Cyprus The Gateway to Global Investments

www.pwc.com.cy Cyprus The Gateway to Global Investments October 2018

Table of contents Foreword 1 Cyprus - The Gateway to Global Investments 2 Local Market Opportunities 3 Cyprus Investor Immigration Programs 6-7 Main Features of the Cyprus Tax System 8 Shipping 9 Cyprus Alternative Investment Funds 10 Payment and Electronic Money Institutions 11 Cyprus International Trust (CIT) 12 Investment Services 13 The Chinese Connection 14-16 Setting up and maintaining a Cypriot Holding Company 17 PwC in Cyprus 18 Your Contacts in PwC Cyprus 19 Our Offices in Cyprus 20

Foreword China s contribution to global investments is of crucial importance for the restoration of global economic stability and growth, as Chinese investments are spread worldwide across all major industries and China is the second largest economy in the world. Cyprus, a long established business centre on the Eastern end of the European Union, offers the ideal location through which China can channel its investments anywhere in the world. Cyprus has gained this enviable position through its excellent infrastructure, the quality of professional services and its legal, regulatory and tax regime. At the same time Cyprus EU harmonized legislation as well as its strong ties with Eastern Europe make it the ideal gateway to European investments. The local market offers attractive investment opportunities to Chinese investors in a variety of sectors such as hotel and tourism, real estate, regional wholesale trading and in the emerging oil and gas industry. Cyprus also offers two programmes for investors and their families - the Cyprus Investment Programme and the Permanent Residence for Investors. At PwC, as the leading professional services firm in Cyprus, we are continuously developing new service offerings to address the new opportunities and challenges facing our clients. In the operation of the world s international markets we leverage the expertise of our teams to help our clients solve complex business problems whilst our quality services help to improve transparency, trust and confidence. Whether you are looking to use Cyprus as a base for your international operations or to invest in Cyprus we can help you make the difference. Evgenios C Evgeniou CEO PwC Cyprus Cyprus The gateway to global investments 1

Cyprus - The Gateway to Global Investments Why Choose Cyprus for International Activities Cyprus today is firmly established as a reputable international financial centre, the ideal bridge between East and West. An EU member state since May 2004, Cyprus offers a unique experience to investors and trading partners. The strong pro-business attitude, the multi-lingual and highly skilled human capital, the state-of-the-art telecommunications infrastructure and the favourable tax system have made the island one of the most progressive and efficient business locations in Europe. Cyprus has succeeded in differentiating itself from other financial centres. It provides a unique combination of favourable participation exemption provisions on income emanating from international activities, applies a wide network of double tax treaties and zero withholding taxes on any type of payments made anywhere in the world. Strategic Location Cyprus is situated in the north-eastern basin of the Mediterranean Sea at the crossroads of Europe, Asia and Africa. It is 65 km south of Turkey, 96 km west of Syria, 385 km north of Egypt, 440 km southeast of Greece and 328 km west of Israel. The strategic location of the island has played an important role in its continuing development into a financial centre. The Services Sector In Cyprus The services sector has become increasingly important as indicated by its almost 70% contribution to Gross Domestic Product (GDP) and its share in employment. Services include tourism, banking, accounting, legal, medical, telecommunications and human capital. The size and rate of growth of this sector, which has been the fastest growing in recent years, has transformed Cyprus into a service economy. The Banking, Legal and Accounting Services in Cyprus closely follow the British pattern. Many Cypriot Banks have branches or rep offices throughout the world and International Banks also have branches on the island. Non-Cypriot citizens have the privilege to open foreign currency and local deposit accounts very easily. The telecommunications infrastructure of Cyprus is well developed and companies are equipped with the latest technology. Low Cost but High Standard of Living The Cyprus cost structure is lower than most of the other international financial centres. At the same time, the Cyprus standard of living is reflected in the country s very high Human Development Index and its high ranking (23rd in the world) in terms of the quality-of-life index. 2 PwC Cyprus

