C Y P R U S SYNOPSIS. The main features of the Cyprus tax regime are as follows:

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1 C Y P R U S SYNOPSIS Cyprus is an island situated in the north eastern Mediterranean Sea at the crossroads of Europe, Asia and Africa. The capital city is Nicosia, which has a population of about 200,000 people. Cyprus gained independence from Britain in 1960 and adopted a presidential system of Government with elections for the President taking place every 5 years. In 1974 Turkey invaded Cyprus and has since occupied the northern 40% of the island although discussions are currently taking place with a view to reunification of the island. The official languages are Greek and Turkish but English is widely spoken and is the language mostly used in business, government and the courts. Laws are based on the English legal system and company law is modelled on the UK Companies Act In addition, Cyprus has been a full member of the European Union since 2004 and adopted the Euro as it s currency in Communications are excellent. A Cyprus International Business Company A Cyprus international business company is defined as an otherwise normal Cyprus company which is owned by non-residents of Cyprus and does business exclusively outside the island. Such a company has the following characteristics: Taxation The main features of the Cyprus tax regime are as follows: - A uniform corporate tax rate of 10% is applied to all companies - Dividend income is exempt from tax in Cyprus irrespective of its source, provided certain conditions are satisfied. Where the exemption does not apply, 15% defence tax is payable but credit for foreign tax suffered is given irrespective of the existence of a treaty. - Interest income is 50% exempt from corporate tax, unless it is received in the ordinary course of business in which case it is taxed like normal trade income. That portion of interest income which is exempt from corporate tax, is subject to defence tax at 10%, but credit is given for foreign tax suffered irrespective of the existence of a treaty - Profit from the disposal of securities is exempt from tax in Cyprus

2 - Profits of a permanent establishment maintained abroad by a Cyprus company are exempt from tax in Cyprus - There is no withholding tax on dividends paid to non resident shareholders - There is no withholding tax on interest payments made abroad - There is no withholding tax on the payment of royalties derived from outside Cyprus - Various reliefs are introduced on company reorganisations. - Group relief is introduced - Losses can be carried forward indefinitely The above benefits, coupled with the fact that Cyprus has an extensive treaty network with almost 40 countries (see list at the end of this information sheet), provide an environment in which very advantageous tax structures can be put in place using a Cyprus company. Shareholders Directors A minimum of one shareholder is required and details appear on the public file but anonymity can be retained by the use of nominee shareholders. Bank references on the beneficial owners must be submitted to the Central Bank of Cyprus but secrecy laws protect these details. Bearer shares are not permitted. A minimum of one director is required and details appear on the public file but anonymity can be retained by the use of third party directors. There is no legal requirement that the directors be Cyprus resident but in order to obtain relief under the taxation treaties signed by Cyprus it is likely that the company would need to be seen to be Cyprus resident and therefore have a majority of the directors based in Cyprus. Annual Reporting Companies need to comply with the following filings annually: 1. Submission of the company annual return to the Registrar of Companies 2. Submission of audited financial statements in Greek to the Registrar of Companies 3. Submission of an annual company income declaration to the Income Tax Authorities 4. Submission of provision tax returns on 1 st August in the tax year and final tax returns on 31 December of the year following the end of the tax year to the Income Tax Authorities. Time Scale Normally it will take approximately 15 working days from the receipt of due diligence documentation on the beneficial owners for incorporation to be achieved. However, in special circumstances an accelerated process is available which would allow incorporation in 5 working days after receipt of those references. Shelf companies are available.

