cyprus offshore

New ‘type’ of Residence Permits For Third Country Nationals

The Cyprus Government, in its continuous efforts for a complete reform of the old and outdated application and filing procedures for the issuance of a residence permit in Cyprus has announced that starting as of Monday the 08/02/2016 the Migration Department will be issuing a new type of residence permit to third country nationals that fall under the following categories:

  1. Applicants that reside or plan to visit Cyprus for studies
  2. Applicants that reside or plan to visit Cyprus as exchange students
  3. Applicants that reside or plan to visit Cyprus for unpaid professional practise
  4. Applicants that reside or plan to visit Cyprus for voluntary service
  5. Applicants that reside or plan to visit Cyprus for research purposes under a contract with a research organisation, including their family members
  6. Applicants that reside or plan to visit Cyprus as family members of a recognised refugee for the purpose of a family reunification
  7. Applicants that hold or intend to apply for an immigration permit, including their dependants
  8. Applicants that are victims of human trafficking or commercial exploitation
  9. Under any other category that will be created or modified from here onwards.

The new type of ‘uniform’ residence permit will be like an identity card and will bear the permit holder’s biometric details (fingerprints and photograph) as well as his/her signature.

Furthermore, it is important to note that all third country nationals that fall under any of the above categories and who have filed an application for the issuance or renewal of a residence permit, which will not be examined by the 08/02/2016, MUST file by the 08/04/2016 a new additional application form (called ‘M+IP’) at the District Office of the Migration Department and pay the relevant fee of EUR10.00.  In the event that the third country national whose application is still pending and did not file this additional application by the 08/04/2016, his/her pending application will be automatically cancelled as per the relevant law.

It should be noted that the above does not apply to any residence permits that have already been issued. These permits will continue to be valid until their expiry date.

For any additional information, please feel free to contact our firm.

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cyprus-parliament-halt-liberization

Cyprus Parliament: ‘‘We put a halt to the liberalization’’

The Liberalization of the Interest Rate and Related Matters Law No. 160(I) of 1999 which came into force in 2000 gave the right and absolute freedom to any banking institution to charge its customers with any increased percentage rate (also known as default interest rate) on overdue loan installments as a result of a breach of the terms of such facility.

Of course, the phenomenon of this liberalization was very welcomed and exercised by most banks in Cyprus. But it didn’t stop there. The banks also imposed higher interest rates than what was agreed initially in the contract with their clients. Indeed, the standard loan agreement form contained a particular clause which gave the banks the unilateral right to increase the basic interest, the margin or the default interest if at their discretion the market conditions and the value of money were altered. Such an alteration to the increase of the interest rate was considered by the courts legal hence the borrower was bound.

This absolute freedom resulted to a disparity on the default interest rate percentage among banking institutions in Cyprus and to the application of interest rates which were considerably above the initial loan interest rate.

The Cyprus Parliament responded to the voice of criticism and introduced certain changes to the Law which aim to regulate and protect the rights of the debtors by prohibiting the increase of the agreed interest rate and the increase of the default interest rate other than rate specified in the Law.

The new provisions of the law on the increase of interest rates and default interest rates are the following:

  • For all credit facilities provided by a banking institution operating in Cyprus, which had not been terminated prior to 9 September 2014 or were concluded after the said date, any default interest rate above 2% is prohibited.
  • For all credit facilities provided by a banking institution operating in Cyprus, which had been terminated on or prior to 7 May 2015, any default interest rate above 2% creates a rebuttable presumption that the interest does not represent the true loss of the banking institution and it is for the banking institution to prove that any such default interest represents its true loss. If the banking institution cannot prove such loss, then any person who has already paid for default interest rate (in excess of 2%) may claim damages for the amount paid and the banking institution has the obligation for restitution or pay compensation to the person who has suffered damage as a result of such charge.
  • Any contractual term which gives to a banking institution the right of unilateral increase of the interest margin in a credit facility agreement which is valid on 9 September 2014, cannot be enforced after the said date.
  • It is prohibited to a banking institution to include in its standard form agreements any term which confers to the banking institution the unilateral right to increase the interest margin in a credit facility agreement.

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eu-switcherland-tax-pact

EU and Switzerland’s New Savings Tax Pact

The European Union and Switzerland have initialed an agreement on the automatic exchange of tax information (AEOI).  The first exchange is scheduled for 2018 after all account data is collected from the onset of 2017.