Local Market Opportunities Energy Cyprus not only lies at the crossroads of important international trade and energy routes but in all probability is surrounded by substantial oil and gas resources, a significant part of which falls within the Cyprus Exclusive Economic Zone (EEZ). Assessments by USGS bring the level of undiscovered oil and gas resources in the Eastern Mediterranean to a total of 3.4 bbl (billion barrels) for oil and circa 345 tcf (trillion cubic feet) for natural gas. In terms of major findings to date in the Eastern Mediterranean, Israel has already announced significant findings at Leviathan and Tamar totaling 32tcf of natural gas and still unproven quantities of oil whereas Egypt s supergiant discovery, Zohr, discovered in August 2015, in the order of 30 tcf has come to confirm and further boost the resource potential in the region. Cyprus to date has announced a 4.5 tcf natural gas discovery (Aphrodite field), which is very significant if one takes into account the island s needs in natural gas which do not exceed 0.035 tcf/year (1bcm/year). To date, 13 exploration blocks have been delaminated by the Republic of Cyprus at the south of the island following international bilateral agreements with Egypt, Lebanon and Israel on the basis of the UN Convention of the Law of the Sea (UNCLOS) 82. Substantial geological and geophysical data has been gathered the last few years for a number of these blocks and are available in the form of Multi Client Seismic Surveys and Interpretation Reports. The Cyprus Government is currently in discussions with Noble Energy and its partners (Delek and Avner, Shell) to reach an agreement for the commercialisation of the Aphrodite discovery. On a governmental level Cyprus and Egypt signed an agreement in September 2018 for the construction of an underwater pipeline to export natural gas from the Aphrodite gas field to Egypt. Total, the consortium of ENI and KOGAS and the consortium of ExxonMobil and Qatar Petroleum have also been awarded offshore blocks in the Cyprus EEZ and there are currently ongoing drilling and other explanatory activities in these blocks. The ongoing drilling and development activity in the licensed blocks of the Cyprus EEZ provides significant opportunities for oilfield service companies. In addition, Cyprus can potentially become a regional energy hub for companies to provide support services in the Eastern Mediterranean region. Finally, commercialisation options for the Aphrodite finding and upcoming infrastructure projects for the development of the gas market in Cyprus provide additional opportunities for investment in the energy sector in Cyprus. Cyprus The gateway to global investments 3

Hospitality & Leisure Tourism is justifiably a driving force of the Cypriot economy and continues to grow. In 2018 visitors surpassed 3.5 million, following major efforts to extend the tourism season, increase flight capacity, as well as ongoing upgrades to tourism infrastructure but also to geopolitical developments in the area. Cyprus is renowned for the hospitality of its people, the quality of its services and the plethora of its treasures, spanning from its beaches 57 of them have been awarded the Blue Flag to its ancient and historical monuments, the picturesque villages inland and the vibrant ecosystem of the Troodos mountains. The latest addition to tourism infrastructure has come in 2018, with the launch of Cyprus first casino. The fully fledged integrated casino resort, which is due to be completed in 2020, aims to be the largest in the Europe region. It will offer a variety of amenities and other additional leisure services such as luxury hotels, spas and conference centre facilities. Other large development projects are under way to improve tourism project. The Limassol marina was inaugurated in 2014 and its success has encouraged other luxury marinas. The Ayia Napa marina started construction in October 2016 and a contract was awarded for the Paralimni marina in January 2018. There are also plans for a marina in Paphos and an upgraded marina in Larnaca. New hotels are under construction and existing ones have recently undergone major renovation. Foreign investment is also flowing into other large development projects, including luxury residential properties and theme parks. The vision of the new Cyprus Tourism Strategy is to increase tourist arrivals to 4,8m by 2030, 40% of whom to arrive in the period November - April. Cyprus Alternative Investment Funds Cyprus has become rapidly a regional domicile for investment funds and fund managers, offering a significant choice of flexible and advantageous solutions. What is more, the stable legal environment, the strong network of financial and professional service providers, the low set-up costs and the competitive legislative and regulatory regime, make Cyprus an attractive jurisdiction in relation to the set-up, re-location and ongoing operation of investment funds. The country is seeing increasing interest and appetite from investors and fund managers looking for new and interesting EU-regulated jurisdictions. Electronic Money and Payment Institutions Cyprus has harmonized its legislation with the relevant EU directives and practices governing the operations of Payment Institutions ( PI ) and Electronic Money Institutions ( EMI ). The country now offers a compelling set of valid arguments for being a hub of choice for establishing or re-domiciling PIs and EMIs, introducing third party payment service providers (TPPs) within the scope of regulation for the first time. 4 PwC Cyprus

Real Estate While property prices surged in the years prior to the international financial crisis, the Real Estate industry has felt the economic pinch in recent years with a fall in prices and decreased sales. The decline in property price is in turn opening up new opportunities for investors who can currently acquire extraordinary properties at exceptional prices. Furthermore, a number of large scale public-private development projects arising ranging from residential and commercial project to hotel and conference developments and healthcare facilities. For instance, Eco city project, Golf resort project, University campus, the development of Marinas etc. Wholesale and Regional Centers With Cyprus key location at the crossroads of major international trade between Europe, Asia and Africa making it a nature transshipment and logistic hub, the island is well placed to act as a central depot for distribution to the markets of Europe, the Middle East, the Gulf and North Africa. Investment Opportunities in the Region Cyprus being a regional Centre is in an ideal location to bring together Chinese Investors with target Investment opportunities in Russia, Eastern Europe, EU, M/E and North Africa. Cyprus The gateway to global investments 5

