Tax Facts & Figures

2007 - Cyprus*

*connectedthinking

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Tax Facts & Figures

2007 - Cyprus

Tax Facts & Figures - 2007 CyprusISSN ¡Ô. 1450-4286

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ContentsPage

Preface...........................................................................5

Personal Income Tax......................................................6-11

Corporation Tax..............................................................12-17

Special Contribution for Defence ...................................18-19

Capital Gains Tax ..........................................................20-21

Estate Duty ....................................................................23

Value added Tax.............................................................23-27

Immovable Property Tax ................................................29

Trusts .............................................................................30

Transfer fees by the Department of Land and Surveys .31

Social Insurance.............................................................32-33

Stamp Duty ....................................................................34-35

Tax Treaties withholding tax tables ................................36-39

Tax diary.........................................................................40-41

PricewaterhouseCoopers ...............................................42-43

PricewaterhouseCoopers offices in Cyprus....................44-45

Your contacts in PricewaterhouseCoopers......................46

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PrefaceThere are significant benefits from a proper and effective taxplanning. Our people possess the knowledge and expertiseto assist you identify such benefits. We are next to you toshare know-how and innovative specialized solutions tosupport you for structuring your operations in a tax efficient way.

This publication aims at providing a general description of thetax system in Cyprus. The tax information contained is basedon the tax legislation and practice as at January 2007.A full and detailed description of the prevailing tax system is not the aim of this booklet nor could it be covered in a briefpublication of this kind. Consequently "Tax Facts & Figures - 2007 Cyprus" should only be used as a source of generalinformation and it cannot substitute proper professionaladvice.

Please do not hesitate to contact us at any of our offices atthe addresses shown at the back of this publication.

PricewaterhouseCoopersChartered Accountants

January 2007

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Personal Income Tax

Basis of taxationAll Cyprus tax residents are taxed on all income accrued orderived from all sources in Cyprus and abroad. Individualswho are not tax residents of Cyprus are taxed on incomeaccrued or derived from sources in Cyprus.

An individual is tax resident in Cyprus if he spends in Cyprusmore than 183 days in any one year. Days in and out ofCyprus are calculated as follows:

(a) the day of departure from Cyprus counts as a day of residence outside Cyprus.

(b) the day of arrival in Cyprus counts as a day of residence in Cyprus.

(c) arrival and departure from Cyprus in the same day counts as one day of residence in Cyprus.

(d) departure and arrival in Cyprus in the same day counts asone day of residence outside Cyprus.

Personal tax rates The following income tax rates apply to individuals:

Chargeable income Tax rate Accumulated taxCí % Cí

0 - 10.000 Nil Nil10.001 - 15.000 20 1.00015.001 - 20.000 25 2.250

over 20.000 30

Foreign pension is taxed at the rate of 5%. An annualexemption of Cí2.000 is granted.

ExemptionsThe following are exempt from income tax:

Type of income Exemption limit• Interest The whole amount

• Dividends The whole amount

• Remuneration from any office or 20% of income with employment exercised in Cyprus by a maximum amount an individual who was not resident of Cí5.000 annuallyof Cyprus before the commencementof his employment, for a period of 3years commencing from 1st Januaryfollowing the year of commencementof the employment

• Remuneration from salaried The whole amount services rendered outsideCyprus for more than 90days in a tax year to a non-Cyprus resident employer or to a foreignpermanent establishment of a Cyprusresident employer

• Profits of a permanent establishment The whole amount abroad under certain conditions

• Lump sum received by way of retiring The whole amount gratuity, computation of pension orcompensation for death or injuries.

• Capital sums accruing to individuals The whole amount from any payments to approved funds(eg provident funds)

• Deposits with Housing Finance 40% of the amount Corporations deposited. The

amount deposited cannot exceed 25% of a person’s total income.(This exemption applies for deposit schemesthat existed as at 30April 2003)

• Profits from the sale of securities * The whole amount

* Securities is defined as shares, bonds, debentures, founders’ shares and other securities of companies or other legal persons,incorporated in Cyprus or abroad and options thereon.

Social grants The following social grants are given:

• Grant of Cí1.500 per annum for every child receiving full time higher education in Cyprus (with certain restrictions) or full time university education outside Cyprus.

• Grant of Cí1.800 per annum for blind persons.

• All families resident in Cyprus fulfilling the provisions of the Law, are entitled to a basic child grant, whereas those families that had a gross family (applicant, spouse, children) income, for the year 2004 below í18.000 are entitled to an additional child grant as indicated in the table below.

Cí Cí Cí

1 child 224 56 282 children 448 224 1683 children 1.343 504 420More than 3 children 672 per child 224 per child 140 per child

Upon application, the applicants do not need to submit anyproof/evidence of their income, unless it is the first time claim.

• The above mentioned social grants are those applicable for the year 2007.