3 Secrecy Although details of the shareholders and directors appear on the public file, statutory secrecy provisions protect details of the beneficial owners supplied to the Central Bank. Local Requirements As a matter of local company law the company MUST maintain a registered office address within Cyprus and must also appoint a company secretary who, for practical reasons, must be resident in Cyprus. We would normally provide these services as part of our domiciliary service fee. Name/Activity Restrictions Names must end with the word "Limited". The following words and their associated activities cannot be used: Assurance, Bank, Building Society or any other words deem sensitive or offensive. OPTIONAL SERVICES Accounting Services All Cyprus companies are required to produce annual audited accounts. The audit has to be submitted in Greek. Sovereign offers to act as the "Fiscal Agent" for your company and assist in completing and filing the necessary returns, assisting with the preparation of the accounts, introducing the company to and liaising with a suitable auditor and liaising with the tax department to ensure that the obligations of the company are met in full and in a timely fashion. Accounting and audit fees cannot be quoted in advance as these will vary depending on the amount of time / work involved, but you should allow a minimum of 1,300 per annum. Directors Most onshore countries have provisions within their tax legislation whereby any company, no matter where it is incorporated, which is managed or controlled from within their jurisdiction will be tax resident there and taxable on its worldwide income at local rates. For example, any offshore company which had UK based directors would be tax resident in the UK and subject to UK tax on its worldwide income. Failure by the directors to declare the liability of the offshore company to UK tax would be an offence under UK law with potentially very serious financial and criminal consequences. Most onshore countries have similar provisions within their tax legislation so it will rarely be advisable for onshore resident clients to act as the directors of an offshore company. To establish that the management and control of the company does take place offshore and the company is therefore tax resident offshore as well as incorporated there we can, and habitually do, provide directors. In most cases this service is essential if legitimate tax savings are to be made. In Cyprus it is often essential to access Cyprus vast tax-treaty network to utilize Sovereign s party directorship services, the fees for which are included in the annual administration cost shown in the above fee schedule. Should individual directors be required, additional fees will apply and will be quoted on a case by case basis.

4 Bank Accounts We can assist with the opening of bank accounts for the company in most places in the world and our fees for attending to the account opening procedures would be from 700 plus the costs of preparing any additional notarised documentation which a particular bank may require. R ing, Fax, Tel & Office Facilities As part of the domiciliary services package we provide a registered office address in the jurisdiction of the incorporation of your company in order to meet the local statutory requirement. An additional service is the provision of an address, telephone and fax number to receive correspondence which can be the same as the registered office address or another of our Group office addreseses. When we receive communications we will deal with them according to your wishes. Fees for the provision of this service is 500 per annum plus handling charges ( 3 per item plus disbursements). If you require this service please tick box 7A of the application form. Dedicated Telephone Lines For those companies which are particularly active or wish to have a higher profile or more substance we can arrange the immediate allocation of a dedicated telephone line answered with the name of your company. Additional costs apply to this service. Trust Services Using a trust to own the shares of an offshore company can result in very substantial tax and non-tax related advantages which will accrue both on death and during the lifetime of the trust settlor. These advantages may be summarised as follows:- (1) SAVING ON INHERITANCE TAX: On death, the inheritance tax which would normally be assessed on the value of the shares would generally be eradicated. (2) ASSET PROTECTION: Assets placed into trust are generally beyond the reach of creditors who might arise as a result of financial difficulties, divorce proceedings, litigation etc. (3) AVOIDANCE OF PROBATE: A trust provides a means whereby assets can be smoothly passed on to the next generation without the disruption, delays, substantial costs, loss of confidentiality associated with the probate procedure which necessarily follows when assets are bequeathed by will. (4) CONTINUITY: Trusts provide a means whereby assets can continue to be administered in accordance with the wishes of the settlor after his death so the weak can be protected from others and the spendthrift can be protected from himself. (5) LIFETIME TAX SAVINGS: During lifetime, substantial income and capital gains tax advantages may result from setting up the trust.

5 Trust services can be provided by our licenced trust corporations in Gibraltar, the Isle of Man and the Turks & Caicos Islands through our various Group offices. Fees for drafting the trust deed and for the provision of trustee services will be quoted on a case by case basis. Please contact your nearest Sovereign office for a copy of our brochure and/or an exploratory discussion. Whilst every effort has been made to ensure that the details contained herein are correct and upto-date, this information does not constitute legal or other professional advice. We do not accept any responsibility, legal or otherwise, for any error or omission. The Sovereign Group, 2013