1. the definition of tax and the residency for companies incorporated in Cyprus,
2. the introduction of withholding taxes on payments of royalties, dividends, and interest to a company tax resident in a country included on the EU blacklist or to a company incorporate dinany of the EU back listed countries which is not considered tax resident anywhere.

Both laws are coming into force on December 31^st, 2022.

Until today, a company was considered as tax resident of Cyprus if its management and control is exercised in Cyprus. After this amendment, any company incorporated or registered in Cyprus whose management and control is exercised outside Cyprus will still be considered as tax resident of Cyprus, unless this company is considered as tax resident in any other state. As a result, a Cyprus-incorporated company can no longer be considered not to be tax resident anywhere. Unless a company is tax resident in a country included in the EU black list or if the company is incorporated in a country not included on the list, it is not tax resident in any jurisdiction

Royalties

The 10% withholding tax will apply to royalty payments made to a company that does not have a residence in Cyprus but which has a residence in a country that is included in the EU blacklist of non-cooperative jurisdictions, or to a company incorporated in such a backlisted country which is not tax resident anywhere, regardless of whether the assets for which the royalty is paid will be used in Cyprus or elsewhere.

Dividends

Dividends paid by Cypriot tax resident companies to companies tax resident in countries included in the EU black list of non-cooperative jurisdictions or to companies incorporated in such countries which are not tax residents anywhere will be subject to a 17% special defense contribution (“SDC”).

The above does not apply to companies listed on a recognized stock exchange.

Interests

The SDC rate on interest paid to a company that is not tax resident of Cyprus but tax resident in a country that is listed on the EU blacklist of non-cooperative jurisdictions, or to a company incorporated in one of those countries that is not considered tax resident anywhere, will be 30%.

The above does not apply to interest paid on securities listed on a recognized stock exchange.

Black listed countries

The list is adopted by EU on the 5^th of October 2021 and consists of the below countries

American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, US Virgin Islands and Vanuatu.

The post Cyprus: Amendments on Income Tax Law & SDC Law appeared first on Chambersfield Economides Kranos.

It is universally acknowledged that internet has an increasing and enormous potential in the development of online business marketplace and electronic commerce. More and more businesses are integrated into the online arena, day by day.

Undeniably, when it comes to online business it is of crucial importance to ensure that your online business is aligned and duly, in compliance, with the relevant regulatory and legislative frameworks. A number of laws have been enacted, that pertain specifically and/or related to the online businesses, including but not limited to intellectual property rights (trademarks, copyrights etc.), privacy policies, terms of service, data protection and consumer rights.

First of all, you have to ensure the registration of your incorporation.

Chambersfield Economides Kranos offers full corporate services in order to cover every possible corporate need, and, can provide you inter-alia, with any legal assistance and/or services required and/or undertake on and/or for your behalf all the necessary procedures, for the purposes of ensuring the registration and formation of your company.

The application for registration of a Cypriot company is filed to and examined by the Companies Registrar and Official Receiver, on a case by case basis.

Also, noted shall be that depending on the services and/or products you wish to provide, you may require to apply for specific license.

Furthermore, when choosing internet as a means for establishing and/or starting your business activities, you must also be properly aware of the issues surrounding intellectual property rights.

Online businesses that embrace modern innovation and invest in research and development, in a cyberspace with a continuous information flow shall, undoubtedly, be Intellectual Property informed and aware.

Intellectual property, comprises, inter alia, industry and industrial property that includes inventions, patents, trademarks, industrial designs and intellectual property rights, creators’ copyright rights, including scientific, musical, literary and artistic works as well as television shows, software, databases, architectural plans, advertising and multimedia, as well as business strategies which include business secrets, confidentiality agreements and know-how.

An important number of consumers avoids electronic commerce, fearing the insufficient data, security and confidentiality.

A strong emphasize shall be placed on consumer protection standards and legislative requirements. When you operate your business online, you have to ensure that your website is properly compliant with the relevant legislative and/or regulatory requirements, considering privacy policies.

Among others there is an outmost need of implementing privacy policies. Privacy policies are used to let customers know how their personally identifiable information is going to be used by the online business.

In addition, personal data protection is deemed to be of outmost importance and one of the main concerns for consumers and businesses.

If you use and/or process the personal data of EU citizens or residents, then the GDPR (General Data Protection Regulation) may apply to you even if you’re not in the EU, imposing high privacy and security standards. Consequently, you have to make sure that you have the appropriate terms and conditions and disclaimers in place.

Moreover, ensuring and implementing cyber security policies is of vital importance for your business, safeguarding sensitive data, personally identifiable information and protecting it from cyber threats.

For online businesses to thrive there is a need of compliance with the relevant legislative and/or regulatory framework, encouraging businesses’ economic growth and success.

Complying with the relevant regulatory and legislative framework will enhance, inter alia, your relationship with your prospective and existing customers and help you building your reputation as an ethical and trustworthy business.

