Investing in Cyprus (Version 04)

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The fourth version of a presentation by PYTHEAS Investors Service on everything you need to know about investing in Cyprus or utilizing the strategic location of this EU member island and its incomparable fiscal incentives as a regional and world business hub, with title, "Investing in Cyprus, an EU bridge to the world of business". Proof of PYTHEAS' world renowned market research capabilities, you will find this report thorough and complete. Addressing all issues that an investor should be aware of, this overview attempts to answer and it does answer, the valid questions: What makes this EU member country so special? Why has Cyprus become the region's, and not only, preferred business hub? Apart from having an established and proven investment environment, the discovery of oil & gas in its seabed will create additional immense opportunities and momentum to the Cyprus economy as a whole…

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Investing in Cyprus, an EU bridge to the world of business February 2011:

Investing in Cyprus, an EU bridge to the world of business February 2011 Version 04

PowerPoint Presentation:

I will sing of stately Aphrodite, gold-crowned and beautiful, whose dominion is the walled cities of all sea-set Cyprus. There the moist breath of the western wind wafted her over the waves of the loud-moaning sea in soft foam, and there the gold-filleted Hours welcomed her joyously… Homer

Map of Cyprus:

Map of Cyprus

Cyprus, Location & National Symbols:

Cyprus, Location & National Symbols Flag Emblem of the Republic

PowerPoint Presentation:

Cyprus is a thriving business hub , strategically located between Europe, the Middle East, Africa and Asia at the crossroads of the global economy. Member of the European Union and the EMU with a modern telecommunications and transportation network and tested banking and legislative infrastructure but also with a corporate tax of 10 % and about 50 double-tax treaties . Cyprus is already an established gateway to the world of international trade and a destination that serves as a strategic base for those entities that seek for a truly competitive advantage. Cyprus, Europe, Asia and Africa

PowerPoint Presentation:

Cyprus’ commitment to business and in particular to the service industry is evidenced by, world-class business facilities , its educated and multilingual workforce and its excellent housing and education offerings . All these, enhanced by, its Mediterranean climate with about 300+ days of sunshine, one of the lowest crime rates in Europe , a choice of cosmopolitan lifestyle or not , its native population that has been through its thousands of years of history accustomed to live and interact with a variety of nations. Statue of Aphrodite (300 B.C.)

Why Cyprus? :

Why Cyprus? An EU member state ; An EMU member state; Democratic country with a free market economy; Strategic location at the crossroads of three continents; Top notch telecommunications; Modern and efficient legal, accounting and banking services based on Brit ish practices; Favourable tax regime including 10% rate of corporation tax; Double-tax treaties with about 50 countries; Bilateral investment agreements with numerous countries; Low set up and operating costs; Highly qualified managerial, clerical and technical staff;

Why Cyprus? (…continued) :

Why Cyprus ? (…continued) Tax system in full compliance with EU requirements and those of the Organisation for Economic Co-operation and Development (OECD) against harmful tax practices ; Additional tax system provisions to the 10% corporation tax and the extensive double-tax treaty network advantage, include: Exemption for tax of dividend income (subject to easily met conditions); Exemption from tax of profits from foreign permanent establishments; Exemption from tax of profits generated from transaction in titles; Exemption from withholding tax on the repatriation of income either in the form of dividends, interest and on almost all royalties; Access to EU Directives; No controlled foreign corporation legislation; No thin capitalization rules (funding by high debt/equity ratio possible); Tax neutral reorganizations for both EU and non EU group companies. The discovery of substantial quantities of oil & gas in its seabed will create immense investment opportunities and momentum...

PowerPoint Presentation:

Slide(s) About Cyprus Geography 10 - 13 Demographics 14 - 15 Government 16 Climate 17 - 18 Ports 19 Yachting Marinas 20 - 21 Diversity of nature 22 - 33 History and culture 34 - 46

About Cyprus – Geography:

About Cyprus – Geography Cyprus, at the crossroads of Europe, Asia and Africa, is situated in the north-eastern corner of the Mediterranean Sea, about, 75 km south of Turkey, 90 km west of Syria, 280 km southwest of Israel, 370 km south of Egypt and 380 km east of the Greek island of Rhodes. It is the third largest island in the Mediterranean after Sicily and Sardinia, with an area of 9,251 km². Roudia Bridge (15 th century A.D.), Paphos

About Cyprus – Geography (…continued):

About Cyprus – Geography (…continued) Of the total area, 37% is occupied illegally by Turkish troops while 3% constitutes the territory of the British Sovereign Base Areas. It has two mountain ranges, Troodos and Pentadaktylos, which run from east to west across the island separated by the central Messaoria plain.

About Cyprus – Geography (…continued):

About Cyprus – Geography (…continued) The densely forested Troodos mountain range in the south-west is a dome-shaped highland dominated by the island´s highest peak, Olympus, at 1,953 meters above sea level. The narrower, Pentadaktylos mountain range in the north, mainly of limestone, rises up to 1,024 meters. Troodos mountains, a view

About Cyprus – Geography (…continued):

About Cyprus – Geography (…continued) Cyprus is almost surrounded by coastal valleys where the soil is alluvial and fertile, suitable for agriculture. Arable land in Cyprus constitutes 46,8% of the total area of the island. Rivers are seasonal and only flow after heavy rain. Water dams, 108 in number, hardly allow valuable water to flow into the sea. Two desalination plants are in operation and three are underway to be delivered by 2013. Beach at Neo Chorio, Paphos

About Cyprus – Demographics:

About Cyprus – Demographics The population of Cyprus is slightly over 1 million ( 2009 est. ), comprising 803 ,200 in the government controlled part and 265,100 (2006 census) in the illegally occupied territory in the North. It is estimated that about an additional 15 0,000 foreigners, mainly European live on the island permanently; also about 25,000 blue collar workers mainly from Central Eastern Europe and Asia and about 50,000 asylum seekers. Cypriot women, 16 th century

