Keen to establish itself as a flourishing centre of interna- tional finance, Cyprus extends a warm welcome to advisers using the centre for invest- ment purposes or to set up companies and trusts. One of the most striking features about Cyprus is its excellent network of double taxation agreements, most of which are comprehensive, follow the OECD model and match many of the more established offshore centres. Cyprus has 26 double taxa- tion treaties with many east and western European coun- tries and the American conti- nent, which offers advantages for efficient tax planning. Cyprus' role as a financial centre is enhanced by its net- work of double tax treaties. Financial companies which, as a result of their business activities, derive income in the nature of interest, divi- dends, capital gains, royalties and other income of similar nature, may take advantage of the double tax treaties and local legislation incentives. A Cyprus offshore com- pany is taxed at just 4.25%. Interest, royalties, dividends and capital gains received in Cyprus are subject to reduced/ exempt treaty rates. Capital gains are untaxed and, depending on the country of source, exemption may also be achieved in that country. With Eastern European countries opening up, Cyprus is uniquely positioned because of its double tax treaties with them. Compared with treaties signed by Eastern Europe with other countries, Cyprus' prove more advantageous. While double tax treaties

and tax planning through treaty shopping is complex, Cyprus, with its treaty net- work and attractive offshore tax incentives, is high on the list of ideal tax planning locations.

Confldentialfty Cyprus has strict regulations regarding secrecy and the disclosure of information. The Central Bank of Cyprus requires the identity of the beneficial owners of the shares in an offshore com- pany to be disclosed to them. However, each director, officer or employee of the bank is bound to secrecy and is criminally liable for dis- closing information to an unauthorised person. Bank employees are required upon appointment to give an oath to maintain complete secrecy and not disclose information to any third party.

Ofthom companies Those companies registered in Cyprus whose shares are directly or indirectly owned by foreigners and whose income is derived from sources out- side Cyprus, qualify as 'off- shore companies'. An offshore entity regis- tered and operating from Cyprus can take one of three legal forms. It can be a lim- ited liability company, a branch in Cyprus of a com- pany which is registered abroad or a partnership. The Companies Law (as amended) which is almost identical to the UK's former Companies Act (1948), pro- vides for private or public companies. A private company, the preferred form for offshore

planning, means a company which by its articles: 0 Prohibits any invitation to the public to subscribe for its shares or debentures. *Limits the number of its members to 50, with a min- imum of two. 0 Restricts the right to transfer its shares and pro- hibits the issue of bearer shares. Private companies can be further divided into exempt and non-exempt. The condi- tions, which must be fulfilled by a private company to be considered exempt, are that: 0 No corporate body holds any of its shares or deben- tures, unless it is itself an exempt private company. 0 No person other than the holder has any interest in the shares or debentures. 0 The number of persons who hold the company's debentures is below 50. * No corporate body is a director of the company. An exempt private com- pany enjoys the following advantages: *It need not annex to the annual return submitted to the Registrar of Compa- nies a copy of its financial

0 It may give loans and guar- antees to its directors. 0 It may appoint as its auditor a person who does not have the statutory qual- ifications to act as such. Company shares must be Cypriot pound-denominated and can be only in registered form. Should anonymity be required, nominees may hold the shares in trust for the ben- eficial owner. It is possible to "buy" ready-made shelf com- panies which have been inac- tive since incorporation. This may save time and expense in relatively simple instances but may prove to be more costly if substantial alterations need to be made to the memorandum and arti- cles of association. Meetings of the board of directors may be held in either Cyprus or abroad. If, from the tax planning point of view, it is important the company be managed and controlled in Cyprus, then the majority of directors must be Cypriot residents. Companies are to have a registered office in Cyprus from the day it com- mences business or from the 14th day after incorporation,

Tax Treaties

Austria. Bulgaria, Canada, China, Czech Rep.,Denmark, Egypt, France, Germany, Greece, Hungary, India, Ireland, Italy, Kuwait, Malta, Norway, Poland, Romania, Slovak Rep., Sweden, Syria, Ukraine, UK, USA, Yugoslavia