98

Tax deductions The following are deducted from income:

Cí• Contributions to trade unions or The whole amount

professional bodies

• Loss of current year and previous The whole amountyears

• Rental income 20% of rental income

• Donations to approved The whole amount charities (with receipts)

• Expenditure incurred for the maintenance Up to í200, í300 of a building in respect of which there or í350 per square is in force a Preservation Order meter (depending

on the size of the building)

• Social Insurance, provident fund, Up to 1/6 of the medical fund, pension fund chargeable incomecontributions and life insurancepremiums (the allowable annuallife insurance premium is restricted to 7 per cent of the insured amount)

Basic annualgrant

Number of children in the

family

Additionalannual grant forfamilies with anannual incomeup to í10.000

Additionalannual grant forfamilies with anannual income

greater thaní10.000 and up

to í20.000

1110

EXAMPLE OF PERSONAL TAX COMPUTATION Cí

Salary 30.000

Rent receivable 2.500

Interest receivable 800

Dividend income 400

Social Insurance contributions 1.625

Life insurance premiums 4.100

Insured sum 50.000

Provident fund contribution 1.600

Donations to approved charities– with receipts 200

TAX COMPUTATION:Cí Cí

Salary 30.000

Rent receivable 2.500

Interest receivable (exempt) -

Dividends receivable (exempt) -

Total income 32.500

Less: deductionsDonations - (with receipts) 200

20% of rent income 500 700

Net total income 31.800

Life insurance premiums: Restricted to 7 per cent of the insured sum (7% @ Cí50.000 = Cí3.500).Provident fund, social insurance contributionsand life insurance premiums restricted to 1/6 of net total income (Cí1.600 + Cí1.625 + Cí3.500 = Cí6.725restricted to 1/6 of Cí33.000*) 5.500

Chargeable income 26.300

Tax payable: - first 20.000 2.250- rest 6.300 1.890

26.300 4.140

Income tax payable 4.140

Special contribution for defence

Dividends receivable Cí400 ¯ 15% 60

Interest receivable Cí800 x 10% 80

Rent receivable Cí2.500 – 25% = Cí1.875 x 3% 56,25 196,25

Total tax payable 4.336,25

* í33.000 is made up of total income including interest and dividendless deductions

1312

Corporation tax

Basis of taxationAll companies tax resident of Cyprus are taxed on all theirincome accrued or derived from all sources in Cyprus andabroad. A non-Cyprus tax resident company is taxed on incomeaccrued or derived from a business activity which is carried outthrough a permanent establishment in Cyprus.

A company is resident of Cyprus if it is managed and controlledin Cyprus.

Corporation tax rates Tax rates

%Semi-government organisations 25Other companies 10

Exemptions

Type of income Exemption limit• Profit from the sale of securities The whole amount

• Dividends The whole amount

• Interest not arising from the ordinary 50%activities or closely related to theordinary activities of the company

• Profits of a permanent The whole amountestablishment abroad, under certain conditions

Tax deductions All expenses incurred wholly and exclusively in earning theincome of the company including:

Type of expense Exemption limit• Donations to approved The whole amount

charities (with receipts)

• Employer’s contributions to social The whole amountinsurance and approved fundson employees’ salaries

• Any expenditure incurred for Up to í200, í300 orthe maintenance of a building í350 per square in respect of which there is meter (depending a Preservation Order on the size of the

building)

• Entertainment expenses for business Up to Cí10.000. purposes Nil if the expense

exceeds 1% of the gross income of the business

but not including:

• expenses of a private The whole amountmotor vehicle

• Interest applicable to the cost The whole amountof acquiring a private motor for 7 yearsvehicle, irrespective of its useand to the cost of acquiring anyother asset not used in the business

Losses carried forwardThe tax loss incurred during a tax year and which cannot be setoff against other income, is carried forward and set off againstfuture profits with no time restriction. This provision is applicablefor all losses incurred from 1997 tax year onwards.

1514

The current year loss of one company can be set off againstthe profit of another provided the companies are Cyprus taxresident companies of a group. Group is defined as:

(a) One company holding at least 75% of the shares of the other company.

(b) At least 75% of the voting shares of the companies are held by another company.

A partnership or a sole trader transferring business into acompany can carry forward tax losses into the company forfuture utilisation.

Losses from a permanent establishment abroad can be set offwith profits of the company in Cyprus. Subsequent profits ofthe permanent establishment abroad are taxable up to theamount of losses allowed.

ReorganisationsTransfers of assets and liabilities between companies can beeffected without tax consequences within the framework of areorganisation.

Reorganisations include:(a) mergers(b) demergers(c) transfer of activities(d) exchange of shares

Annual wear and tear allowances on fixedassetsThe following allowances which are given as a percentage onthe cost of acquisition are deducted from the chargeableincome:

Fixed assets %Plant and machinery• Plant and machinery 10• Furniture and fittings 10• Televisions and videos 10

• Industrial carpets 10• Boreholes 10• Machinery and tools used in an agricultural business 15• Computer hardware and operating systems 20• Application software 33 1/3• Commercial motor vehicles 20• Motor cycles 20• Excavators, tractors, bulldozers,

self-propelled loaders and drums for petrol companies 25

• Expenditure on application software less than Cí1.000, is written off in the year of acquisition

Buildings• Commercial buildings 3• Industrial, agricultural and hotel buildings 4• Flats 3• Metallic greenhouse structures 10• Wooden greenhouse structures 33 1/3

Boats• Sailing vessels 4,5• Steamers, tugs and fishing boats 6• Shipmotor launches 12,5• New cargo vessels 8• New passenger vessels 6• Used cargo/passenger vessels Over their useful lifesTools• Tools in general 33 1/3• Videotapes property of video clubs 50

Special type of companiesShipping companies • No income tax is payable on the profits earned or dividends

paid by a Cyprus shipping company which owns ships under the Cyprus flag and operates in international waters (includingchartering), or on the salaries of officers and crew of such ships.