About Cyprus – Demographics (…continued) :

About Cyprus – Demographics (…continued) Ethnic groups: Greek Cypriot (76.5%), Turkish Cypriot (10%), other (13.5%). Official languages: Greek and Turkish, English widely spoken. Population growth rate: 1.66% Urban population: 70% Life expectancy: 77.66 years Literacy: 99.6% Capital: Nicosia, (Lefkosia) Main cities: Limassol, Larnaca , Famagusta*, Paphos , Kyrenia*. *Occupied illegally by the Turkish army Extract from the Royal Geographical Society (1889)

About Cyprus – Government (…continued) :

About Cyprus – Government (…continued) Executive Power Presidential system of government. The President is elected by universal suffrage for a five-year term. Executive power is exercised through an 11-member Council of Ministers appointed by the President. Legislative Power Multi-party House of Representatives. Voting system of simple proportional representation. House members are elected by universal suffrage for a five-year term. Judicial Power Justice is administered by the Supreme Court and by the Assize and District Courts. Local Authorities Local government is the responsibility of the Municipal and Community Councils.

About Cyprus – Climate:

About Cyprus – Climate Cyprus is the warmest island in the Mediterranean. The mean daily temperature in July and August ranges between 29°C on the central plain to 22°C on the Troodos mountains, while the average maximum temperature for these months ranges between 36°C and 27°C respectively. Winters are mild and the island, on average, enjoys more than 300 days of sunshine every year, and the rainy season is confined to the period between November and March. Colours of the sea, Ayia Napa

About Cyprus – Climate (…continued):

About Cyprus – Climate (…continued) Rain is unevenly distributed geographically with the highest in the two mountain ranges and the lowest in the eastern lowlands and coastal areas. Snow occurs rarely in the lowland and on the northern range of Pentadaktylos but falls every winter on ground above 1000 meters on the Troodos range, usually occurring by the first week in December and ending by the middle of April. Troodos in winter

About Cyprus – Ports:

About Cyprus – Ports International Airports Larnaca, and Paphos International Seaports Larnaca Limassol Paphos Latchi St. Raphael Resort, and Vassilikos Limassol Seaport, a view

About Cyprus – Yachting Marinas:

About Cyprus – Yachting Marinas Larnaca Marina 450 berths (expanded to 1000 berths by 2014) St. Raphael Resort, Limassol 237 berths Limassol Marina 665 berths (completed in 2012) Venus Rock, Paphos 1000 berths (completed in 2015) Ayia Napa Marina Resort, Famagusta 500 berths (completed in 2014) The Limassol Marina (artist’s impression)

About Cyprus – Yachting Marinas:

About Cyprus – Yachting Marinas P aphos Marina, Kissonerga 600 berths (completed in 2014) Paralimni Marina, Famagusta 500 berths (completed in 2014) Zygi Marina, Larnaca 400 berths (completed in 2012) Porto Mare, Larnaca 300 berths (completed in 2014) Paphos Marina, Kissonerga (artist’s impression)

About Cyprus – Diversity of Nature:

About Cyprus – Diversity of Nature The variety of plant and animal life and the unspoiled scenery make Cyprus one of the most beautiful places for appreciating nature. With its rugged coastline, alternating between long stretches of sand or pebble beaches, rocky shores and promontories, sun-baked plains and forested mountains, there is something for everyone to appreciate. Mountain Campion, Agros

Diversity of Nature (…continued):

Diversity of Nature (…continued) For a birdwatcher Cyprus is a must-visit, as the island is on the migration path between three continents, while a large number of endemic plants, such as the Cyprus orchid, tulip and crocus, make it a botanist’s paradise also. The island has its very own national animal, the Cyprus M ouflon, a wild sheep that roams free in the extensive forests of western Troodos. Cyprus Mouflon , Troodos

Diversity of Nature (…continued):

Diversity of Nature (…continued) Exotic and rare forms of wildlife give Cyprus a special touch. Green and Loggerhead turtles breed on the island's sandy beaches in summer, while the Mediterranean monk seal and dolphins have also been seen swimming in the warm, calm, crystal clear seas of the island. Loggerhead turtle (Caretta Caretta), Pomos

Diversity of Nature (…continued):

Diversity of Nature (…continued) Situated in the southeast of the island, Cape Greco National Forest Park is an area of unique natural beauty noted for its magnificent sea cliffs and indigenous flora. Many of the 36 different orchid species growing on the island are found here. Crocuses, colchicums and irises add both color and fragrance. Cyprus Bee Orchid, Cape Greco

Diversity of Nature (…continued):

Diversity of Nature (…continued) Cape Greco National Forest Park occupies an area of 390 hectares and offers visitors an opportunity to enjoy a number of activities such as swimming, scuba diving, parasailing, fishing, rowing, cycling, riding, climbing and hiking. A temple to Aphrodite existed here in antiquity. Cape Greco sunset, Famagusta

Diversity of Nature (…continued):

Diversity of Nature (…continued) Akamas, a peninsula and a nature conservation park is situated at the westernmost point of Cyprus. It is a rugged thumb-shaped strip of land crisscrossed by rocky hiking trails. The peninsula is the easternmost point of the three major flora zones of Europe. Sunset at Akamas sea caves, Paphos

Diversity of Nature (…continued):

Diversity of Nature (…continued) The number of plant species found in Akamas runs up to 600, of which 35 are endemic. The variety of fauna is also impressive: 168 bird species, 12 mammals, 20 reptiles and butterfly species of which the endemic Glaucopsyche Pafos butterfly is said to be the symbol of the area. Glaucopsyche Pafos butterfly, Akamas