Cyprus Investor Immigration Programs The Cyprus Government offers two Investor Immigration Programs for investors and their families the Cyprus Investment Program and the Permanent Residence Program. Cyprus Investment Program Investment type Investment of 2M (excl. VAT) Residential property of 500.000* (excl. VAT) Total Investment (excl. VAT) On the basis of the relevant Council of Ministers Decisions (dated 13.09.2016, 01.2018 and 21.05.2018), non-cypriot Investors can acquire the Cyprus Citizenship by Naturalization (by exception on the basis of the Civil Registry Laws of 2002-2017). Key Information: The final approval for Citizenship is granted by the Cyprus Council of Ministers, which has complete discretionary power A threshold of 700 approvals per year is in force (main applicants) The review process by Competent Authorities is around 6 months The investor and the Service Provider supporting him/her, has to comply with the Code of Conduct governing the Cyprus Investment Programme Main applicant and his/her spouse apply jointly. Upon approval, children s and parents applications follow A due diligence report on adult applicants must be submitted as part of the application The level of investment is set at 2M - 2.5M, with a number of investment options available, as shown in the table herein. The Program caters for naturalisation of the Investors families, i.e. spouse, underage children, and qualifying adult children between 18 to 27 years old. A.1 Investment in real estate, land development and infrastructure projects - Residential properties* - Commercial properties / Land development / Developments in the tourism sector / Combination A.2 Investment in financial assets of Cypriot companies / organizations** A.3 Investment in Alternative Investment Funds or financial assets of Cypriot companies / organizations that are licensed by CySec A4 Combination of the aforementioned investments - including investments in special Government Bonds of the Republic of Cyprus up to 500.000 2M 2,5M 2,5M 2,5M 2,5M *At least one residential property must be, of at least 500.000 (excl. VAT) which must be kept for life. ** The company/ies must have a physical presence in Cyprus, with significant activity and turnover and employ at least 5 Cypriots or EU nationals. 6 PwC Cyprus

Adult applicants must hold a Residence Permit in Cyprus for at least 6 months prior to acquiring the Cyprus Citizenship. Additionally, adult applicants must hold a Clean Criminal Record from the country of origin and the country of residence, if they differ. Their names must not be included in the list of persons whose property is ordered to be frozen within the EU. Investments need to be kept for at least three years from the date of Naturalisation. In case of purchase of immovable property under construction, the 3-year period will start to count from the date of issuance of the Planning Permit. The parents of the Investors can also obtain the Cyprus citizenship with an additional investment in a permanent residence of minimum 500.000 (excluding VAT). (PricewaterhouseCoopers Ltd, is a Registered Service Provider (No. 221) eligible to provide services for Citizenship applications) Permanent Residence (Immigration Permit, expedited process Category 6.2) Non-EU citizens, who purchase property in Cyprus of minimum 300.000 excl. VAT, are entitled to apply and receive an Immigration Permit through an expedited process. This Permit grants its holders the right to travel to and reside in Cyprus for life. The Permit is extended to the applicant s spouse, under age children, adult dependent children up to 25 years old and parents/in-laws. Key requirements are as follows: At least 200.000 of the purchase consideration must be fully settled at the time of application. Funds transferred from abroad and deposited in a bank operating in Cyprus in a 3-year fixed deposit amount. A secure and steady annual income transferred on a regular basis from abroad to a bank operating in Cyprus. The approval time by the Competent Authorities is around 3 months. The above are in accordance with the legal basis that regulates each Program and may be subject to change. Cyprus The gateway to global investments 7