• The exemption also applies to the bare boat charterer of a vessel flying the Cyprus flag under parallel registration.

1716

• Local or international ship management and crew management businesses (corporated or unincorporated) have the option to be taxed either at the rate of 4,25% or at rates equal to 25% of the rates used to calculate tonnage tax of vessels under management which are registered outside Cyprus. If no election is made tonnage tax will be imposed.The election is made annually by 30 November of the previous year.

Insurance companiesProfits of insurance companies are liable to corporation taxsimilar to all other companies except in the case where thecorporation tax payable on taxable profit of life insurancebusiness is less than 1,5% on gross premium. In this casethe difference is paid as additional corporation tax.

International Collective InvestmentSchemes (ICISs)The sole object of an ICIS is the collective investment of fundsof the unitholders. ICISs can take the following legal forms:

• International fixed capital company

• International variable capital company

• International unit trust scheme and

• International investment limited partnership

ICISs are liable to corporation tax similar to all other legalentities depending on the legal status of the ICIS.

1918

Special Contribution forDefence Special contribution for defence is imposed on income earnedby Cyprus tax residents. Non-tax residents are exempt fromspecial contribution for defence. It is charged at the ratesshown in the table below:

Tax ratesIndividuals Legal entities

% %• Dividend income from Cyprus 15 Nil

resident companies

• Dividend income from non-Cyprus 15 Nil1 (under resident companies conditions)

• Interest income arising from the Nil Nilordinary activities or closely related to the ordinary activities of the business

• Other interest 102 10

• Rental income (reduced by 25%) 3 3

• Profits of semi-government N/A 3organisations

Notes1. Dividend income from abroad is exempt from defence fundcontribution provided that the company receiving the dividendowns at least 1% of the company paying the dividend. Thisexemption does not apply if:

(a) more than 50% of the paying company’s activities result directly or indirectly in investment income and

(b) the foreign tax is significantly lower than the tax rate payable in Cyprus.

When the exemption does not apply, the dividend income issubject to special contribution for defence at the rate of 15%.

2. Interest income from savings bonds and developmentbonds and all interest earned by a provident fund is subjectto special contribution for defence at 3% (instead of 10%).

In the case where the total income of an individual (includinginterest) does not exceed Cí7.000 in a taxable year, then therate is reduced to 3%.

Special contribution for defence on rental income and tradingprofits is payable in 6 monthly intervals on 30 June and 31December each year.

In the case of interest and dividends received gross anydefence due is payable at the end of the month following themonth in which they were received.

Dividends received from companies net of 20% withholdingtax under the legislation that was in force up to 31 December2002, and not distributed as dividends up to 31 December2002, can be distributed within six years from the date of theirreceipt without any further tax deduction.

Foreign taxes paid can also be credited against the defencetax liability.

Deemed dividend distributionIf a Cyprus resident company does not distribute a dividendwithin two years from the end of the tax year then:

• 70% of accounting profits (after some adjustments) are deemed to have been distributed.

• 15% special contribution for defence is imposed on deemed dividend distribution applicable to shareholders who are residents of Cyprus.

• Deemed distribution is reduced with payments of actual dividends which have already been paid during the two years from the profits of the relevant year.

When an actual dividend is paid after the deemed dividenddistribution, then special contribution for defence is imposedonly on the additional dividend paid.

2120

Capital Gains Tax Capital Gains Tax is imposed at the rate of 20% on gains fromthe disposal of immovable property situated in Cyprus includinggains from the disposal of shares in companies which ownsuch immovable property excluding shares listed in anyrecognised stock exchange.

ExemptionsThe following disposals of immovable property are not subjectto Capital Gains Tax:

• Tranfers arising on death.

• Gifts made from parent to child or between husband and wife or between up to third degree relatives.

• Gifts to a company where the company’s shareholders are members of the donor’s family and the shareholders continue to be members of the family for five years after the day of the transfer.

• Gifts by a family company to its shareholders, provided suchproperty was originally acquired by the company by way of donation. The property must be kept by the donee for at least three years. For gifts that were made from the companyto its shareholders and took place before 28 May 1999, the exemption applies irrespective of how the immovable property was originally acquired by the company.

• Gifts to charities and the Government.

• Transfers as a result of reorganisations.

• Exchange or disposal of immovable property under the Agricultual Land (Consolidation) Laws.

• Expropriations.

• Exchange of properties, provided that the whole of the gain made on the exchange has been used to acquire the other property. The gain that is not taxable is deducted from the cost of the new property, i.e. the payment of tax is deferreduntil the disposal of the new property.

Determination of capital gainLiability is confined to gains accruing since 1 January 1980.The costs that are deducted from gross proceeds on thedisposal of immovable property are its market value at 1 January 1980, or the costs of acquisition and improvementsof the property, if made after 1 January 1980, as adjusted for inflation up to the date of disposal on the basis of theconsumer price index in Cyprus.