Diversity of Nature (…continued):

Diversity of Nature (…continued) From the various trails hikers have spectacular views of rock formations, limestone outcroppings, cliffs and boulders sculpted into odd shapes suspended above the sea. According to a version, the area took its name from the Greek mythological hero Akamas, son of Theseus, who came to Cyprus after the Trojan War and founded Akamantis. Pyramid Orchids, Akamas

Diversity of Nature (…continued):

Diversity of Nature (…continued) An area of incomparable natural beauty, Akamas was also the place where Aphrodite and Adonis had their love trysts. Akamas is ideal for walking, cycling, diving, swimming, fishing, exploring, boat cruising, bird watching… Akamas in Spring, Paphos

Diversity of Nature (…continued):

The island’s national plant is the Cyprus cyclamen, an endemic plant that flowers from September to January. The national tree is the golden oak that takes its name from the golden color of its leaves. Also endemic to Cyprus, it is found in the Troodos mountain range and flowers from April to May. Wild Cyclamen, Evryhou Diversity of Nature (…continued)

Diversity of Nature (…continued):

Diversity of Nature (…continued) The fruits ripen all year round. The forests are also graced with pine, cypress and cedar. Olive and carob trees grow widely, while deciduous fruit trees and nuts are grown in the mountains. Home to the endemic Cyprus Warbler and the Cyprus Pied Wheatear, Cyprus is in the middle of north-south migration routes making it an important stopover for millions of birds every year. Warbler, Kakopetria

Diversity of Nature (…continued):

Diversity of Nature (…continued) With more than 350 species of birds, there is much to the delight birdwatchers. Besides the endemic Cyprus Warbler and Cyprus Pied Wheatear, there are four endemic subspecies – the Cyprus Scops owl, the coal tit, the short-toed tree creeper and jay. Flamingo at the Larnaca Salt Lake

About Cyprus – History and Culture:

About Cyprus – History and Culture Throughout the centuries both the history of Cyprus and Cyprus culture have been formed by its location at the crossroads of cultural exchange between Europe, Asia and Africa. Antiquities excavated here bear witness to a culture influenced from abroad, due to its geographic location between the great cultures of the ancient world, but which developed from these influences Cyprus’ own unique tradition . Figurine, Chalcolithic Period , mid 3 rd millennium B.C., Lempa, Paphos

History and Culture (…continued):

History and Culture (…continued) Cyprus has one of the oldest scientifically documented histories of the world dating back 11,000 years. The island was famous in antiquity for its copper mines, fine craftsmanship and luxury goods, and, perhaps most of all, as the birthplace of the Goddess Aphrodite, goddess of love, beauty and sexual rapture. Thus the name, Cyprus (Kypros in Greek) a synonym of Aphrodite (Kypria, Cyprian) and/or copper, like the color of her skin. Marble statue of Aphrodite, Hellenistic Period , Soloi

History and Culture (…continued):

History and Culture (…continued) For much of its long history, and indeed down to modern times, Cyprus has played a central role in the complex political and economic relationships of the eastern Mediterranean area, both as a source of raw materials and manufactured goods, but also as a point of contact between the diverse populations of the entire region; reflected in its richly textured archaeological record. Dionysus god of wine and entertainment as the “divine child” with a halo (400 B.C.), Paphos

History and Culture (…continued):

History and Culture (…continued) Very few places can match the island’s rich mosaic of history, art and culture. Minoans, Mesopotamians, Hittites, Arcadians, Achaeans, Mycenaeans, Macedonians, Phoenicians, Assyrians, Egyptians, Persians, Romans, Levantines, Byzantines, Crusaders, Saracens, Frankish, Lusignans, Venetians, Ottomans, British, Turks have all left their mark on the island… Khirokitia Neolithic archaeological site, Larnaca

History and Culture (…continued):

History and Culture (…continued) The island could be seen from the Levantine and Anatolian coasts but would need great personal effort and hardship to be “colonized”. The Cypriot is forced by the myriad of conquerors and the different elements to become tough and crafty, shrewd and hospitable, free-spirited and entrepreneuring… Sanctuary of Apollo (800 B.C.), Limassol

History and Culture (…continued):

History and Culture (…continued) The cultures that did develop in Cyprus through time quickly formed the unique cultural identities that so often occur on islands when there is a barrier to communication. They found their own path and individuality as they were shaped by an amazingly colorful and diverse history, geology, geography, flora, fauna and simply 'Cyprusness' of their surroundings. Paphos Castle (13 th Century A.D.)

History and Culture (…continued):

History and Culture (…continued) During prehistory the island was influenced by the Pharaohs of Egypt to the south, the Mesopotamian kingdoms to the east, the Hittite empire to the north and the Minoan and Mycenaean cultures of the west. It is this unique fusion of cultures and influences that is one of the great joys of Cypriot archaeology. Mycenaean terracotta , 1230 B.C. Engomi , Famagusta

History and Culture (…continued):

History and Culture (…continued) During 13 th century B.C. Arcadian Greek settle on the island and about a century later Achaean Greek. By 800 B.C. Cyprus has ten Greek kingdoms and it is a flourishing and prosperous country. From 750 B.C. Cyprus is conquered several times by Assyria, Egypt and Persia. In 333 B.C. Alexander the Great claims Cyprus for part of his empire. In 58 B.C. Cyprus becomes part of the Roman Empire. Leda and the Swan mosaic, Paphos (300 A.D.)