Main Features of the Cyprus Tax System The tax system of Cyprus is in full compliance with EU requirements and also within the OECD requirements against harmful tax practices. The tax system provides to the investors: 12,5% corporation tax Exemption from tax of foreign dividend income with easily met conditions Exemption from tax of profits from foreign permanent establishments (PE) with easily met conditions, with option to tax with a credit for foreign taxes Exemption from tax on profit generated from transactions in titles Up to 80% Notional interest deduction calculated on Company s new share capital 80% notional deduction for qualifying profits from qualifying Intellectual Property (IP). Qualifying portions of the income able to benefit from the 80% deduction is the R&D expenditure undertaken by the IP owner itself. Old IP Box ended as from 30 June 2016 and transitional rules will apply for IP already in IP Box as at 30 June 2016 until 30 June 2021. Cyprus tax residency for individuals either by residing for over 183 days in a year or for just 60 days subject to conditions. Non-domiciled tax residents individuals exempted from tax on dividends, interest and rental income 50% employment income exemption for expatriates earning over 100.000 for a period of 10 years Neutral tax treatment for foreign currency exchange differences ( forex ) which do not relate to trading in forex Exemption from withholding tax on the repatriation of income anywhere in the world either in the form of dividends, interest and on all royalties (except when intellectual property is used in Cyprus) Extensive double tax treaties network Access to EU directives Group loss relief The tax payer may apply for a ruling for any matter that he wishes to get the written opinion of the Commissioner of Taxation. Double Tax Treaty Network and EU Directives Cyprus has an extensive network of Double Tax Treaties (DTT). Several others are under negotiation. Where there is no DTT, when appropriate a Cyprus company can benefit from the EU Directives to eliminate withholding taxes when collecting income from the EU. Unilateral tax credit on foreign taxes withheld at source is also available. The Treaty network covers EU, including UK, France and Germany; most East European countries including Russia, Ukraine, Poland and Romania; USA, Canada, China, Singapore, India, South Africa, as well as Middle East countries, such as Egypt, Kuwait Qatar and UAE. 8 PwC Cyprus

Shipping The Cypriot maritime registry is today one of the largest in the EU and the 10th largest worldwide. Moreover, Cyprus is the biggest third party ship management centre in the EU. The Cyprus Merchant Shipping Legislation, creates a highly tax efficient harbor for shipping groups and an ideal holding company location. It was enacted as from 1 January 2010 and places Cyprus in a very competitive position. Cyprus has become the only EU country with a Tonnage Tax system that: Provides for TT on the net tonnage of the vessels rather than Corporation Tax on the actual profits, regulated by the DMS rather than the Tax Authorities Grants total tax exemption of profits tax and distribution tax at all levels allows mixed activities within a company/ group (shipping subject to TT and other subject to 12,5% corporation tax) Supports an open registry Allows split shipmanagement activities (crewing or technical) The law provides full exemption to shipowners, charterers and shipmanagers from all profit taxes and imposes tonnage tax on the net tonnage of the vessels at the following rates. Shipowners & charterers Shipmanagers Units of net tonnage TT per 100 units TT per 400 units 0-1.000 36,50 36,50 1.001-10.000 31,03 31,03 10.001-25.000 20,08 20,08 25.001-40.000 12,78 12,78 >40.000 7,30 7,30 It is possible, and quite common, for shipowners, charterers and shipmanagers to invest surplus funds and have non shipping income. Such income, that is not subject to TT, is subject to corporation tax at the normal rate of 12,5%. The tax legislation provides for several exemptions that may reduce the effective rate of non shipping income to well below 12,5%. Cyprus The gateway to global investments 9