Expenses that are related to the acquisition and disposal ofimmovable property are also deducted, subject to certainconditions eg transfer fees, legal expenses etc.

EXAMPLE

CíSale price at June 2006 200.000

Cost of acquisition at 1 January 1988 (40.000)

Indexation allowance January 1988 to June 2006 Cí40.000 @ 88,86% (35.544)Capital gain 124.456Legal expenses (600)

Capital Gain 123.856

ExemptionsIndividuals can deduct from the capital gain the following:

Cí• Disposal of private residence

(subject to certain conditions) 50.000

• Disposal of agricultural land by a farmer 15.000

• Any other disposal 10.000

The above exemptions are given only once and not for everydisposal. An individual claiming a combination of the above isonly allowed a maximum exemption of Cí50.000.

23

Estate DutyEstate duty has been abolished since 1 January 2000. The executor/administrator of the estate of the deceased, isrequired by the Deceased Persons Estate Law, to submit tothe tax authorities a statement of assets and liabilities of thedeceased within six months from the date of death.

Value Added TaxVAT is imposed on the provision of goods and services inCyprus, as well as on the acquisition of goods from theEuropean Union and the importation of goods into Cyprus.

Taxable persons charge VAT on their taxable supplies (outputtax) and are charged with VAT on goods or services whichthey receive (input tax).

If output tax in a VAT period exceeds total input tax, apayment has to be made to the state. If input tax exceedsoutput tax a repayment is due from the state.

With regard to intra-community acquisitions the trader doesnot pay VAT on receipt of the goods in Cyprus but instead heaccounts for VAT using acquisition accounting. This involves asimple accounting entry in the books of the business wherebyhe self-charges VAT and at the same time claims it back if itrelates to taxable supplies thereby creating no cost to thebusiness.

In cases where the acquisition relates to an exempt transaction,the trader must pay the VAT that corresponds to the acquisition.

VAT ratesThe legislation provides for the following four tax rates:

• Zero rate (0%)

• Reduced rate (5%) from 1 July 2000

• Reduced rate (8%) from 1 August 2005

• Standard rate (15%) from 1 January 2003

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Hotel and similar tourist accommodation services, and supplies of goods made in the course of cateringwith the exception of alcoholic drinks which are subject to VAT at the standard rate. The transport of passengers and their accompanying luggage by sea, within Cyprus.

ExemptionsCertain goods or services are exempt from VAT. They include:

• Rents

• Medical Services

• Insurance and financial services

• Disposal of used immovable property and new immovable property for which a proper application for planning permission was filed with the relevant authority before 1 May 2004.

Disposals of new immovable property for which a properapplication for planning permission was filed with therelevant authority after 1 May 2004, are subject to VATat standard rate.

Grant for acquisition of first residenceThe grant is given to entitled persons for theconstruction or purchase of a new house or the transferof ownership of a building which is used as the mainpermanent residence.

The application for the grant is submitted to the Ministryof Finance, in relation to houses for which anapplication has been submitted for the issue of aplanning permission after the 1 May 2004, by anyphysical person citizen of the Republic of Cyprus or ofany other EU member state who resides permanently inthe Republic of Cyprus and has reached the age of 18at the time of application. The grant is given for houseswhose total area does not exceed 250 mÇ and isrestricted to 130 mÇ.

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Zero rate 0%Zero rated goods and services include the following:

• Supplies of goods to other EU Member States

• Exports

• Food

• Commissions received from abroad for exportation of goods

• Medicines

• International air and sea transport

Reduced rate of 5%The reduced rate of 5% applies to:

• Funeral services and supply of coffins• Road sweeping, garbage collection and recycling• Services of authors, composers, artists and critics of

works of art• Supply of fertilizers• Supply of animal feeding stuffs• Supply of seeds• Supply of live animals of a kind generally used for

human consumption• Newspapers and magazines• Books• Non-bottled water• Gas• Transfer of persons and their luggage on a rural

or city bus• Various goods for the use of handicapped persons• Ice-cream, yogurt ice-cream and similar products• Salted or spicy products made from potato• Dry roasted or spicy nuts

Reduced rate of 8%The reduced rate of 8% was introduced on 1 August2005 and the following services have been transferredfrom the standard rate of 15% to the reduced rate of 8%:

Rural and private taxi transport services, tourist,excursionand long distance bus services.

From 1 January 2006 the following supplies weretransferred from the lower reduced rate (5%) to thehigher reduced rate (8%):

27

RegistrationRegistration is compulsory for businesses with (a)turnover in excess of Cí9.000 during the 12 precedingmonths or (b) an expected turnover in excess ofCí9.000 within the next 30 days. Businesses withturnover less than Cí9.000 and companies which makesupplies for which the right to claim the amount of therelated input VAT is granted have the option to registerif they wish to do so.

Exempted products and services, and disposals of items of capital nature are not taken into account fordetermining annual turnover for registration purposes.Registration is effected by completing the appropriateapplication form.

VAT declaration - Payment/return of VATVAT returns must be submitted quarterly and the payment ofthe VAT must be made by the 10th day of the second monththat follows the month in which the tax period ends.

VAT registered persons and companies have the right torequest for a different filing period. Approval of the VATauthorities is required.

