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Cyprus’ new rules for intra-group back-to-back financing arrangements

Cyprus’ Tax Department has issued on the 30th of June 2017 an expository Circular in relation to the update Tax Treatment of intra-group back-to-back financing arrangements, with effect as from the 1st of July 2017. The Circular applies to all existing and future transactions. Tax rulings issued before the 1st of July 2017 will no longer be valid for tax periods as from the 1st of July 2017. The Circular is applicable to Companies that carry out group financing transactions and are Cypriot tax resident companies or are non-Cypriot tax resident companies and have a permanent establishment in Cyprus and the financing activities are attributable to the permanent establishment. ‘Intra-group financing transaction’ refers to any activity of granting of loans or cash advances remunerated by interest (or which should be remunerated by interest) to related companies, financed by financial means and instruments (debentures, private loans, cash advances, bank loans). Two companies are considered to be related if they fall within the scope of Section 33 of the Cyprus Income Tax Law. The application of arm’s length principle (Section 33 of the Income Tax Law) to intra group financing transactions is quite significant since the latter have to correspond to the price which would have been accepted by independent entities in comparable circumstances, taking into account the economic nature of the transaction.Read full article LATEST UPDATES

General Principles of Family Law in Cyprus

Introduction In Cyprus, the majority of the cases that are related to family matters, such as divorce, property relations, custody of a child and maintenance are resolved by Family Courts. Under certain circumstances the family matters are resolved by the President of the District Court or the Family Courts of the Religious Groups. Jurisdiction Family Courts in Cyprus have jurisdiction to resolve the following matters: The dissolution of any religious marriage, in Cyprus or abroad, that was conducted under the rules of the Greek Orthodox Church; The dissolution of any religious marriage, in Cyprus or abroad, of any other faith (except from those marriages that are resolved by the Family Courts of the Religious Groups); The dissolution of any civil marriage, in Cyprus or abroad; Family matters in judicial proceedings initiated by the treaties to which Cyprus is a signatory country; Any family or matrimonial dispute between spouses and their children such as matters of parental care, adoption, maintenance, acknowledgment of paternity and property. An important requirement for the family Courts to have jurisdiction is that one of the parties or both parties are resident in Cyprus for a continuous period of three months or more. However, the dispute involves property relation, then there is no need for any of the parties to be residents in Cyprus. A decision issued by a Court of another country can be enforced in Cyprus provided that Cyprus has an agreement with that particular country for mutual recognition and enforcements of judicial decisions with the country issuing the decision. If the country issuing the decisions is an EU Member States, then the enforcement will be effected by using the EU Regulations. Read full article LATEST UPDATES

KPK LEGAL FOUNDATION

We are proud to announce the establishment of the “KPK LEGAL FOUNDATION”, a charitable foundation set up by our firm to formalise our covert philanthropic work over the past 3 years of purchasing and distributing food, clothing and other necessities to those in need. Contribution to society is one of the core values of our firm and its members and the establishment of our foundation constitutes a promise to continue our charitable work and to intensify our efforts to provide relief and support to deprived and disadvantaged members of society in any way that we can. More on the activities of our foundation, events and ways to get involved will be published through our website. LATEST UPDATES

Legal 500 recommended firm

KPK Legal has been included as a recommended firm for a second consecutive year by the recently published “Legal 500” rankings of law firms . Legal 500 is an independent legal rankings directory that has been analysing the capabilities of law firms across the world, with a comprehensive research programme. It assesses the strengths of law firms in over 100 jurisdictions. The rankings are based on a series of criteria which aim to highlight the practice area teams who are providing the most cutting edge and innovative advice to corporate counsel. This year's recommendation relates to our Commercial, Corporate and M&A practice which was described as follows : “Kannava, Kitromilidou & Co LLC works for local and international clients across the whole gamut of corporate and commercial mandates. Varnavas Playbell and Maria Kitromilidou are the key names” Notwithstanding its young nature, KPK Legal is included amongst a handful of law firm in the island which are recommended by the Legal 500 thus validating a quality of service, a client base and a transaction list which is comparable if not superior to the best of firms, some of which operate in this industry for decades. Such recognitions only serve to cement our drive to constantly improve the quality, responsiveness and efficiency of our service thus enhancing our value proposition to our clients. LATEST UPDATES

Shareholders’ Rights – Classes of Shares and Rights Attached

The sufficiently high number of companies being incorporated in Cyprus every year, attracting investors from all over the globe from different backgrounds and business cultures could be a reasonable indication that private companies remain the ultimate business vehicles.  This short article indents to discuss the types of shares commonly used in the share capital structure of private companies with a particular focus on private companies limited by shares and demonstrate the perspective how different classes of shares can affect the rights and privileges of shareholders under the Cyprus legal regime. The main types of private limited liability companies as reflected in the Companies Law Chapter 113 as amended (the “Companies Law”),  are divided in companies limited by shares and companies limited by guarantee, with the former being the most common business vehicle for shareholders. Section 29 of the Companies Law defines a private company as a company which by its articles of association: restricts the right to transfer its shares; limits the number of its members to 50; prohibits any invitation to the public to subscribe for tis shares of debentures; prohibits the issue of bearer shares. The legal system in Cyprus, similar to the Companies Act 1948 of the United Kingdom has adopted the common law principle which identifies a private company as a separate legal entity.  Thus the liability of the shareholders in a private limited liability company is limited to the nominal value of the shares each shareholder has agreed to take up or at a premium that he has agreed to take up such shares. Once the member has paid for his shares, his liability towards the debts or liabilities of the company is discharged. While the Companies Law does not indicate a minimum requirement for private companies a member (shareholder) of a company must subscribe for at least one share.   As already mention the share capital of a company may be divided into different classes of shares of a fixed amount. The type of shares acquired by a shareholder will also determine the rights that each shareholder shall enjoy following the subscription in such shares, subject always to the provisions of the Companies Law and the articles of association of the company.  Hence it is essential to refer to the articles of association of a company to acknowledge the rights attached to the different types of shares. A most common type of shares used [...]