Cyprus Alternative Investment Funds The Fund and its use Investment funds are collective investment undertakings, which raise capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors. A fund can be structured as an alternative way of financing for projects including venture capital, shipping, entrepreneur projects, startups and real estate projects, or as a means for boutique fund managers collectively join investors money. It can also accommodate family wealth/succession planning. AIFs at a glance The legal framework in Cyprus allows for the establishment of the following three (3) types of AIFs: Alternative Investment Fund (AIF) AIFs are available to either retail or professional and/or well-informed investors (WIPIs) in the form of an investment company (with fixed or variable capital), a common fund, or a limited partnership. Although AIFs have no restrictions regarding the type of permitted investments, they are subject to certain investment restrictions for risk spreading and liquidity purposes, depending on their investment strategy and type of investors. Internal management is also possible, if structured as an investment company. Alternative Investment Fund with Limited Number of Persons (AIFLNP) AIFLNPs are a special category of private AIFs addressed only to WIPIs. Due to their private nature they accept a maximum number of fifty (50) investors (including co-owners and applying look through provisions for beneficial owners of investors structured as legal entities) and can be structured in the form of an investment company (with fixed or variable capital) or a limited partnership. Compared to AIFs, AIFLNPs are subject to a lighter regime without onerous reporting obligations and no investment restrictions or diversification rules in place. Similarly to AIFs, AIFLNPs can be managed internally, if they are established as investment companies. Registered Alternative Investment Fund (RAIF) The establishment of a RAIF results to a drastically time efficient and more affordable way for establishing AIFs in Cyprus. The RAIFs are exclusively addressed to WIPIs and can adopt all available legal forms, similarly to the AIF. RAIFs do not require authorization by the Cyprus regulator, the Cyprus Securities and Exchange Commission ( CySEC ) in order to commence operations as long as they are managed by an Alternative Investment Fund Manager (AIFM) established in Cyprus or in another EU Member State. It is also possible for other types of eligible fund management companies to manage a RAIF, under certain conditions, however internal management is not available. The establishment of a RAIF is notified to the CySEC and is included in a special register maintained from the latter to this end. Why a Cyprus AIF? The choice of a Cyprus AIF has a number of significant advantages: Competitive Framework Modern regulatory framework in line with the applicable EU legislation, that takes into consideration the new market realities and conditions. Flexibility AIFs offer a variety of structuring options, including the set-up of an umbrella scheme with multiple investment compartments. In addition, any asset can be pursued subject to their investment strategy. Each compartment of an AIF is treated as a separate taxpayer. Cost Efficient Jurisdiction Low set-up costs with simplified procedures in relation to the set-up, ongoing operation and relocation of the fund. Transparency Best practice policies for investor protection and Anti-Money Laundering. Taxation of individuals Senior employees and executives of investment fund management companies or internallymanaged investment funds may opt for a new mode of personal taxation. Subject to conditions, their variable employment remuneration which is effectively connected to the carried interest of the fund managing entity may be subject to Cyprus tax at the flat rate of 8% (with a minimum tax liability of 10.000 p.a) for a period of 10 years in total (subject to the annual election of the individual) Friendly Regulator Supervised by a competent, accessible and business friendly regulator, which follows international trends and understands the needs of the market. Passporting rights EU passporting rights for Cyprus AIFMs managing Cyprus or EU AIFs and RAIFs: Management of AIFs and RAIFs established in another EU member State either directly or by establishing a branch in that EU Member State. Marketing of units or shares of AIFs and RAIFs to professional investors in any EU Member State. Specialization Experienced professionals specializing in the offering of high quality fund administration, custody and legal services. 10 PwC Cyprus

Payment and Electronic Money Institutions Payment and Electronic Money Institutions Payment services offered by a Payment Institution (PI) are listed below: Services enabling cash to be placed on a payment account as well as all the operations required for operating a payment account. Services enabling cash withdrawals from a payment account as well as all the operations required for operating a payment account. Execution of payment transactions, including transfers of funds on a payment account with the user s payment service provider or with another payment service provider. Execution of payment transactions where the funds are covered by a credit line for a payment service user. Issuing of payment instruments and/or acquiring of payment transactions. Money remittance. Payment initiation services. Account information services. Establishment and expansion of your business in the European Union Both PIs and EMIs, once established and duly licensed in Cyprus, may offer their services freely within the EU on a cross-border basis or by establishing branches through the socalled EU passporting process, without any further authorization from the Central Bank of Cyprus (CBC) as they benefit from EU rules on freedom of provision of services. Any PI or EMI established in Cyprus wishing to expand its business in the EU either under the freedom of establishment or under the freedom to provide services, can notify its intention to the Central Bank of Cyprus (CBC) providing the required information as stipulated by the relevant legislation. Electronic Money Institution (EMI) In addition to the above stated services, EMIs can also offer electronic money services. Electronic money is a monetary value represented by a claim on the issuer, which is: Electronically-including magneticallystored (e.g. chargeable internet based account, magnetic card). Issued on receipt of funds for the purpose of making payment transactions (conversion of bank money into electronic money). Accepted by a natural or legal person other than the electronic money issuer. Cyprus The gateway to global investments 11