History and Culture (…continued):

History and Culture (…continued) After the division of the Roman Empire Cyprus becomes part of Byzantium. In 1191 AD Cyprus is defeated by the crusader Richard the Lionheart. The island is then sold to the Knights Templar, who resell it to Guy de Lusignan. From 1192 to 1489 Cyprus is ruled under a feudal system and Catholicism becomes the official religion. Famagusta Gate, Nicosia

History and Culture (…continued):

History and Culture (…continued) In 1489 control of the island passes to the Venetians who take steps to fortify the island and build walls around the towns of Nicosia and Famagusta. In 1571 Cyprus becomes part of the Ottoman Empire. In 1878, under the Cyprus Convention, Britain assumes administration of the island although it remains part of the Ottoman Empire. Byzantine church of Ayia Paraskevi (900 A.D.), Yeroskipou

History and Culture (…continued):

History and Culture (…continued) In 1914, however, when Turkey entered WWI on the side of the Germans, Britain annexed the island. In 1923 Turkey relinquishes all rights to Cyprus and in 1925 Cyprus is declared a Crown colony. During WWII 30,000 Cypriots join the British regiment to fight Nazism. An armed struggle breaks out in 1955 against colonial rule, which lasts until 1960 when the island is granted independence. Sarcophagus (5 th century B.C.), Amathus

History and Culture (…continued):

History and Culture (…continued) In 1963 Turkish-Cypriot ministers withdraw from the Government in protest at proposed changes to the Constitution and Turkey threatens to invade. In1974 the Greek junta instigates a coup in Cyprus against the Cypriot Government and Turkey uses that as a pretext and invades the island – the coup fails. 13 th century B.C. rhyton, Kition

History and Culture (…continued):

History and Culture (…continued) Turkey continues to illegally occupy 37% of the island, violating the UN charter. It has established the Turkish Republic of Northern Cyprus, an illegal state, recognized only by Turkey and continues to maintain the division of the island through force. Occupied Cyprus: Ancient Greek city of Salamis (1193 B.C.), Famagusta

PowerPoint Presentation:

Slide(s) The Economy – G eneral 49 - 59 The Economy – Sectors & Bodies Banking 60 - 64 Insurance 65 - 66 The Cyprus Stock Exchange 67 - 68 Hospitality & Tourism 70 - 73 Real Estate & Construction 75 - 78 Shipping 80 - 83 Manufacturing 85 - 87 Slide(s) Mining 89 - 91 Agriculture 92 - 93 Education 95 - 97 Healthcare 99 - 101 Environment 102 - 104 Energy 106 - 110

PowerPoint Presentation:

Cyprus is classified among the high-income countries and has a standard of living that is higher than most other European Union member-states…

The Economy – General:

The Economy – General The Cyprus economy is characterised by robustness and macroeconomic stability. In 2004 it joined the European Union. In 2008 it was classified by the IMF amongst the 32 advanced economies of the world . From 1 January 2008, the country entered the Eurozone and adopted the Euro (€) and monetary policy is dictated by the European Central Bank. Cyprus has an open, free-market, service-based economy with the private sector playing the dominant role. Throughout the post-Independence period, Cyprus has had a record of successful economic performance , reflected in rapid growth, full employment conditions and external and internal stability .

The Economy – General (…continued):

The Economy – General (…continued) The underdeveloped economy, inherited from Colonial Rule in 1960, has been transformed into a modern economy, with dynamic services, industrial and agricultural sectors and advanced physical and social infrastructure. Cyprus is classified among the high-income countries . It has a standard of living that is higher than most other European Union member-states (>98% of the European average) and the performance of the economy compares favorably with that of most of the wealthier other EU countries . The average annual rate of growth between 2004 and 2008, prior to the Global Financial Crisis, was 4.2 %, while inflation stood at 2.5% and unemployment at 4.4% over that period. As at end-2010, GDP was at 0.8% (-1.7% in 2009), inflation at 2.4% (0.3% in 2009) and unemployment at 7.1% (5.4% in 2009).

The Economy – General (…continued):

The Economy – General (…continued) The success of Cyprus in the economic sphere is attributed, inter alia, to the adoption of a market oriented economic system, the pursuance of sound macroeconomic policies by the government as well as the existence of a dynamic and flexible entrepreneurship and a highly educated labor force. Moreover, the economy benefited from the close cooperation between the public sector and the social partners – the Government’s role is limited to the creation and sustainability of an entrepreneurial environment. The Turkish Invasion. These achievements appear all the more striking, bearing in mind the severe economic and social dislocation created by the Turkish invasion of 1974 and the continuing occupation of the northern part of the island by Turkey – investment activity will continue to be weighed down by the island’s political problems and economic imbalances (namely twin fiscal and current account deficits) caused by the illegal occupation of almost 40% of the island by Turkey.

The Economy – General (…continued):

The Economy – General (…continued) The Turkish invasion inflicted a serious blow to the Cyprus economy and in particular to agriculture, tourism, mining and quarrying: 70% of the island’s rich producing resources were lost, the tourist industry lost 65% of its hotels and tourist accommodation, the industrial sector lost 46%, and mining and quarrying lost 56% of production. The loss of the Port of Famagusta, which handled 83% of the general cargo, and the closure of the Nicosia International Airport, in the buffer zone, were additional blows. The Global Financial Crisis. Although the island has been somewhat shielded from the global financial crisis, largely because of its low reliance on exports, prudent fiscal policies, resilient financial sector, and limited exposure to subprime mortgages, the crisis has not left Cyprus unaffected.

The Economy – General (…continued):

The Economy – General (…continued) It is important to note that Cyprus was affected by the global crisis with a lag, as it entered into a shallow recession in early-2009, about a year after the Euro-area as a whole. Prior to the crisis, rapid credit growth drove private sector indebtedness up and led to overheating. Above Euro-area average real wage and price dynamics exacerbated external imbalances and the related loss in competitiveness and immediately required necessary adjustment in saving patterns will moderate growth going forward. Meanwhile, tax revenue buoyancy during the upturn, especially related to asset prices, proved cyclical and the fiscal position took a sharp turn for the worse since 2009.