Limitation to Actionable Rights

The Limitation of Actions Law Chapter 15 (the “Law”), used to set a maximum period of time that one had in order to take legal action for a particular breach of law. However, in the Republic of Cyprus due to the existing political situation since the invasion of Turkey in 1974 the Law was suspended through a number of suspension laws which were amended and renewed over the years allowing for a legal claim to arise without been affected by the limitation period. On 1st of July 2012 the Law was abolished as a new legislation known as the Limitation of Actionable Rights Law of 2012, L.66(I)/2012 (the “Amendments”) came into effect. The limitation period however kept being postponed by the members of the Cyprus parliament who were voting in favour of such extension resulting in the actual limitation never really been effected. However, as the deadline of the last extension was approaching on the 31st of December 2015, it was decided that a further extension would not be granted but rather as of the 1st of January 2016, the limitation period would actually start running. As a result the limitation period for proceedings, the right of which existed at 01.01.2016, begins to run from that date and not from the date that the cause of action was completed. However, for new claims, the base of which is completed after 01.01.2016 the limitation period starts to run from the date in which the base of claim was completed. For further information you can contact Maria Kannava (m.kannava@kpklegal.com) or Tereza Pendondgis (tereza@kpklegal.com) LATEST UPDATES

Automatic Exchange of Information – CRS reporting

The Organisation for Economic Cooperation and Development (OECD) has introduced new global standards of exchange of tax information. The European Commission (EC) with its turn has implemented these new standards via Directive 2014/107/EU which introduces the mandatory rules knows as CRS allowing the tax authorities of the European Union (EU) Member States to exchange tax information and have immediate access to the tax information of any European tax payer citizen. For identification purposes of a citizen’s tax residence account holders or potential account holders will be required to provide any authorized credit institutions and any other financial institutions upon request self-certifications which include their tax identification numbers and their country of tax residence. The information that will be exchanged between the tax administrators of EU Member States will include: - Interest, dividends, and other similar types of income. - Information on account balances, sale proceeds from financial assets, and income from certain insurance products. - Information on accounts which are held either directly or indirectly by the holders of the accounts as long as they reside and are tax residents in countries which implement the CRS. According to the EC, as there is consistency between the rules of the EC and the global standard of exchange of the OECD, EU tax authorities can use one single format to cooperate within but also outside the EU. In the case of countries outside the EU multilateral agreements will need to be entered. On 29th of October 2014 Cyprus signed a Multilateral Competent Authority Agreement on Automatic Exchange of Financial Information which was published in the official Government Gazette on 18th of December 2015. The authorized credit institutions in Cyprus as well as any other financial institutions have already started, from the 1st of January 2016, requesting all necessary information from the account holders who are tax residents of Cyprus in order to update their records and provide the relevant authority in Cyprus that is the Inland Revenue Department with all collected information in order for the Inland Revenue Department to be in a position to provide any requested information to any relevant tax authority of any EU Member State or other country implementing CRS. In case of refusal by account holders or potential account holders to provide any requested information to the authorized credit institutions as well as to any other financial institutions new customers will not be able to proceed with [...]

New Act enforcement

A new Act was enacted namely the Law Concerning the Transfer and Mortgaging of Immovable Property (Amended) No. 10 Law of 2015 and accordingly, it shall be read in conjunction with the Articles of the Transfer and Mortgaging of Immovable Property Laws of 1965 to (No.9) of 2015. The purpose of this legislation is to resolve the problems that purchasers of immovable property are facing when they are trying to obtain Title Deeds due to the fact that although they have either repaid in full or partially the seller due to the land being mortgaged by the seller and his/her economic inability to release the immovable property from such mortgage the purchasers are left with no title deeds. Under certain conditions and depending on each case, the Director of the Lands Registry Department has the authority to exempt, eliminate, transfer, and remove mortgages or other encumbrances, for the purpose of issuing title deeds for the purchaser’s benefit. An application will need to be submitted at the Lands Registry Department to consider the purchaser’s claim in issuing a title deed and in case the full purchase price has not been settled the Director of the Lands Registry Department may within 30 days from the submission of the said application demand the settlement of the balance before proceeding. If the purchase neglects, omits or denies settling the remaining balance the Director of the Lands Registry Department may proceed with the transfer of the immovable property but with a penalty of 50% on the transfer fees increased by 50%. A requirement for submitting such an application is for a contract of sale to be already submitted at the Lands Registry Department. The procedure of transferring a property and issuing a title deed will take at least six to seven months, where titles in the developer’s name exist and no serious objections are raised. LATEST UPDATES

Property Law changes. Discount on tax.

The 1980 Tax Immovable Property Law was amended by Law N. 140(I)/2015. More specifically, Law N. 140(I)/2015 amends Article 3.The approved amendment bill which suspends the deadline for the payment of the immovable property tax until the 30th of November 2015 gives the privilege of a discount of 17,5 %, to those who decide to pay the aforementioned tax until the 31st of October 2015. In case where payments are settled by the use of an online method or through a financial institution the new regulations allow for a discount of 20% on the total tax. LATEST UPDATES