Where in a quarter input tax is higher than output tax, andtherefore a repayment is due, the difference is refundable oris transferred to the next VAT quarter to be credited againstany payable account.

26

The amounts of the grant valid from 1 May 2004 are asshown in the table below:

Difference between zero rate and exemptsuppliesThe difference between zero rate and exempt suppliesis that businesses that make exempt supplies, are notentitled to recover the VAT with which they have beencharged on their purchases, expenses or imports.

Irrecoverable input VATAs an exception to the general rule, input VAT cannotbe recovered in a number of cases which include thefollowing:

• Acquisition used for making exempt supplies.

• Purchase, import or hire of saloon cars.

• Entertainment and hospitality expenses (except those relating to employees and directors).

• Housing expenses of directors.

One bedroomapartment

Two bedroomapartment

Three bedroomapartment

í10.739 (í950 x 130 s.m. x 15/115 x 10/15)

í10.739 (í950 x 130 s.m. x 15/115 x 10/15)

í9.891 (í875 x 130 s.m. x 15/115 x 10/15)

í8.478 (í750 x 130 s.m. x 15/115 x 10/15)

í11.304 (í1.000 x 130 s.m. x 15/115 x 10/15)

í5.652 (í500 x 130 s.m. x 15/115 x 10/115)

Semi detachedhouse

Detached house

Construction ofhouse

29

Immovable Property TaxImmovable Property Tax is imposed on the market value as at1 January 1980 and applies to the immovable property ownedby the taxpayer on 1 January of each year. This tax ispayable on 30 September each year.

Physical and legal persons are both liable to ImmovableProperty Tax.

Tax rates

Property value Rate Accumulated taxCí ‰ Cí

Up to 100.000 - -100.001 - 250.000 2,5 375250.001 - 500.000 3,5 1.250

Over 500.000 4

ExemptionsThe following are not subject to Immovable Property Tax:

• Public cemeteries

• Churches and other religious buildings

• Public hospitals

• Schools

• Immovable property owned by the Republic

• Foreign embassies and consulates

• Common use and public places

• Property under Turkish occupation

• Buildings under a Preservation Order

• Buildings of charitable organisations

• Agricultural land used in farming or stock breeding, byfarmer or stock breeder residing in the area.

31

Transfer fees by theDepartment of Land andSurveys

The fees charged by the Department of Land and Surveys fortransfers of immovable property are as follows:

Rates applying from 19 March 1999Value Rate Fee Accumulated

fees

Cí % Cí CíUp to 50.000 3 1.500 1.500

50.001 - 100.000 5 2.500 4.000Over 100.000 8

In the case of property transferred to a family company, transferfees are refundable after five years if the property remainswith the company and the shareholders remain the same.

In the case of property transferred from a company whoseshareholders are spouses and/or their children, to one of thetwo spouses, or their children or to a relative up to thirddegree of relation the transfer fees are calculated on the valueof the property as follows:

• if the transfer is to a spouse 8%

• if the transfer is to a child 4%

• if the transfer is to a relative 8%

Also the following rates are applicable in the case of freetransfers:

• from parents to children 4%

• between spouses 8%

• between third degree relatives 8%

• to trustees í5

Value in these cases is the one written on the title deed whichrefers to values of the year 1920.

In the case of companies’ reorganizations, transfers ofimmovable property are not subject to transfer fees by theDepartment of Land and Surveys.

30

TrustsA trust is established by an individual "the settlor" and is ameans whereby property "the Trust Property" is held by oneor more persons "the Trustees" for the benefit of another orothers "the Beneficiaries" or for specified purposes.

Trusts have traditionally been very important tax planningdevices. Even today a very high proportion of tax savingschemes involve trusts.

International trustsInternational trusts are governed by the International TrustsLaw of Cyprus. International Trusts are not taxed in Cyprus.In fact, Cyprus International Trusts enjoy important taxadvantages, providing significant tax planning possibilities.The following advantages are indicative of the possibleoptions for tax minimisation.

• All income, whether trading or otherwise, of an InternationalTrust (ie a Trust whose property is located and income isderived from outside Cyprus) is not taxable in Cyprus.

• Dividends, interest or other income received by a Trust froma Cyprus international business company are neither taxablenor subject to withholding tax.

• Gains on the disposal of the assets of an international Trustare not subject to capital gains tax in Cyprus.

• An alien who creates an International Trust in Cyprus andretires in Cyprus is still exempt from tax if all the propertysettled and the income earned is abroad, even if he is abeneficiary.

• The assets of an international trust are not subject to estateduty in Cyprus.

• Trusts are usually used by wealthy individuals for thepurpose of protecting their estate from inheritance or capitalgains taxes in their home country. They can also be usedby expatriates settling into a trust before repatriating, assetsacquired while working abroad, to protect such assets fromthe tax net of their home country.