Cyprus International Trusts (CIT) Trusts are a concept familiar to Common Law. They originated in England more than 1.000 years ago and developed ever since. They are based on Equity principles and around the unique characteristic of ownership under these principles. Namely, that ownership may be split into two constituent parts. Legal ownership, which has to do more with formalities, i.e. who is the registered owner, and beneficial ownership, which has to do more with rights i.e. who is the real owner. The main legal framework governing trusts in Cyprus is a combination of English Law i.e. the Principles of Equity and Statute Law i.e. The Trustees Law of Cyprus (Cap 193), which, is modelled on the English Trustee Act of 1925 and the International Trusts Law of Cyprus (Law 69(I) of 1992 as subsequently amended. The International Trusts Law of Cyprus builds on the well-established English principles of equity and trusts and has created one of the most attractive trusts legal frameworks in the world. It is intended to offer to qualified persons such as Chinese nationals, the opportunity to create a trust that will suit the most complex situations and demands and enjoy many advantages. Such a trust is called a Cyprus International Trust (CIT). Uses of Cyprus International Trusts: - succession planning - to hold property for minors or successive generations of a family - to protect property against spendthrift people - to provide discreetly for others - to provide for a couple on their marriage whilst ensuring that the property so provided is tied up in the event of that marriage failure - to establish a fund for the benefit of family members according to future needs as and when they arise - to enable charitable objects to carried out Advantages of a CIT Cyprus compares favourably and is at least at par with all other trust jurisdictions. That said, it has one major advantage over all other jurisdictions. Cyprus is an EU member State and in the white lists of the OECD and many major countries. Asset protection A CIT may only be challenged on grounds of defraud of a creditor within a 2 year limitation period which runs from the date the property in question was transferred to the CIT. Reservation of powers The Law recognises in the relevant Statute that the Settlor has the right to reserve powers and in the case of a CIT these may include the power to revoke or amend the trust, to appoint and remove Trustees, the Protector amongst others and to approve Trustee decisions. Perpetuity A CIT can last indefinitely (until there is no longer any Trust property). CITs are transparent for tax purposes. Non-Cyprus tax resident beneficiaries are subject to Cyprus tax only on Cyprussourced income and profits of the trust (if any). Cyprus tax resident beneficiaries are subject to Cyprus tax on income and profits of the trust derived from sources within and without Cyprus 12 PwC Cyprus

Investment Services PricewaterhouseCoopers Investment Services (Cyprus) Limited provides professional and independent advice on portfolio investments and strategic asset allocation. PricewaterhouseCoopers Investment Services (Cyprus) Limited is a Cyprus Investment Firm (CIF) authorized and regulated by the Cyprus Securities and Exchange Commission ( CySEC ). As independent investment advisors, we conduct unbiased manager selection illustrations, then monitor the portfolio and evaluate performance attribution metrics to ensure the investments are suitably aligned with the investment objectives. We use accurate independent benchmarking tools to monitor the managers and compare performance returns to assess risk and return trade-offs. As part of our service, we will also review in depth the fees charged by your managers to safeguard the portfolio from pricing inconsistency. How we can help: Investment Consulting - Managing Your Investment Manager Knowing what you require and making sure it is delivered For investors, selecting the most appropriate manager is challenging. Our team pulls together our knowledge on the strategies, performance and costs being experienced by other similar investors across the industry to put in place a portfolio that is run as effectively and efficiently as possible. Here are some of the services we provide to both private and corporate investors: Setting your investment objectives We design and review investment policy statements and mandates to ensure the portfolios are suitably aligned to investment objectives. Using proprietary tools and portfolio analytical software such as Bloomberg, we determine an asset allocation consistent with your objective and risk tolerance. Moreover, we create suitable benchmarks that properly reflect your investment objectives Finding the most appropriate investment manager We optimize portfolio success through a diligent procurement method to illustrate the best manager(s) and assist in the management of that relationship. We undertake fee negotiations with third party investment managers to ensure you obtain their best price. Monitoring investment performance We strengthen risk management practices through regular independent reviews of managers adherence to mandate risk. Improve the extent and depth of performance reporting to include relevant analysis of nominal, relative and risk-adjusted returns across multiple portfolios. Assess ongoing benchmarking of charges and expenses incurred within your portfolio to ensure performance attributes are not affected by fees. Why Choose Us We pride ourselves in providing you with the highest level of services where you will gain access to the PricewaterhouseCoopers Investment Services (Cyprus) Ltd team and the following services: Independent: We put the client first and are not driven by commissions. Expertise and Knowledge: Our professionals have acquired outstanding academic professional qualifications (e.g. CFA, ACA, etc) and have international multi-year experience in various sectors of the financial industry. Members of the team worked as investment bankers, portfolio managers and private bankers. Your diligent watch dog : A dedicated wealth advisor will be assigned for you to closely monitoring your investment managers and stand by your side. Cyprus The gateway to global investments 13