On 19 March 2015, the agreement was initialed by Jacques de Watteville, the Swiss State Secretary, Dominique Paravinci, the Deputy Director of the Switzerland’s Directorate for European Affairs and Heinz Zourek, the Head of EU Directorate General on Tax and Customs Union.

The agreement which is expected to be signed in the coming weeks, will replace the savings tax agreement that has been in force since 2005 and extends to all 28 member states of the EU.

As provided in the AEOI agreement, EU member states and Switzerland will be required to exchange account information automatically on a reciprocal basis annually.  Such information exchanged will include the name, address, date of birth, tax identification number, and an extensive amount of financial and account balance information about EU taxpayers from both parties.

Tax Commissioner Pierre Moscovici commented that “We are taking a decisive step towards total tax transparency between Switzerland and the EU. I am confident that our other neighbours will soon follow suit.  This transparency is vital to ensure that each country can collect the tax revenue due”.

It is intended for the deal between the EU and Switzerland to come into force on 1st January 2017.

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arbitration-what-bear-in-mind

Arbitration: What to bear in mind

Without a doubt, International Commercial Arbitration is the most preferable and modern method of the so called ADR (Alternative Dispute Resolutions). The most significant reason why parties choose Arbitration in order to resolve their disputes is mainly for the avoidance of delays in resolving the disputes arising between them.

One may argue that there is no effective justice in Cyprus. Judges deliver judgments two or three years after the lawsuit is filed to the Court Registrar due to the procedural rules which have to be followed and the compliance time with the above-mentioned rules, received from the Lawyers. Thus, parties nowadays prefer Arbitration as a Dispute Resolution incorporating to their main agreement an arbitration clause or drafting a separate arbitration agreement.

The delay in justice is not the only reason why parties in a dispute may decide to refer to Arbitration. Arbitration is recognized as an effective ‘tool’ and is enforced on an international level. There are many conventions which refer to the procedure followed in Arbitration, such as the New York Convention for the recognition and enforcement of arbitral awards.

Party autonomy also plays an important role why parties resolve their disputes with Arbitration. Party autonomy is considered to be the fundamental cornerstone of the arbitral proceedings since parties must clearly express their consent to arbitrate. Furthermore, parties are free to choose the arbitrator, the applicable law, the seat of arbitration etc.

What is more important, arbitration procedure is of a confidential nature and third parties are not entitled to attend and/or obtain any information regarding the case. Thus, arbitration offers privacy, a benefit court proceedings are not offering. This is of great significance where the parties in a dispute are internationally known, (e.g. ‘big’ companies) who definitely do not want to have their dispute published.

One must note that Cyprus has two Legislations related to Arbitration. We have the Arbitration Law, Cap.4 (1944) and the International Commercial Arbitration Law (L.101/1987). The First – which unfortunately has not been modified yet – refers to disputes between two or more Cypriot individuals or companies, it is of a domestic enforcement. The Second does not refer to local individuals but it mainly covers the disputes arising out of international nature relationships. So, if a Cyprus Company is entered into agreement with an Italian one, and there is a clause regarding arbitration, the Second one will be enforced, of course if the parties agree to resolve their disputes in Cyprus and/or under the Cyprus Law. This also applies in cases where a Cyprus Company is entered into agreement with non-European Companies.

Amongst the most known Arbitration Institutions are the following: the London Court of International Arbitration, the International Chamber of Commerce, Vienna International Arbitral Centre, the  Arbitration Institute of the Stockholm Chamber of Commerce, American Arbitration Association, China International Economic and Trade Arbitration Commission, Singapore International Arbitration Centre, World Intellectual Property Organization, Arbitration and Mediation Centre etc. One must bear in mind that every Institution has its own Arbitration Procedural Rules and the parties have to be willing to apply these rules to their dispute.

Arbitration became known in Cyprus the last two-three years, after the ascertainment of the necessity to relieve the Court from its workload. In my opinion, the main problem why Arbitration in Cyprus is not so preferable than any of the above International Institutions – not even preferable locally- is because of the Legislation we already have which has to be modified in order to comply with the International Standards of Arbitration and Arbitration Institutions. It is unacceptable for the Domestic Legislation – Cap.4 to remain the same as the first document enacted in 1944. Also, the provision of the Application of the Civil Procedure Rules – Article 30 creates another problem why an individual thinks twice before he/she refers the matter to Arbitration. If the Arbitrator applies the Civil Procedure Rules, then one party may argue what is the difference than going to a Court and resolve the dispute arisen. Our Civil Procedure Rules – which have not been modified yet, except from two Rules only (Rules 25 &30) – are considered to be a most significant ground in the delay of justice.

