Tax Law & International Tax Planning — NICOLAS EROTOCRITOU & CO LLC

Today’s globalization and economic uncertainty and instability of the market have risen the power of both domestic and international tax authorities to investigate and impose their aggressive sanctions upon both individuals and corporate entities. In nowadays challenging conditions require a tax planning for every private business and wealthy individuals to consider tax effective solutions.

Our firm has a knowledge and expertise both in International Taxation but also in Cyprus Tax regime to assist our clientele in the best possible and effective tax solutions.

Our services include in International Taxation:

• Double Tax Treaties, their interpretation and implementation

• Tax efficient holding company jurisdictions

• Cross-Border financing and tax implications

• Tax efficient IP and intangible assets

• Interpretation of the OECD regulations and its effect on our client’s structures.

• Advising on the EU Parent-Subsidiary Directive and its’ effect on EU and international Taxation

On domestic Tax issues arising we assist and find solutions of our client’s requests. Our clientele is made of both commercial corporations, financial institutions, and private individuals.

Our services for Private Individuals:

• Tax domicile and residency matters

• The Cyprus non-domicile tax regime

• Incentives for private individuals and their families for relocating and transferring their tax residency status in Cyprus.

• Tax efficient schemes for private individuals when relocating in Cyprus, including leasing schemes for yachts and private aircraft and the use of trusts.

Personal Tax Regime

Tax residence of Cyprus is determined by the so called “days test”. There is the standard 183 days test by which a person spending in Cyprus more than 183 days in a calendar year is automatically a Cyprus tax resident. Further to that test, there is a new 60 days rule, which is subject to certain criteria. With that rule Cyprus tax residents are taxed on their worldwide income.

In order the 60 days rule to be applicable a certain conditions must co-exists through out each year for a certain individual wishes to be a Cyprus tax resident by this route:

• Spend a minimum of 60 days in Cyprus.

• Not have spent more than 183 days in any other country.

• Not be a tax resident in any other country.

• Maintain a permanent residence in Cyprus (rented or owned).

• Employed in Cyprus or hold an office (e.g. a director) in a Cyprus Company or carry out business in Cyprus.

The 60 days rule is very attractive for international business people who, for various reasons, cannot physically spend a minimum of half a year in the island.

Non - Domicile Tax regime

Cyprus is considered to be a prime choice of destination for individuals both EU and non-EU nationals, who are wishing to move their tax residence to another country. The Non-Domicile tax regime effectively applies for a maximum of seventeen years. Non-Domicile tax residents are specifically exempt from tax on dividends, interest, gain from sale of shares and other qualifying titles, capital gains not involving Cyprus situated real estate and trust distributions of a passive or capital nature.

These tax exemptions are of particular interest to high net worth individuals, the vast majority of their income being usually derive from such sources.

Cyprus also, offers other attractive tax elements for both individuals and companies, such elements are:

• Personal income tax band rates with the first €19,500 tax exempt. Then band rates ranging from 20% up to 35% for over €60,000.

• 50% tax exemption for Cyprus sourced salary over €100,000 per year.

• 100% exemption on remuneration for salaried services rendered outside Cyprus for more than 90 days in a tax year to a non-Cyprus resident employer.

• 100% exemption on lump sum life insurance payments or from approved provident funds.

• Foreign pension taxed at a flat rate of 5% (with first €3,420 being tax exempt).

• Double Tax Relief for any foreign tax.

• No inheritance tax.

• No wealth tax.

Film Tax Incentives in Cyprus

Cypriot Government introduced a package of financial incentives in its 2018 Cyprus Filming Scheme. Cyprus has the potential to become a state of the art production hub, with its diversity in cultural and natural filming locations, from stunning cities to scenic mountains and top-rated beaches.

Our island has a rich range of historical and cultural landscape for films. It harmonious blend old tradition with nowadays modernity, makes it unique shooting location. We have a natural beauty, with pristine sandy beaches, exquisite mountain viewing, valleys and waterfalls, which already captured the attention of international film producers.

Cyprus offers short distances and also well built infrastructure. This allows for quick and easy movement of crew and equipment while safety is guaranteed as the country is one of the safest countries in the world. With 330 days of sunshine per year, and also been in the crossroads of three continents, Europe, Africa and Asia, it is a pole of attraction for many different cultures.

Several films were filmed in Cyprus and have won awards in film festivals. Cyprus has also attracted a major league movie with an estimated €25 million of production costs, starring Nicolas Cage

There are four ways international film productions can score big with the Cyprus Filming Scheme:

• Cash Rebates.

• Tax Credit.

• Tax Allowance.

• VAT refunds.

Cash Rebate

Up to 35% rebate on eligible expenditures occurring in country is granted. The minimum expenditure, that it does not exceed 50% of the total production budget needs to be at least:

• €200,000 in the case of feature films.

• €100,000 for TV drama series or self-contained drama films.

• €50,000 for documentaries for TV or cinema broadcast.

• €30,000 for the other TV programs.

Furthermore, the production must promote Cypriot, European, or world culture through cultural test criteria. The maximum amount of aid for each production is €650,000 after an audited report is produced and submitted.

Tax Credit

Under the same guidelines of the above cash rebates, production companies can receive a reduced corporate tax rate. The maximum aid shall represent 35% of eligible expenditures made in Cyprus. The sum of the tax credit cannot be greater than 50% of the total taxable yearly income in which the production is made. The tax credit can be carried forward within the next five years as long as it does not exceed the 50% restriction.

Tax Allowance by Investment

Investment in filmmaking infrastructure and equipment by small and medium-sized enterprises can be eligible to deduct the investment from the taxable income. This includes premises, studies and film equipment. The tax allowance aid cannot be greater than 20% of eligible expenditures for small enterprises and 10% for medium ones. The equipment must stay in Cyprus for at least 5 years to be eligible for the tax allowance.

VAT Refund

Vat refund is granted for qualifying expenditures incurring in Cyprus and related to the implementation of the production.

Our firm has a knowledge and expertise both in International Taxation but also in Cyprus Tax regime to assist our clientele in the best possible and effective tax solutions. We interpret the Double Tax Treaties signed by Cyprus, on behalf of our clients in order to be implemented on their business models.