Be fully prepared in properly complying with all the legal requirements and/or formalities, will minimize possible risks to your business and/or prevent any unwanted legal complications.

Our legal team of expert and experienced professionals can advise you and assist you with all legal aspects related to formation and/or operation of online businesses, as well as consultation and representation in relevant litigation proceedings.

For further information and/or clarifications you may require, please contact our offices.

The post Online Business appeared first on Chambersfield Economides Kranos.

In the last few years the term “StartUps” has become quite popular, despite the fact that this business model first appeared in 1950s.

“StartUps or Young Entrepreneurships” are newly established enterprises which offer innovative ideas, aim at extremely fast business development and reach a wide audience.

Their main goal is to create a model that can evolve and repeat itself.

Due to the above-mentioned characteristics, a large percentage of these companies originate from the field of technology aiming at the dynamic development of an existing idea or the creation of an innovation that will satisfy a new need.

Based on our experience, the past has repeatedly demonstrated that there is no “secret recipe for success”. Each case is different and unique, it accepts either positive or negative influences from the various changes and fluctuations that occur in the domestic and international market, as they result from the political, economic, social, technological, environmental and legal framework.

Due to the complexity of the aforementioned factors as they arise from the markets, especially from the legal perspective, it is important for StartUps companies, from the conception of the idea until its realization, to cooperate with a law firm specializing in company and business law. Embracing this approach, you directly ensure the protection of the newly established company, the implementation of the correct procedures and due diligence on the points of cooperation. It also prevents uncertainties on terms and conditions, while providing legal and business advices at every stage of the business development.

Although each case is unique, we have noticed that there are common legal questions about the establishment of the StartUp corporate entity, such as:

• Which is the most appropriate type of forming a corporate entity for a “StartUp” company?

The most popular corporate entity of a “StartUp” type is the Limited Liability Company (LTD). This is because the company is a separate legal entity and the responsibility of the owners and shareholders is limited to their share of the investment capital, without any extension to their personal assets, unless of course the case is of a criminal nature.

• Where will the headquarters of the new entity’s StartUp be?

Because of the European Union as well as globalization, a “StartUp” company can choose its headquarters among multiple jurisdictions. Cyprus is one of the most popular jurisdictions for the incorporation of a company since it has a straightforward taxation system and a 12.5% corporate tax, one of the lowest in Europe. In addition, among others reasons, Cyprus has more than 60 double taxation treaties established with other countries, is a Member State of the European Union, operates in a favorable tax regime, has a low to zero retention of dividend taxes, any financial losses of a company may be transferred against future profits for an indefinite period, while the company registration is quick and immediate.
Additionally, Cyprus’s investment strategy is strongly supported by the government and is constantly creating new business opportunities.

• How long does it take to establish a new legal entity in Cyprus?

7 – 9 days

• What is the appropriate structure / organization chart of the new legal entity “StartUp”?

The appropriate structure / organization chart of the new legal entity depends on a case-by-case basis; however, it is explained in a descriptive way in the Memorandum and Article of Association, defining the relations of the contracting parties.

• What should be mentioned in the Memorandum and Article of Association of the new legal entity?

The Memorandum and Article of Association mentions, all general terms as well as specific, all the conditions that ensure and regulate the relations of all the Contracting Parties involved, as they result from the legislative framework of the jurisdiction in which the new legal entity will operate.

• How will the ownership of partners and / or shareholders and employees be divided in the new legal entity?

The drafting of a shareholders’ agreement defines, inter alia, their obligations and rights, their meetings, the decision-making process to be followed, the terms and conditions of a voluntary resolution and the provision of the necessary mechanisms for the immediate settlement of disputes between the parties.

• What contracts are needed to ensure the stable and continuous development of the new legal entity?

It is wise to have shareholders and employee contracts that will define and clarify the relationship of all the parties involved.

• Is the drafting of a Privacy and Confidentiality Agreement needed?

Because of the innovative nature of “StartUps”, it is advised to draft a Privacy and Confidentiality Agreement when two or more members exist, to preserve the idea until the new entity has its proprietary intellectual property in its possession.

• Do the “StartUps” need to register their intellectual property?

The main competitive advantage and the most important predictor of StartUps’ success is innovation. Therefore, safeguarding and protecting intellectual property is of major economic importance for the enterprises of this type.

My legal and business advice for StartUps, is to work with a law firm specialized in corporate, commercial and employment law, prior to the start of the company, which will also have the necessary knowledge and connections at an international level. This cooperation will ensure the protection of the new corporate entity while the company is in line with all procedures resulting from the legislative framework.

In addition, such cooperation is a necessary pillar for setting the right foundations of the enterprise, which can later evolve into an international “StartUp”. Unfortunately, we have repeatedly observed that the founders of companies turn to legal advisors at a later stage and they are called upon to solve various problems that could be avoided with the proper cooperation of reliable lawyers who are familiar with this company model.

The post StartUps – Frequently Asked Questions appeared first on Chambersfield Economides Kranos.