To conclude, Arbitration is still considered to be the most effective method of Dispute Resolution and its various advantages are worldly recognized, with the most important one to be the prompt resolution of the dispute between two parties. As William E. Gladstone states, ‘Justice delayed is justice denied’.

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alternative-investment-fund-cyprus

Alternative Investment Funds workshop and refresher course

Last week Socratis Parparinos Chief Operating Officer and Andreas Ioannou Head of the Corporate attended a workshop aimed at updating their knowledge relating to the establishment and onwards management of Alternative Investment Funds (herein after AIF’s).
At Parparinos & Milonas, we continually strive to ensure our staff are given the opportunity to refresh their knowledge and keep up to date with current affairs by following a continued program of seminars via external and internal training.
With our new AIF closing in on approval from the Cyprus Securities and Exchange Commission and 2nd and 3rd AIF being in the pipeline, it seemed appropriate to take time out of the busy day to day schedule and further out knowledge on what is proving to be in many quarters an unknown quantity.

AIF’S IN CYPRUS

Currently very few AIF operate in Cyprus. However demand as well as desire for their incorporation and set up and onwards management is growing day by day. An asset for both foreign investors looking to establish a Fund in Cyprus as well as High Net Worth Individuals in Cyprus the AIF, shall become a prominent tool for Corporate Tax Planning in the near future.

HISTORY AND BENEFITS

Derived from the passing of the Alternative Investment Fund Managers Law of 2013 in July, Cyprus harmonized with the EU Directive of 2011 No. 61. (EU Directive 2001/61/EC). Allow me to take the opportunity to detail some of the main benefits in using an AIF:

  • Cyprus residents holding units of AIF under certain conditions are subject to a reduced taxation, which totals to just 2,1% of AIF’s profits compared to up to 17% dividend income tax applicable in other cases.
  • An AIF can be used for real estate, private equity, leveraged forex to hedge fund trading in exotic financial instruments and investments of any kind, listed or non-listed.
  • The price at which an investor may subscribe to the shares of an AIF or have its shares redeemed is based on the prevailing Net Asset Value (NAV), plus or minus a subscription or redemption fee respectively.
  • AIFs can be set up as an umbrella fund, with its sub-funds being segregated portfolios of assets and, accordingly, the assets of a sub-fund belong exclusively to that sub-fund shareholders and shall not be used to discharge directly or indirectly the liabilities or claims against the umbrella or any other sub-fund.
  • The sub-funds can be denominated in another currency than the currency of the main AIF.
  • Every sub-fund can have its own currency, shareholders, assets/liabilities and operate totally independently from the other investors.
  • Should the client wish they can appoint an approved and regulated fund manager such as SCSS Fund Management Ltd., which is a licensed AIFM regulated by CySEC which will allow for many synergies and cost efficiencies.
  • An approved and licensed AIFM like SCSS Fund Management Ltd will provide the core service of Portfolio Management and Risk Management as well as the ancillary services of Fund Administration, Marketing and Distribution and other activities related to the assets of the AIFs. Thus giving both credibility to the investors as well as safety to the stakeholders.
  • Investors in units of the AIF will enjoy confidentiality with the list of unit holders only being kept by the Fund manager.

MAIN CHARACTERISTICS OF AN AIF

  •  Legal Form: Variable Capital LLC, or Limited Partnership
  • Legislation Cyprus AIF Law and Cyprus AIFM Law
  • Regulated by the Cyprus Securities and Exchange Commission EU Passporting is available providing that markets’ approval is received
  • Taxed in Cyprus
  • Deposits are placed with a custodian bank
  • Multiple classes of shares without limitation
  • The legislation looks to invite investors through a vehicle that can house endless numbers of investors
  • All assets welcomed

Should you require further details please do not hesitate to send in a message to articles@pmcorporatelaw.com and we shall be happy to discuss how an AIF maybe a suitable vehicle for you.