1. Cyprus - Remains to
be an ideal hub for
inbound and outbound
Investments
Angelos Gregoriades
Chairman and Head of Tax
7 June 2013

2. 1
©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Main Messages
Questions that have arisen:
• How would people react?
• How would the economy react?
• Will exchange controls be needed to prevent capital flight?
• Will the Russians leave the island?
• How long will it take before they do so?
• How can the economy find alternative ways to reignite its engines?

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©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Main Messages
Agreement with the Eurogroup supported by IMF sets out measures for:
• Restoring the soundness of the banking sector;
• Controlling public finances;
• Ensuring sustainable growth.

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©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Current Situation
Capital Controls
• Branches and Subsidiaries of foreign banks are exempted from the Capital controls for
transactions involving foreign investors.
• Capital Controls for domestic banks institutions affecting cross-border transactions
remains as follows:
Transactions that fall within the normal business activity of the customer up to
€500.000 per transaction do not require prior approval whereas for amount exceeding
€500.000 prior approval is required;
Transfers of deposits/funds outside the Republic up to €5.000 per month are allowed
regardless of the purpose.

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©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Current Situation
The Moneyval/Deloitte Anti-Money Laundering Review for Cyprus concluded that:
• Cyprus does NOT engage in money laundering activities;
• Cyprus legal framework is fully harmonized with relevant European Union Directives and
sometimes goes beyond;
• Solid level of Compliance on Customer Due Diligence across the sector;
• Very low level of suspicious activity. Out of more than 9,200 cases examined, only 29
circumstances required further investigation;
• No indication of a negative re-assessment of Cyprus by Moneyval and there is nothing
unique in Cyprus.

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©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Growth Drivers
—
• Gas Exploration and Exploitation
•—Tourism
•—EU Funds
• International Business

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©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Growth Drivers
International business continues to be a driver of growth due to Cyprus competitive
advantages.
 Market evidence reveals that effects of haircuts on deposits did not trickier a mass
exodus of international business because the main pillars of the development of
Cyprus as a business centre, which have been the tax, legal and regulatory
frameworks and the quality of professional services, have remained fundamentally
unchanged.
 Opportunities for export of services, other than Russia and Ukraine, in middle East,
India and China.

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©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Growth Drivers
Reasons for resilience include
— Historical, ties with main markets, such as Russia and Ukraine;
— More than 20 years of experience in international business;
— Well developed and dynamic industry of over 500 organisations supporting
international businesses (large accounting firms, legal firms etc.);
— Proven and modern Infrastructure for International Businesses;
 Tax environment;

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©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The Cyprus Tax System at a Glance
Main Features
• Taxation is based on Residency status;
• 12,5% corporate tax on trading profits as from 1.1.2013;
• Interest expense on 100% corporate acquisitions permitted (New!);
• Fully reformed IP Regime (New!);
• Capital gains on sale of securities: 100% exemption;
• Capital gains from the sale of immovable property situated outside Cyprus are tax
exempt;
• Group relief availability (75% holding);
• No withholding tax on outgoing payments (dividends-interest-royalties).

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©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Main Features
• Tax free Reorganisations (cross border permitted);
• Foreign PE profits exempt;
• No thin capitalization rules (no debt to equity ratio);
• Tax free corporate re-domiciliation permitted;
• Possibility for establishing an SE (European Company);
• Applicability of all EU directives;
• Advance ruling practice exists;
• Extensive and expanding favourable Double Tax Treaty network.
The Cyprus Tax System at a Glance

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©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Cyprus Double Tax Treaty Provisions
Cyprus with Russia Ukraine
Dividend WHT
5% If direct investment of EUR
100.000
Same
Interest 0% 2%
Royalty 0% 5%/10%
Capital Gains
Sale of shares ‘’Property-rich’’
companies taxed in both States
BUT 4 year period exemption
None
Limitation of Benefits
Applicable ONLY in cases where
companies are not incorporated in
Cyprus
None

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©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Why Cyprus?
Russian Outbound Investment
 The removal from the Russian ‘’offshore list’’ creates new opportunities for the use of
Cyprus as a gateway to Europe, Asia and Africa;
 The new opportunities in the Oil and Gas Sector in Cyprus will enable Russian
investors to geographically diversify their operations;
 Access to the financial markets through the listing of Cyprus holding companies
holding Russian investments;
 The new updated provisions of the Trust Legislation enhance further the value of
Family Trust arrangements;
 The access to all EU Directives enable the free flow of investment income to Cyprus
from the rest of Europe.

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©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Russian Inbound Investment
 As we have seen the Cyprus-Russia Protocol maintains some important beneficial
provisions as compared to other recently signed Protocols;
 The development of Cyprus as a Funds centre through the introduction of the new EU
Funds Directives will encourage and promote foreign investment inflow into Russia;
 Approximately 27% (36 out of 132) Cyprus Investment Firms represent Russian
Interests mainly active in the area of:
• Foreign Exchange Trading;
• Asset Management;
• Brokerage Services.
Serving the Russian investors.
Why Cyprus?

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©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
An IP friendly location
An IP friendly location for:
• Royalty income and gains from the disposal of an IP;
• National deduction of 80% from qualifying royalty income reduces tax rate to
approx.2.5%;
• 5 year amortization of IP acquisition cost further reduces taxable base;
• No withholding taxes on royalty payments if IP not used in Cyprus;
• Favorable withholding tax on royalties received from aboard;
• Access to the Royalties EU Directive so that royalty payments within the same group of
companies are tax exempt.

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©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
An IP friendly location
A Financing hub
• Taxation of interest income as trading profit at 12.5% ;
• Financing costs deductible from financing income;
• Interest Acquisition Costs deductible;
• Margin Availability for back to back loan transactions (max ,35%);
• The exemption from taxation of gains from disposal of securities sets a favorable framework
for debt restructurings;
• No withholding taxes on interest payments;
• Favorable withholding tax on interest received from abroad;
• Access to the Interest EU Directive so that interest payments within the same group of
companies are tax exempt.

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©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Attracting European funds for inbound Russian investments
Investment Funds present a credible alternative to Banks and Cyprus has set up
the regulatory frame work which is fully compliant to the EU directives
• Cyprus poses an ideal hub for attracting funds from EU Investors for inbound
investment into the Russian Market due to the fact that Russian fund managers
have;
 Long dated use of and familiarisation with Cyprus vehicles and with the Cyprus
legal framework;
 Long dated presence of Russian Asset Managers in Cyprus (e.g. Renaissance,
Troika);
 Deep Understanding of Russian Clients needs;
 Availability of Cost-effective fund administration and asset management
services;
 Tax efficiency due to the fact that gains from trading in securities are tax exempt.

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©2013 KPMG Limited, a Cyprus limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Thank you !
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18. ©2013 KPMG Limited, a Cyprus limited liability company and a member firm of
the KPMG network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity. All rights
reserved. Printed in Cyprus.
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