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 The
Cyprus government has proposed through modification of the current law, the
exception of small size companies from their obligation of submission of their
annual financial accounts. This exception will also apply to the preparation of
unified financial accounts for small size Groups or Holding companies.
More specifically, the parliamentary committee proposes the introduction of the
above modifications on the existing law which is discussed and expected to be
placed for voting by the Parliament in April. According to the proposed bill,
the exception for small size companies in regard to the submission of their
financial accounts for inspection is judged necessary due to the large number of
companies now registered in Cyprus in addition to the fact that the current
status decreases the reliability and the prestige of country as international
enterprising and financing centre where high Financial and International
Accounting Standards are maintained.
Additionally, the bill incorporates the exception from the obligation of
preparation of unified financial accounts for small size groups or holding
companies, so that it is consistent with regulation which was introduced by the
European Committee for the application of international accounting standards.
This amendment is judged essential in an effort to maintain the competitiveness
of Cyprus as an investment destination for the registration of companies of
international activities. It is expected that all mother companies of
international activities which are already in Cyprus will not be compelled to
transfer their registered office in any other competitive jurisdictions. On the
other hand, apart from the big cost for the preparation of unified financial
accounts from such companies, there is currently a serious weakness of not being
able to prepare annual audited accounts for the group as various affiliated
companies may not be able to respond on time
The Cyprus parliament has passed legislation in March allowing for EURO
adoption as of January 1. 2008.
Experts from the Finance Ministry and the Central Bank of Cyprus warned that
delaying eurozone entry beyond January 1, 2008 could cause very serious problems
for the economy.
Cyprus formally applied to adopt the EURO last month and Finance Minister
welcomed the result of the parliamentary vote. “We have worked hard to fulfill
the economic criteria and this legal convergence is a major step towards the
formal economic evaluation of the EU and the ECB”.
The Minister of Finance expects the whole process, including the locking of
the Cyprus pound against the EURO, to be concluded in the first 10 days of July.
 Greece’s Piraeus Bank announced they
had sold to rivals Marfin Popular Bank (MPB) their stake in Cyprus’ the Bank of Cyprus.
The transaction saw MPB acquire an 8 per cent stake in the Bank of Cyprus
from Piraeus, formerly its largest shareholder.
The 8 per cent stake was acquired in one single block trade on the Athens Stock
Exchange. A total of 42.4 million shares were transferred at 11.24 euros per
share.
Furthermore, Piraeus and Marfin agreed a three-year peace treaty, whereby they
undertook not to launch takeover bids for one another until the end of 2010.
Piraeus had been pursuing a tie-up with the Bank of Cyprus, but a recent cash
and stock offer was rejected by Bank of Cyprus board. Piraeus had since repeatedly said
it would liquidate its holding in Bank of Cyprus to lock in capital gains.
Regulations governing mergers and acquisitions state that a company launching a
public offer cannot at the same time be a buy-out target.
Since the two Banks [Marfin and Piraeus] have signed a truce, one can only think
that the next target must be the Bank of Cyprus.
ECJ
Advocate-general opinions is that
United Kingdom VAT regime may be discriminating against closed-ended investment
funds.
The U.K. investment
trust industry has received a
breakthrough after an
ECJ
advocate general gave his opinion saying that the current UK VAT rules may be
discriminating against closed-ended investment funds.
In the opinion,
advocate-general there was no reason why these funds, which include
investment trust companies, should not be eligible for VAT exemptions.
This means that the industry could be in line for a multimillion-pound VAT
break.
ECJ Advocate -general
did agree with
HM Revenue & Customs
that a member state is entitled to determine the
special investment funds whose management is exempt from VAT and that the
exemption does not necessarily apply to the management of all special investment
funds. He even went further,
that this power is bound by the requirement to ensure that, in exercising its
discretion, it must do so in a way that does not offend the principles of fiscal
neutrality so that competing investment funds must be treated equally in
relation to the charging of VAT.
If the Court follows the
above, it will bring
clarity and consistency to the VAT treatment of collective investment to the
benefit of the investors.
 Ukraine
and Cyprus are expected to sign a new tax treaty during the first half of 2007. Once signed and in force, the new treaty
will replace the Cyprus-former USSR tax treaty of 29 October 1982 in bilateral
relation between Ukraine and Cyprus.
Some details of the draft tax treaty have become available. The treaty generally
follows the OECD Model Convention. The maximum rates of withholding tax are:
- 15% on dividends in general and 5% if the receiving company holds
directly at least 25% of capital of the paying company
- 10% on interest in general and
- 10% on royalties in general
In contrast to the aforementioned rates of withholding tax under the pending
tax treaty between Ukraine and Cyprus, no withholding tax is currently levied on
dividends, interest and royalties under the Cyprus-former USSR tax treaty, which
Ukraine and Cyprus currently apply in bilateral relations. More details will be provided
later.
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