33

7. Farmers, stock breeders, aviarists, fishermen and other related professions, hawkers, postmen, refuse collectors, workers in mines & quarries, marine workers specializing in underwater constructions, installators of forklift equipment, street sweepers and people responsible for provision of services and salesmen

8. Butchers, bakers, confectioners and similar professions

9. Designers, users of computers, ship engineers, agents and musicians,magicians, persons that do not fall in any other professional category

Other employer’s contributionsThe employer makes the following other contributions based onemployee’s emoluments:

%• Social cohesion fund 2

• Redundancy fund 1,2

• Industrial training fund 0,5

• Holiday fund (if is not exempt) 8

32

Social InsuranceContributions

%• Employer 6,3

• Employee 6,3

The maximum level of annual income on which socialinsurance contributions are paid on is as follows:

Cí• Weekly employees 26.288• Monthly employees 25.788

The contributions of self-employed persons are 11,6 per centof income, according to the following table.

Weekly salaries1. Doctors, pharmacists, specialists in

health matters (qualified), accountants, economists, lawyers and other professionalsUp to 10 years> 10 years

2. Wholesalers, estate agents, directors (businessmen)

3. Professors and teachersUp to 10 years> 10 years

4. Builders and other related construction industry businesses

5. Drivers, excavator drivers and other related professions, technicians, associates in media, machinery users (apart from the construction industry) assemblers of products, writers, typists, cashiers, secretaries and technicians which do not fall in any other category

6. Shopkeepers, cleaners, messengers, guards and owners of dry cleaners

Upper Limit Cí

Lower Limit Cí

182 496366 496

366 496

177 496354 496

222 496

177 496

168 496

123 496

Upper Limit Cí

Lower Limit Cí

135 496

182 496

3534

Stamp DutyThe following table gives the amount or rate of duty payable oncertain documents. Transactions which fall within the scope ofreorganizations are exempt from stamp duty. Also, any contractsrelating to assets situated outside Cyprus or business affairsthat take place outside Cyprus are exempt from stamp duty.

Nature of documents• Receipts - for sums of Cí2 – Cí20 2 cents

• Receipts - for sums of over Cí20 4 cents

• Cheques 3 cents

• Letters of credit Cí1

• Letters of guarantee Cí2

• Bills of exchange (payable within three days on demand or at sight) 50 cents

• Contracts - up to Cí100.000 Cí1,5 per thousand- over Cí100.000 Cí2 per thousand- without fixed sum Cí20

• Customs declaration documents Cí10 - Cí20

• Bills of lading Cí2

• Charterparty Cí10

Upon incorporation of the company

Upon subsequent increases

Authorised share capital í60 plus 0.6% on the authorised share capital

Issued share capital There is no stamp duty payable if the shares are issued at their nominal value. There is a í10 flat duty if the shares are issued at a premium

Authorised share capital 0.6% on the additional share capital

Issued share capital í10 flat duty on every issue, whether the shares are issued at nominal value or at a premium.

• Powers of attorney - general Cí3- limited Cí1

• Certified copies of contracts and documents Cí1

Dividends Interest Royalties

% % %Treaty countries:Austria 10 nil nilBelarus 5 (18) 5 5Belgium 10 (8) 10 (6,19) nilBulgaria 5 (23) 7 (6,24) 10 (24)

Canada 15 15 (4) 10 (5)

China 10 10 10Czech Republic 10 10 (6) 5 (7)

Denmark 10 (8) 10 (6) nilEgypt 15 15 10France 10 (9) 10 (10) nil (3)

Germany 10 (8) 10 (6) nil (3)

Greece 25 (11) 10 nil (12)

Hungary 5 (8) 10 (6) nilIndia 10 (9) 10 (10) 15 (15)

Ireland nil nil nil (12)

πtaly 15 10 nil∫uwait 10 10 (6) 5 (7)

Lebanon 5 5 nilMalta nil 10 10Mauritius nil nil nilNorway nil (13) nil nilPoland 10 10 (6) 5Romania 10 10 (6) 5 (7)

Russia 5 (17) nil nilSingapore nil 10 (6,25) 10Slovakia 10 10 (6) 5 (7)

South Africa nil nil nilSweden 5 (8) 10 (6) nilSeychelles nil nil 5Syria nil (8) 10 (4) 10Thailand 10 15 (21) 5 (22)

United Kingdom 15 (14) 10 nil (3)

United States 5 (9) 10 (10) nilUSSR (20) nil nil nilYugoslavia (26) 10 10 10

Received in CyprusDividends Interest Royalties

(1) (1) (1)

% % %Non-treaty countries: Nil Nil NIl (2)

Treaty countries:Austria 10 nil nilBelarus 5 (18) 5 5Belgium 10 (8) 10 (6,19) nilBulgaria 5 (23) 7 (6) 10Canada 15 15 (4) 10 (5)

China 10 10 10Czech Republic 10 10 (6) 5 (7)

Denmark 10 (8) 10 (6) nilEgypt 15 15 10France 10 (9) 10 (10) nil (3)

Germany 10 (8) 10 (6) nil (3)

Greece 25 10 nil (12)

Hungary nil 10 (6) nilIndia 10 (9) 10 (10) 10 (16)

Ireland nil nil nil (12)

πtaly nil 10 nil∫uwait 10 10 (6) 5 (7)

Lebanon 5 5 nilMalta 15 10 10Mauritius nil nil nilNorway nil nil nilPoland 10 10 (6) 5Romania 10 10 (6) 5 (7)

Russia 5 (17) nil nilSingapore nil 10 (6,25) 10Slovakia 10 10 (6) 5 (7)

South Africa nil nil nilSweden 5 (8) 10 (6) nilSeychelles nil nil 5Syria nil (8) 10 10Thailand 10 15 (21) 5 (22)

United Kingdom nil 10 nil (3)

United States nil 10 (10) nilUSSR (20) nil nil nilYugoslavia (26) 10 10 10

Paid from Cyprus

Tax treaties withholding tax tablesThe following tables give a summary of the withholding taxes providedby the double tax treaties entered into by Cyprus.