The Economy – General (…continued):

The Economy – General (…continued) Economic conditions have started to stabilize after the economic downturn, and the Cypriot economy is poised to return to modest growth in 2011. However, global financial risks remain elevated and growth prospects in main trading partners remain muted, which weigh on the outlook for Cyprus for the short term. Golfing at Aphrodite Hills, Paphos

The Economy – General (…continued):

The Economy – General (…continued) Kolossi Castle (1210 A.D.), Limassol The banking sector remains sound overall, although the growth in non-performing loans calls for vigilance. Turning to medium-term prospects, containing the growth of public spending and enhancing wage flexibility are needed to boost productivity and improve growth.

The Economy – General (…continued):

The Economy – General (…continued) The recovery still faces several downside risks, a slightly appreciated euro and higher domestic inflation rate will lead to a loss of competitiveness on the European and the global markets. Moreover, austerity measures in Cyprus and its trading partner countries could lead to a decline in domestic demand (in Cyprus) and import demand (in the trading partner countries) and therefore to slower economic growth in 2011. In particular, spending cuts in Greece, Italy and other Mediterranean countries will have a negative spill-over effect on the Cypriot economy because of fewer exports to those countries, thus GDP will grow only modestly in 2011, estimated to below 2%.

The Economy – General (…continued):

The Economy – General (…continued) Imports . Main imports are raw materials, consumer and capital goods, transport equipment and fuels. In 2010 (Est.), more than 50% of total imports came from the EU. Main partners: Greece (20.1%), Italy (10.7%), USA (10.1%), UK (8.9%), Germany (8.8%), Israel (6.9%), China (5.5%), Japan (5.2%), the Netherlands (4.9%), France (4.1%). Exports . Major exports are manufactured and agricultural products such as clothing, footwear, pharmaceuticals, cement, cigarettes, furniture, paper goods, wines, potatoes, dairy and citrus fruit. In 2010 (Est.) almost 50% of domestic exports went to EU countries. Main partners: Greece (23.8%), Germany (9.2%), UK (8.8%). Also about 14% of exports went to the Middle East and 8% to Eastern Europe. Wholesale and Retail Trading accounts for 14.5% of GDP (March 2010).

The Economy – General (…continued):

The Economy – General (…continued) The services sector is the fastest growing area of the economy and today accounts for about 68% of GDP and 69% of total employment (March 2010). The sector includes banking, insurance, hospitality and tourism, trade, real estate, public administration, business and legal services. Economy Sectors – Contribution to GDP ( as at 31/03/2010) Source: Statistical Service of the Republic of Cyprus

The Economy – General (…continued):

The Economy – General (…continued) Despite its openness to international markets and the strong presence of multinational organizations, the Cyprus economy has proven to be relatively robust, showing during the global financial crisis continuous signs of endurance with minimal comparatively economic slowdown. Cyprus navigated through the global and regional financial crises better than most other states in Europe. Akamas in Spring, Paphos

Banking:

Banking The banking system comprises of the Central Bank of Cyprus, which is the regulatory and supervisory authority for the banking institutions, the banks, and the international banking units. It includes also the cooperative credit institutions which are overseen by the Commissioner of the Co-operative Societies´ Supervision and Development Authority. Although Cyprus’ banking sector is complex owing to its role as an international and regional financial center, it poses risks by virtue of its size and concentration, but its capitalization appears adequate. Only a small number of commercial banks have Cyprus as their home country; the rest are branches or subsidiaries of foreign banks. Despite recent decline in profitability, return on equity remains high compared to the Euro area and liquidity ratios appear comfortable.

Banking (…continued):

Banking (…continued) In view of the global crisis, to their credit, banks lowered dividend payout ratios, cut operational costs, strengthened non-interest margins, and bolstered fee-based activities to support net income; increased loan loss provisions and tightened underwriting standards; and have been able to attract deposits from Greece owing amongst other to perceived safety of the banking system. Fisherman at Liopetri River, Famagusta

Banking (…continued):

Banking (…continued) Exposure to Greece is significant which creates additional pressure on NPLs; NPLs reported by cooperative banks are higher, and weaker classification norms than for commercial banks strongly suggest that they are significantly understated. Despite the above, t he banks’ predominant reliance on more stable retail funding, negligible exposure to complex securities, high levels of liquidity, and strong Beach at Ayia Triada, Paralimni

Banking (…continued):

Banking (…continued) supervision as well as the recent and ongoing stress tests carried out by the Central Bank of Cyprus indicate that the system has the capacity to absorb further shocks if any occur. Note also that the banking sector plays the most significant role in the financial sector, representing approximately 80% of total financial sector assets. Sea caves at Cape Greco, Famagusta

Banking (…continued):

Banking (…continued) Useful links: Central Bank of Cyprus COOP Central Bank Republic of Cyprus, Ministry of Finance Association of Cyprus Banks Authority for the Supervision and Development of Cooperative Societies Bank Employees Union of Cyprus Sunset at Governor’s beach, Limassol

Insurance:

Insurance Cyprus has a relatively developed insurance industry which is growing alongside the banking and investment funds business – the largest insurance companies in Cyprus are subsidiaries or affiliates of banks. Cyprus insurance and reinsurance companies benefit from a sound legal and regulatory framework with the “Superintendent of Insurance” safeguarding the high quality of insurance/reinsurance operations through an efficient supervisory review and monitoring the smooth running of their business. Although the ICCS has introduced significant supervisory and regulatory reforms, closer co-operation with foreign supervisors is required, given the potential spill-over effects from neighboring countries. Consideration should also be given to enlarging the deposit insurance facility.

