 dwt Victor Dubrovsky oil and chemicals tanker built in 1997 and the
5771 dwt Kalia merchant tanker built in 1999 and purchase last December for USD
10.8 mln.
As major economies such as China continue absorb large orders of fuel, raw
materials and chemicals, the demand on tanker companies to provide more cargo
shipments will continue to rise, benefiting Ocean Tankers with increasing
revenue, as other competitors have yet to switch from single-hull to twin-hull
tanker ships.
 The
Cyprus government exercises its sovereign rights according to the international
law and the practice followed as regards oil exploitation, according the Cypriot
President Tassos Papadopoulos. He stressed the view that the issue of oil
reserves deposits in the island's sea area is totally separated from the Cyprus
problem.
Cyprus has already singed agreements for the delimitation of its Exclusive
Economic Zone with Egypt and Lebanon.
On the 15th of February, the Norwegian company that undertook on behalf of the
Cyprus government initial explorations, presented the results to interested Oil
companies. The results were quite positive and hence major oil companies have
shown an interest to continue explorations in specific plots within the sea. The
Oil companies are expected to submit their interest/offers by mid July.
 Under
the Cyprus Company Law Cap 113 an amendment has occurred [with Law 124(I)/2006]
which enables a foreign company to transfer its domiciliation (registered office,
etc) to Cyprus and continue its corporate operations from Cyprus under the laws of
the Republic of Cyprus.
Under this law and in conjunction with the competitive Tax advantages that
Cyprus offers as the lowest EU Tax jurisdiction in Trading, Investing, Holding,
and Restructuring, creates a step forward which will help to attract more
corporations to Cyprus.
Under the Cyprus legislation an application to redomicile a foreign company
in Cyprus the following requirements have to be fulfilled and
submitted to the Registrar of Companies:-
- The Memorandum of Association or equivalent constitutional document of
the foreign company should provide for such possibility or redomiciliation;
- Resolution (or equivalent document) of the foreign company, authorising
the Directors to redomicile the company in Cyprus;
- a copy of the revised constitutional document of the company satisfying
the provisions of Cap 113 and which accords to the laws of the country of
first incorporation;
- a certificate of good standing (or equivalent) from the country of first
incorporation;
- an affidavit statement by a director of the foreign company, by its
board of directors (or equivalent) stating:-
- the name of the company and the name which it wishes to continue
using with once the process of redomiciliation is completed;
- the jurisdiction of first incorporation;
- the date of incorporation;
- the resolution (or equivalent) with which the company has decided to
redomicile in Cyprus;
- that the foreign company has formally declared its decision to
redomicile in Cyprus to the authority of the country of the first
incorporation (copy of which must be provided);
- that there no criminal or administrative procedures pending against
the company whether in the past or present;
Further the following documents will be required:-
- an affidavit statement by a director, duly authorised resolution
declaring the solvency of the company stating clearly that the persons
signing do not know of any circumstances that would negatively and
materially affect the solvency of the company within (12) months of the date
of application;
- certificate of company shareholders
- any other document that may required by the Registrar to prove that:-
- such application is allowed under the laws of the country first
incorporation; and
- that the parties needing to consent to such action under the law of
the country of first incorporation have so consented;
The application for domiciled will be be denied if:-
- procedure for dissolution or winding up or any other insolvency
proceedings settlements or writs against the foreign company are in the
process or equivalent proceeding have been commenced against the company;
- a liquidator, receiver or equivalent administrator has been appointed in
relation to the foreign company;
- any order exists that limits or suspend the rights of the company
creditors;
- any legal proceeding, criminal or civil have commenced against the
foreign company in the jurisdiction of primary incorporation;
Once the documents mentioned all above have been submitted to the Registrar
of Companies and the latter are satisfied according all the requirements then a
temporary certificate of redomiciliation will be issued. The temporary
certificate will give the redomicilied company status of a legal person under
the Cyprus companies law and will extend t it all rights and obligations arising
there from. The amended constitutional document will be deemed to be the
Company's Articles of Association.
Within six (6) months from the issue of of the temporary certificate the
foreign company must submit to the Registrar of Companies proof that the
foreign company has deregistered otherwise the Registrar may:-
- strike out the company off the Registry and inform the
jurisdiction of the foreign company that the company has not not been
registered in Cyprus or
- may extend for another three (3) months the period in order submitting
such proof of deregistration if there is a reasonable cause for such delay.
After the last extension no further extensions are allowed be granted.
FINANCIAL ACCOUNTS:-
- The foreign company must prepare their financial statements in
accordance with International Financial reporting standards (IFRSs) as
adopted by the EU as if the company established since their incorporation in
Cyprus.
- If the foreign has not previously prepare the financial statements in
accordance with IFRSs, must apply IFRS 1 "First time adoption of
International Financial Reporting Standards" for the preparation of the
first financial statements in accordance with IFRSs.
 European
Commissioner responsible for Taxation and Customs Union László Kovács, welcomes
the ruling on a case concerning pension taxation. The Court clearly rules
against national tax rules not allowing tax deductibility of pension
contributions paid to foreign funds, while they allow such tax deductibility for
contributions paid to national funds. It is the culmination of almost six years
of work by the Commission to create a single market for occupational pensions
without tax obstacles. The Commission started this process with the Pension
Taxation Communication of April 2001 (IP/01/575), and opened nine infringement
cases. Since then, seven Member States already took the Commission's position
into account and modified their legislation accordingly. The Court confirmed the
Commission's position today. He hopes that that the remaining Member States will
take the ruling into account and also modify their legislation.
Judgment:
Case C-150/04
The European Commission opened an investigation concerning a proposal by
Denmark to amend its flat-rate tonnage-based tax scheme (tonnage tax) for
shipping companies. The Danish authorities intend no longer to require companies
benefiting from this tax scheme to send the authorities financial information
relating to their transactions with their foreign subsidiaries.
Denmark wants the Commission to approve this change to the current scheme. The
notified measure should not normally alter either the level of aid that Danish
shipping companies receive or the budgetary impact of the scheme for the Danish
State.
The Commission nevertheless took the view that the change could negate one of
the control measures linked to the scheme, namely the monitoring of commercial
transactions between companies subject to this scheme and their subsidiaries.
The abuse-prevention measures required by the Commission for all the tonnage tax
schemes within the Community are essential to ensure that these very favourable
taxation measures are not extended to activities other than maritime transport.
The Commission has therefore decided to open a formal investigation procedure
concerning the measure notified by Denmark with a view to obtaining the opinion
of any interested third party, in particular the tax authorities in the other
Member States.
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