39

(20) Armenia, Azerbaijan, Kurghystan, Moldova, Tatzikistan,Uzbekistan and Ukraine apply the USSR/Cyprus treaty.

(21) 10% on interest received by a financial institution or when itrelates to sale on credit of any industrial, commercial or scientificequipment or of merchantise.

(22) This rate applies for any copyright of literary, dramatic, musical,artistic or scientific work. A 10% rate applies for industrial,commercial or scientific equipment. A 15% rate applies forpatents, trade marks, designs or models, plans, secret formulaeor processes.

(23) This rate applies to companies holding directly at least 25% of theshare capital of the company paying the dividend. In all othercases the withholding tax is 10%.

(24) This rate does not apply if the payment is made to a Cyprusinternational business entity by a resident of Bulgaria owningdirectly or indirectly at least 25% of the share capital of theCyprus entity.

(25) 7% if paid to bank or financial institution.

(26) Slovenia and Serbia/Montenegro apply the Yugoslavia/Cyprustreaty.

38

Notes

(1) Under Cyprus legislation there is no withholding tax on dividends,interests and royalties paid to non-residents of Cyprus.

(2) In case where royalties are earned on rights used within Cyprusthere is withholding tax of 10%.

(3) 5% on film and TV royalties.

(4) Nil if paid to a Government or for export guarantee.

(5) Nil on literary, dramatic, musical or artistic work.

(6) Nil if paid to the Government of the other state.

(7) This rate applies for patents, trademarks, designs or models,plans, secret formulas or processes, or any industrial, commercialor scientific equipment, or for information concerning industrial,commercial or scientific experience.

(8) 15% if received by a company controlling less than 25% of thevoting power or by an individual.

(9) 15% if received by a person controlling less than 10% of thevoting power.

(10) Nil if paid to a Government, bank or financial institution.

(11) The treaty provides for withholding taxes on dividends butGreece does not impose any withholding tax in accordance withits own legislation.

(12) 5% on film royalties (apart from films broadcasted on television).

(13) 5% if received by a person controlling less than 50% of the votingpower.

(14) This rate applies to individual shareholders regardless of theirpercentage of shareholding.

Companies controlling less than 10 per cent of the voting sharesare also entitled to this rate.

(15) 10% for payments of a technical, managerial or consultingnature.

(16) Treaty rate 15%, therefore restricted to Cyprus legislation rate.

(17) 10% if dividend paid by a company in which the beneficial ownerhas invested less than US$100.000.

(18) If investment is less than 200.000 euro, dividends are subject to15% withholding tax which is reduced to 10 per cent if therecipient company controls 25% or more of the paying company.

(19) No withholding tax for interest on deposits with bankinginstitutions.

4140

Tax DiaryEnd of following month

Payment of tax deducted from employees salary(PAYE)

31 JanuarySubmission of declaration of deemed dividenddistribution (IR623) for the year ended 31 Decembertwo years ago.

30 JuneSubmission of previous year personal returns ofindividuals not preparing audited financial statements (1) (2)

Payment of special contribution for defence for thefirst six months of the year

1 ∞ugustSubmission of provisional tax declaration and paymentof first instalment of provisional tax for the year

Payment of previous year's final corporation tax under the self-assessment method

Payment of previous year's income tax based on the assessment raised by the Commissioner ofIncome Tax

31 ∞ugustPayment of premium tax for life insurance companies- second instalment for the year.

30 SeptemberPayment of provisional tax - second instalment for the year

Payment of immovable property tax for the year

31 DecemberSubmission of previous year audited financialstatements and tax returns (2)

Payment of provisional tax - third and last instalment for the year

Payment of second instalment of special contributionfor defence for the last six months of the year

Payment of premium tax for life insurance companies- third and last instalment for the year

PenaltiesThe official rate for 2007, as set by the Finance Minister, is8% per annum for all amounts due after 1 January 2007. The interest rate for outstanding amounts before 1 January2007 is 9%.

In addition to the interest, a penalty is also charged dependingon the circumstances.

Notes(1) Physical persons submit returns only when their gross

income exceeds CYí10.000.

(2) A physical person is obliged to submit audited financial statements if his/her turnover exceeds Cí40.000 annually.

43

Global Compliance ServicesAccounting, company administration and corporate supportservices including advice on establishment and administration oflocal and international business companies, collective investmentschemes, UCITS investment firms and trusts.

Legal Advisory Services Our Legal Advisory Services, staffed with legal advisors withextensive knowledge in corporate law issues and business relatedsubjects, aim at delivering solutions that combine legal expertisewith commercial insight thus adding value to the clients’ business.

If you would like further information, please contact any one of theboard members or directors of operations listed overleaf.

PricewaterhouseCoopersPricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services for public andprivate clients. More than 140.000 people in 149 countriesconnect their thinking, experience and solutions to build publictrust and enhance value for clients and their stakeholders.

PricewaterhouseCoopers Cyprus tap the knowledge andexperience of their international network helping their clients tosolve complicated business problems, improve their performanceand manage risk in a hard competitive environment.

Our position is strengthened with more than 700 people andoffices throughout Cyprus (www.pwc.com/cy). Our team effortmakes us efficient in preparing our clients for the needs oftomorrow.

Organised under specialized service lines in Cyprus, we providea wide range of financial services to both local and internationalclients, which operate in all sectors of business activity and rangefrom the private individual to the large multinational organisation.

Some of the services provided by the firm are:

Assurance ServicesStatutory and regulatory audit services, which include evaluationof information systems and advisory services for accounting andregulatory issues for all types of businesses through specialistindustry divisions (Financial Services, Consumer & IndustrialProducts and Services). Expertise on corporate reporting,performance measurement as well as compliance and review of security and information technology systems.

Advisory ServicesGovernance, Risk Management and Compliance, Strategy &Operational Effectiveness, Security & Technology, ProcessImprovement, Corporate Finance, Transactions Support, CrisisManagement, People and Change, as well as general advisoryservices.

Tax ServicesPersonal: Tax planning, completion submission & agreement oftax returns, tax services to expatriates, pensioners and other non-Cypriot individuals. Corporate: Tax planning on structuring,mergers & buyouts and other business issues, tax returnsadministration, agreement with Tax Authorities and obtaining taxrulings. VAT: Advisory services for tax planning, VAT recovery and VAT minimization and tax compliance (administration of taxreturns, communication with VAT authorities, agreement ofdisputed assessments etc).

42

4544

PricewaterhouseCoopersOffices in Cyprus

LarnacaMailing address P O Box 40450, CY-6304 Larnaca, CyprusStreet address City House, 4 Artemidos Avenue,

CY-6030 Larnaca Cyprus∆el +357-24555000, Fax +357-24555001Board Members:Costas M Nicolaides (in charge of office), Christos M Themistocleous, Yiangos AKaponidesDirectors of Operations: George Skapoullaros,Bambos A Charalambous

PaphosMailing address P O Box 60479, CY-8103 Paphos, CyprusStreet address City House, 58 Gr Dighenis Avenue,

CY-8047 Paphos, Cyprus∆el +357-26555000, Fax +357-26555001

Board Members Board Members: Savvas C Michail (in charge of office), Pantelis G Evangelou

www.pwc.com/cy

NicosiaMailing address P O Box 21612, CY-1591 Nicosia, CyprusStreet address Julia House, 3 Th Dervis Street,

CY-1066 Nicosia, Cyprus Tel +357-22555000, Fax +357-22555001 Board Members: Phidias K Pilides (Chief Executive Officer), Dinos N Papadopoulos (Deputy Managing Partner), Panikos N Tsiailis,Christakis K Santis, Stephos D Stephanides, Costas L Hadjiconstantinou, George Foradaris,Angelos M Loizou, Androulla S Pittas, Costas LMavrocordatos, Panicos Kaouris, George M Loizou, Timothy D Osburne, Tassos Procopiou,Andreas T Constantinides, Theo Parperis, Constantinos Constantinou, Philippos C Soseilos, Evgenios C Evgeniou, Christos Tsolakis, Nicos A Theodoulou, Marios S Andreou, Nicos P Chimarides, Aram Tavitian, Constantinos Taliotis, Stavros A Kattamis, Chrysilios K PelekanosDirectors of Operations: Adrian Ioannou, Androulla Aristidou, Achilleas Chrysanthou, Chris Odysseos, Demetris V Psaltis, Melina Pyrgou

LimassolMailing address P O Box 53034, CY-3300 Limassol, CyprusStreet address City House, 6 Karaiskakis Street,

CY-3032 Limassol, Cyprus∆el +357-25555000, Fax +357-25555001Board Members: Tassos I Televantides (Deputy Managing Partner, in charge of office), Vasilis Hadjivassiliou, Nicos ANeophytou, Liakos M Theodorou, Stelios Constantinou, Petros C Petrakis, Nikos TNikolaides, Cleo A Papadopoulou, Tasos N NolasDirector of Operations: Constantinos L Kapsalis

Board Membersand Directorof Operations

Board Membersand Directorsof Operations

Board Membersand Directorsof Operations

46

Your contacts for tax matters inPricewaterhouseCoopers

Nicosia +357-22555000

Board Members Panikos N TsiailisPanicos KaourisTimothy D OsburneMarios S AndreouNicos P ChimaridesChrysilios Pelekanos

Board Members

Director of Operations

Senior Manager

Nicos A NeophytouCleo Papadopoulou

Constantinos L Kapsalis

Martha Lambrou

Board Member

Director of Operations

Senior Manager

Costas M Nicolaides

Constantinos L Kapsalis

Yiannos Charalambous

Limassol +357-25555000

Larnaca +357-24555000

Board Member Pantelis Evangelou

Paphos +357-26555000

Senior Managers Stelios ViolarisAngela EliophotouEftychios EftychiouMariel YardAntonis Christodoulides

4948

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