Insurance (…continued):

Insurance (…continued) Useful links: Republic of Cyprus, Insurance Companies Control Service Insurance Association of Cyprus Insurance Institute of Cyprus Cyprus Association of Actuaries Motor Insurers’ Fund of Cyprus Troodos mountains during the night

The Cyprus Stock Exchange:

The Cyprus Stock Exchange The Cyprus Stock Exchange (CSE) started its operations as a legal entity in the form of a public corporation body in March 1996. The CSE is a regulated Exchange where all transactions concerning corporate and public securities are carried out. Such securities include stocks, bonds and warrants. The main participants in the market are the Members of the Stock Exchange (stock brokerage firms), the listed issuers and the investors. Trading of shares by foreigners on the Stock Exchange is as easy as on any modern stock market. Foreign investors are subject to the same rules and regulations of the CSE as Cypriots or other EU nationals, regarding capital distribution.

The Cyprus Stock Exchange (…continued):

The Cyprus Stock Exchange (…continued) Useful links: Republic of Cyprus, Ministry of Finance Cyprus Stock Exchange Cyprus Securities and Exchange Commission Cyprus, Treasury of the Republic Larnaca Salt Lake, a view

PowerPoint Presentation:

Cyprus, the island for all seasons!

Hospitality & Tourism:

Hospitality & Tourism Tourism is the single most important economic activity in Cyprus, as it contributes close to €1.55 billion in revenue, about 14% of the islands GDP. With about 94,000 licensed beds in all categories of accommodation, Cyprus hosted in 2010 2.17 million tourists. Scuba-diving at Latchi, Paphos

Hospitality & Tourism (…continued):

Hospitality & Tourism (…continued) 82.6% of the tourists in 2010 were European residents with the UK accounting for 46% of tourist arrivals, Russia (10%), Germany (6%), Greece (6%), and Sweden (5%). Asia accounted for 4%. Revenue from tourism for 2010, was at €1.55 billion compared to €1.49 billion in 2009, recording an increase of 3,8%; prior to the crisis, however, from 2005 to 2008 the mean annual revenue was €2.4 billion. The long-term tourism development strategy on which Cyprus has embarked, offers multiple opportunities for investment; the establishment of cooperation networks and partnerships; and the exchange of knowledge and expertise with other countries.

Hospitality & Tourism (…continued):

Hospitality & Tourism (…continued) The attraction of investment, including the promotion of joint ventures between Cyprus and foreign enterprises, is an explicitly-stated government objective. Noteworthy, announced projects from both the private and government sector for Hospitality/ Real Estate projects over the next 4 years exceed €15 billion. Kamares Aqueduct (1745 A.D.), Larnaca

Hospitality & Tourism (…continued):

Hospitality & Tourism (…continued) Off to the open sea, Paralimni Fishing Shelter Useful links: Republic of Cyprus, Ministry of Commerce, Industry & Tourism Cyprus Tourism Organisation Cyprus Hotel Association Association of Cyprus Travel Agencies Association of Cyprus Tourist Enterprises Cyprus Hotel Industry Employees Provident Fund Cyprus Sustainable Tourism Initiative Cyprus Airways

PowerPoint Presentation:

Perhaps the best reason to invest in a Cyprus real property is the fact that there are double-tax-treaty agreements with about 50 countries.

Real Estate & Construction:

Real Estate & Construction In recent years, Cyprus has experienced a remarkable rise in property prices followed by intensive construction activity, especially in the residential property sector. The rising construction and real estate sector boosted by demand from the international community has contributed to the country’s economic growth significantly. Cyprus enjoyed a more than ten-year real property boom until 2008. Then with the global financial crisis the market began to fall in certain areas, mainly because of: (a) The fall in the value of the Sterling against the Euro over the past two years – British buyers, who accounted for more than 50% of foreign buyers, have less equity at their disposal; (b) The worldwide economic turmoil has also changed the characteristics of the “typical” overseas property buyer – investors are much more cautious about their investment decisions;

Real Estate & Construction (…continued):

Real Estate & Construction (…continued) (c) The lack of transparency with certain property related laws, although the Cyprus government is making concrete attempts to rectify the situation; (d) The high mortgage interest rates – amongst the highest in Europe. In 2010 (Est.), Construction industry accounted for 10% to GDP. Elea Golf Club, Paphos

Real Estate & Construction (…continued):

Real Estate & Construction (…continued) Presently the real estate and construction industries are characterized by weaker demand compared to 2008. It is Pytheas’ opinion, however, that despite the current real property and construction industries contraction, Cyprus remains one of the most popular destinations for Europeans and other nationals that seek to invest in a holiday, a retirement or an investment home . In terms of real property product attraction, the financial and other benefits are comparatively to other EU countries immense, i.e. some of the best tax breaks in the EU (if not the best), lower cost of living compared to mainland Europe, excellent weather, rich heritage and culture, superb medical facilities and infrastructure.

Real Estate & Construction (…continued):

Real Estate & Construction (…continued) Makronisos beach, Ayia Napa Useful links: Republic of Cyprus, Ministry of Interior Republic of Cyprus, Department of Town Planning & Housing Republic of Cyprus, Department of Lands & Surveys Cyprus Real Estate Agents Association The Cyprus Valuers Association Republic of Cyprus, District Administration Offices Home4U Estates Limited

PowerPoint Presentation:

The Cypriot maritime registry is the tenth largest in the world, one of the largest in the EU, and Cyprus is the biggest third-party ship management center in the EU!