The Chinese Connection Cyprus as an international financial centre is an ideal tax efficient gateway for Chinese investments anywhere in the world as well as for facilitating investment into China itself. The Double Tax Treaty between China and Cyprus strengthens the financial ties of the two countries, enhancing and promoting further the scope for tax efficient investment opportunities. Cyprus Holding Company A Cyprus holding company is ideal for investments in EU as well as non EU companies. It is widely used as an ultimate or intermediary holding company in a number of structures including the holding of operating, financing, real estate, as well as shipping companies. It is also particularly effective in respect of facilitating successful IPOs in a number of jurisdictions. Key Features Reduction of foreign taxes Foreign taxes on dividends as well as on other payments received by the Cyprus resident companies are eliminated or minimised due to access to an extensive and favourable double tax treaty network and due to access to EU Directives. Foreign taxes on capital gains may be eliminated due to exclusive taxing rights of Cyprus in a large number of double tax treaties. Reinvestment of profits No taxes on key sources of foreign income of the Holding Company Unconditional exemption of profit on disposal of shares or other titles held by the Cyprus resident company Foreign sourced dividends exempt subject to easily met conditions which do not require any holding period, percentage holding or minimum investment criteria. Tax efficient repatriation of profits No taxes on payments to foreign shareholders of the Holding Company: On dividends Profit on disposal of the holding company Proceeds from liquidation or capital reductions Additional Benefits Reinvestment of profits without any tax leakages in Cyprus No Controlled Foreign Companies rules Key Considerations for setting up in Cyprus: Reinvestment of profits Cyprus / HK Hold Co Cyprus Hold Co e.g. Rus Co, Ukr Co, EU Co, DTT Co No WHT No Tax No / Low WHT The decision to use Cypriot companies must be driven by valid business reasons. A Cypriot company s purpose should be to carry out bona fide, genuine business activities e.g. acting as regional head offices, management companies, financing companies and Intellectual Property companies with appropriate substance i.e offices, qualified people and the relevant functions and risks. Tax strategies need to be aligned with management and operational business model 14 PwC Cyprus

Financing, Royalty and Trading Companies Cyprus tax resident financing, royalty as well as trading companies are used with minimum tax leakage ensuring maximization of the after tax return of the investors. Key Features They enjoy all favourable provisions and benefits relating to holding companies and may be effectively set up on a standalone basis or as subsidiaries of a Cyprus Holding company. Reduction of foreign taxes Foreign taxes on interest and royalties are eliminated or minimised due to access to an extensive and tax efficient double tax treaty network and due to access to the EU Interest and Royalties directive. Foreign taxes on trading incomes may be eliminated due to exclusive taxing rights of Cyprus through double tax treaties. Low Taxes on All Sources of Income Trading income, interest and royalty income are taxable at the rate of 12,5% after deduction of expenses wholly and exclusively incurred from the generation of income of the company (one of the lowest in EU). Liberal deductibility of expenses. Thin spreads of income are acceptable by the tax authorities (subject to transfer pricing study) Availability of Notional interest expense deduction. No thin capitalisation rules exist, thus companies may be financed completely with debt resulting to maximum deductibility of interest expense (primarily used for financing structures but widely used for trading and royalty structures). Neutral tax treatment for foreign currency exchange differences ( forex ) which do not relate to trading in forex. 80% Notional deduction for qualifying profits from qualifying IP. For any transactions subject to VAT, the rate is 19%. However most international transactions with careful planning may fall outside the scope of VAT. Any foreign taxes may be credited on taxes in Cyprus on the same income. Cyprus The gateway to global investments 15

Financing Parent company finance Cyprus company via equity. Cypriot company use the funds to provide interest bearing loan. Cypriot company receives interest income that is taxable at 12.5%. Cypriot company s taxable income can be reduced up to 80% via NID. Cy Finco is 100% equity-financed thus strengthening the argument that Cy Finco is beneficial owner of the interest income. Tax Efficient Extraction of Profits No taxes on payments of interest and royalties to non residents (with the exception of royalties used in Cyprus). No withholding taxes on services received from abroad. Key Considerations for Setting up in Cyprus: The decision to use Cypriot companies must be driven by valid business reasons. A Cypriot company s purpose should be to carry out bona fide, genuine business activities e.g. acting as regional head offices, management companies, financing companies and Intellectual Property companies with appropriate substance i.e offices, qualified people and the relevant functions and risks. Tax strategies need to be aligned with management and operational business models. Notional Interest Deduction ( NID ) Under the NID provisions, companies will be able to deduct notional interest expense based on new equity issued after 1 January 2015. Only Share Capital and Share Premium fall under this category. The NID interest rate is the yield on 10 year government Bond (as at 31 December of the prior tax year) of the country where the funds are employed in the business of the company plus a 3% premium. This is subject to a minimum amount which is the yield of the 10 year Cyprus government bond (as at the same date) plus a 3% premium. The resulting NID cannot exceed 80% of the taxable profit (as calculated prior to the NID), i.e. it cannot reduce income to nil or create tax losses. Zero WHT on dividend distribution 12,5% tax on taxable income - can be reduced upto 80% due to NID Low or nil WHT on interest income Parent EU / Non - EU Cy Co EU/Non EU Op Co equity Interest bearing loan 16 PwC Cyprus