Shipping :

The Merchant Shipping Legislation enacted as from 1 January 2010 places Cyprus in a very competitive position; Cyprus has become the only EU country with an EU approved TT 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 10% corporation tax); Supports an open registry; Allows split ship management activities (crewing or technical). Shipping

Shipping (…continued):

Shipping (…continued) The favorable income tax legislation compliments the excellent Merchant Shipping Legislation, creating a highly tax efficient harbor for shipping groups and an ideal holding company location. Noteworthy, is that the Cypriot maritime registry is the tenth largest in the world, one of the largest in the EU, and Cyprus is the biggest third-party ship management center in the EU. The Larnaca Marina

Shipping (…continued):

Shipping ( …continued) The Cyprus Registry is one of the only two “Open Registries” within the EU, estimated to constitute 25% of the whole EU “fleet”. The island has its own well-established maritime infrastructure comprising the admiralty courts, unions and Classification Society. The Cyprus flag is in the white list of Paris Memorandum of Understanding demonstrating the government’s commitment to safety and maintenance of Cyprus as a reputable maritime centre. Good international relations have played an important role in the development of Cyprus as a shipping center – other than a reputation of an international financial center, Cyprus has the unique advantage of being a member of the UN, Council of Europe, Commonwealth, the Conference for Security and Co-operation in Europe and the Group of Non Aligned Countries.

Shipping (…continued):

Shipping (…continued) Useful links: Republic of Cyprus, Department of Merchant Shipping Cyprus Shipping Chamber Cyprus Union of Shipowners Cyprus Shipping Association Cyprus Ports Authority CYMEPA Republic of Cyprus, Department of Customs & Excise Governor’s beach, Limassol

PowerPoint Presentation:

The manufacturing industry of Cyprus has been going through difficult times, experiencing a fall in the growth of production, exports and employment… undergoing restructuring…

Manufacturing:

Manufacturing The manufacturing industry of Cyprus has been going through difficult times in the past decade and a half, experiencing a fall in the growth of production, exports and employment. This development has been the result of an erosion in Cyprus’ competitiveness, both abroad and in the local market, at a time of increasingly intensified, international competition. At the root of these problems lie, (a) the structural weaknesses of the sector, (b) the drastic reduction of tariff protection due to the participation of Cyprus in the World Trade Organization, (c) the rising labor costs, (d) the smaller local market, and (e) the low productivity. As a result the share of the manufacturing sector in the Gross Domestic Product and in corresponding employment remained stagnant.

Manufacturing (…continued):

Manufacturing (…continued) A reformulated government policy to facilitate the process of modernization and technological upgrading of the manufacturing and industrial sector has been adopted by (a) the attraction and development of new high-tech industries, (b) providing assistance for the reconstruction of Cyprus traditional industry, (c) providing assistance for productivity improvement, and (d) the attraction of capital intensive foreign investment. Manufacturing accounted in 2010 (Est.) for 8% of GDP and provided employment to 11% of the workforce. The main industries are food, beverages, tobacco, textiles, clothing, footwear, leather goods, metal products, pharmaceuticals, chemicals and plastic products.

Manufacturing (…continued):

Manufacturing (…continued) Avakas Gorge, Akamas Useful links: Republic of Cyprus, Ministry of Commerce, Industry and Tourism Cyprus Employers & Industrialists Federation Cyprus Chamber of Commerce & Industry Republic of Cyprus, Department of Customs & Excise Republic of Cyprus, Public Procurement

PowerPoint Presentation:

Although relatively well-endowed with mineral resources, the Mining Industry in Cyprus has been on the decline for the last three decades and it is practically non existent…

Mining:

Mining For several millennia, Cyprus was an important source of copper ores and other ores and minerals. Although relatively well-endowed with mineral resources – it is among the five richest areas in the world with respect to copper-pyrites and also has rich chromite deposits – the mining industry in Cyprus has been on the decline for the last three decades and it is practically non-existent. Skouriotissa copper mine, Troodos

Mining (…continued):

Mining (…continued) The only mining activity is the Skouriotissa Copper Mines which produces copper metal cathodes (99.999%) with the application of the Leaching-Solvent Extraction-Electrowinning. There is, however, extensive quarrying of rocks and industrial minerals with about 220 quarries – 45 of these quarries are in their final stage of operation – producing havara and aggregates for local use (i.e., calcarenite, diabase, etc.), limestone, clay and gypsum as raw material, clay, building stone, etc. Bentonite, graded gypsum, grinded umber and ochre, lime, cement, plasters and building stones are exported. Concerning the prospecting of metals, increased interest is shown recently for copper and precious metals, especially gold and silver.

Mining (…continued):

Mining (…continued) Useful links: Republic of Cyprus, Ministry of Agriculture, Natural Resources & Environment Republic of Cyprus, The Mines Service Ancient quarry, Paphos

Agriculture:

Agriculture Agriculture in 2010 (Est.) accounted for 2% of GDP and provided employment to 8% of the workforce. Principal crops are potatoes, other vegetables, cereals, citrus, grapes and olives. Livestock farming is mainly in cattle, sheep, goats, pigs and poultry. Fish production is derived from inshore and trawl fishing and marine aquaculture. Harvesting grapes at Kilani, Limassol

Agriculture (…continued):

Agriculture (…continued) Useful links: Republic of Cyprus, Ministry of Agriculture, Natural Resources & Environment Republic of Cyprus, Department of Agriculture Wine Products Council Cyprus Agricultural Payments Organisation Republic of Cyprus, Agricultural Research Institute Wheat bales at Mazotos, Larnaca

PowerPoint Presentation:

86% of Cypriots between the ages of 25 to 60 have a tertiary educational level…

Education:

Education Full time education is compulsory from the age of five. Primary and secondary education is free. In addition to state schools there are private fee-paying schools in all towns, whose basic language is English. Cyprus offers, 3 public universities and 3 private ones; 43 tertiary educational institutions, 34 of which private and 9 public; 345 public and 28 private primary schools; and 126 public and 36 private secondary schools. Since 2004 Cyprus has consistently allocated over 6% of GDP of public expenditure on Education, the highest in the EU. With an average annual increase of 10.5% in the total number of tertiary students in the last 5 years, and with almost a third of all tertiary students studying in Cyprus coming from abroad, there is a great opportunity for new universities, colleges and research centers.