Setting up and Maintaining a Cypriot Holding Company Although there are no restrictions on the legal form of the holding company in Cyprus, the most commonly used form is the private limited liability company. There are no legal requirements as to the minimum or maximum share capital of the company. However, it is recommended that the authorised share capital should be at least 10.000 that may conveniently be divided into 10.000 shares of 1 each. Not all of these shares have to be subscribed for, but it is recommended that at least 2.000 shares are issued and fully paid upon incorporation. Accounting Requirements & Filing Under the Cyprus Companies Law Cap.113, financial statements of Cypriot companies are prepared in accordance with the International Financial Reporting Standards (IFRS s). These standards require the Cypriot holding companies to prepare consolidated audited financial statements on an annual basis. Consolidation is not required when the Cypriot holding company is an intermediary holding company and a holding company further up the ownership chain prepares consolidated financial statements under approved accounting standards. The audited financial statements of the entity must be prepared for company and tax law purposes and submitted to the Registrar of Companies with the annual return. A tax return is submitted to the Income Tax Office for each tax year. The tax year is the calendar year. Shareholders Under Cypriot law, every company, limited by shares, must have at least one shareholder. Appointment of Directors Companies are managed and controlled by the board of directors. Under the Cyprus Company Law, a Cypriot private company must have at least one director. In all other cases at least two directors are required. Management and control of a company determines under Cypriot tax legislation the tax status of the company. Therefore, the venue of its meetings is significant for tax purposes. The Role of the Company Secretary The company secretary s role is to keep the company in good order with the Registrar of Companies, prepare and file annual returns, effect changes in the directors, shareholders, memorandum and articles share capital etc, prepare and keep minutes of all directors meetings and communicate with the Registrar of Companies on behalf of the company. Period Needed for Registering a Company The formation and registration procedures, including various administrative needs such as printing of the company s letterheads, opening of statutory books and the opening of the required bank accounts, up to the time the certificate of incorporation is issued, can normally be completed within a period of one week. Cyprus The gateway to global investments 17

PwC in Cyprus We support you to create the value you are looking for by providing specialised solutions based on quality. Together we build relationships based on trust and we say things as they are, to assist you to deal with issues that tomorrow will prove important. We adapt the expertise of our almost 1000 professionals in Cyprus and the power of our global network of 236,235 experts in 158 countries to your specific needs, helping you make the difference. In a demanding and challenging business environment, our diverse teams of experts are sharing deep knowledge and experience. We provide a broad range of services as listed below to meet your increasingly complex needs. Assurance Tax Advisory Advisory Indirect Tax Advisory Legal International Private Clients Tax Reporting Strategy Our industry specialisation in the following sectors, gives you the benefit of our in-depth industry knowledge and experience. Banking Funds Transportation & Logistics Real Estate & Construction Energy CySEC Regulated Investment Firms Hospitality & Leisure Insurance Retail & Consumer Communication & Technology Visit www.pwc.com.cy to discover the benefits we can bring to you. 18 PwC Cyprus

Your contact in PwC Cyprus Panicos Kaouris Partner In charge of China Business Development Team Tax Advisory T: +357 22 555 290 panicos.kaouris@pwc.com Theo C Parperis Partner Head of Tax and Legal T: +357 22 555 477 theo.parperis@pwc.com Chris Odysseos Partner International Private Clients T: +357 22 555 494 chris.odysseos@cy.pwc.com Michalis Stephanou Partner Advisory T: +357 22 555 770 michalis.stephanou@cy.pwc.com Fawn Ren Advisory In charge of Chinese communication T: +357 22 555 461 ren.fawn@pwc.com Luwen Zhang International Private Clients Chinese communication T: +357 22 555 738 luwen.zhang@pwc.com Cyprus The gateway to global investments 19

Our offices in Cyprus Nicosia Mailing address: Street address: Limassol Mailing address: Street address: Paphos Mailing address: Street address: P O Box 21612, CY-1591 Nicosia, Cyprus PwC Central, 43 Demostheni Severi Avenue,CY-1080 Nicosia, Cyprus Tel:+357-22555000, Fax:+357-22555001 P O Box 53034, CY-3300 Limassol, Cyprus City House, 6 Karaiskakis Street, CY-3032 Limassol, Cyprus Tel:+357-25555000, Fax:+357-25555001 P O Box 60479, CY-8103 Paphos, Cyprus City House, 58 Grivas Dighenis Avenue, CY-8047 Paphos, Cyprus Tel:+357-26555000, Fax:+357-26555001 Designed by: PricewaterhouseCoopers Ltd - Marketing & Communications Department This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. 2018 PricewaterhouseCoopers Ltd. All rights reserved. PwC refers to the Cyprus member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. 20 PwC Cyprus