Education (…continued):

Education (…continued) Notably, 86% of Cypriots between the ages of 25 to 60 have a tertiary educational level and more than 55% of Cypriot tertiary students studied abroad. The Government is pursuing the establishment of high technology industry through the creation of incubators and research and technological development centers. University of Cyprus Sports Center, Nicosia

Education (…continued):

Education (…continued) Useful links: Republic of Cyprus, Ministry of Education & Culture The Cyprus Council for the Recognition of Higher Education Qualifications Cyprus Higher Education Cyprus Education via Internet Cyprus Pedagogical Institute Cyprus Education Web Portal Cyprus Educational Commission Republic of Cyprus, Research Promotion Foundation Cyprus International Institute for Environmental & Public Health 1,500 hundred year old mastic tree, Apeshia

PowerPoint Presentation:

An excellent healthcare system that offers value for money and quality medical treatment and an excellent reputation for essential post-operative care… healthcare tourism is on the rise…

Healthcare:

Healthcare Cyprus gained prominence for its excellent healthcare system that offers value for money and quality medical treatment for patients from all over the world as well as an excellent reputation for its essential post-operative care that is complimented by its immaculate climate; it is recognized by the World Health Organization to be on a par with other developed countries. Promoted also as an up-and-coming destination for healthcare tourism, the island has public hospitals in all cities and an extensive network of smaller rural hospitals country-wide, with more than 2500 beds and 2,250 doctors in private clinics and a large number of practices that offer a wide range of medical services, whether specialized or not.

Healthcare (…continued):

Healthcare (…continued) Public hospitals provide free or subsidized medical coverage depending on a person's status (i.e. family status and income level). A comprehensive social insurance scheme covers every working male and female and their dependants. Benefits and pensions from the scheme cover unemployment, sickness, maternity, widows, injury at work, old age and death. Traditional tavern, Ayia Napa

Healthcare (…continued):

Healthcare (…continued) Useful links: Republic of Cyprus, Ministry of Health Cyprus Health Services Promotion Board Cyprus Medical Association Cyprus Dental Association Cyprus International Institute for Environmental & Public Health Meadow in Spring, Famagusta

Environment:

Environment The protection of the environment is an essential element in the Cyprus’ economic and social development policies. Environmental legislation has been completely harmonized with the relevant EU laws and directives. Cyprus has signed the nine International Environmental Agreements and has ratified the Cartagena Protocol on Biosafety, which has already been implemented for governing the movement of living modified organisms (LMO) resulting from modern biotechnology to countries outside the EU. Moreover, Cyprus has ratified the Kyoto Protocol. The government acknowledges that Cyprus is a country with very high consumption rates and as a result it has one of the fastest rising production rates of waste.

Environment (…continued):

Environment (…continued) The environmental, health and socioeconomic impacts of the uncontrolled disposal of waste is also huge especially considering the fact that Cyprus is a very small island. The government is determined to reduce the production rates of waste and treat alternatively waste (reuse, recycling, energy recovery) with final target the minimization of waste ending to landfills. As a result, the first solid municipal waste plant commenced operation in Larnaca (2010) – claimed to be the most modern of its kind in the world, the construction of a hazardous waste unit is under consideration, two landfills have been upgraded, another is under way and two more new ones are at the planning stage, several other programs are in place for the management of solid and liquid waste, i.e. for, electric and electronic equipment, end-life cars and tires, batteries, separation and collection of household waste, etc.

Environment (…continued):

Environment (…continued) Useful links: Republic of Cyprus, Ministry of Agriculture, Natural Resources & Environment Republic of Cyprus, Department of Forests Terra Cypria Cyprus Environmental Studies Centre Friends of the Earth Cyprus CYMEPA Bird Life Cyprus Cedar Valley, Troodos

PowerPoint Presentation:

The discovery of significant oil and natural gas reserves in the seabed areas between Cyprus and Egypt, Cyprus and Lebanon and Cyprus and Israel is likely to give a different momentum to the growth of the Cyprus economy!

Energy:

Energy The energy policy of Cyprus is fully harmonized with the energy policy of the European Union. In 2000 the Energy Services department was established under the Ministry of Industry, Commerce & Tourism and founded the Cyprus Institute of Energy with a main purpose to develop and expand the use of renewable sources of energy. Other activities of the Energy Services department include the liberalization of the electricity market by abolishing the monopoly of the Electricity Authority of Cyprus (EAC), the government owned and only power provider. Cyprus is in the process of establishing a strategic stock oil (by 2012) and an onshore natural gas terminal (by 2013).

Energy (…continued):

Energy (…continued) Apart from establishing a number of new gas turbine generators, EAC also plans to gradually convert its existing oil-fired thermal power units to run on natural gas. A new CCGT unit (220MW) has been installed at the Vasilikos Power Station which can run on both diesel and/or natural gas. A Public Natural Gas Company (DEFA) has been founded as a private legal entity, with the Government of Cyprus as its main shareholder and the option for EAC to participate in its share capital; this company will be the sole importer and supplier of natural gas in Cyprus. The estimated local natural gas demand spans from 0.9bcm in year 2013 to 2bcm in year 2035.

Energy (…continued):

Energy (…continued) The discovery of significant oil and natural gas reserves in the seabed areas between Cyprus and Egypt, Cyprus and Lebanon and Cyprus and Israel is likely to give further boost to the Cyprus economy. Specifically, oil has recently been discovered in the seabed between Cyprus and Egypt, while the seabed separating Lebanon and Cyprus is believed to hold significant quantities of both oil and natural gas. Rich natural gas reserves were also located between the exclusive economic zones of Cyprus and Israel. Talks are underway between Cyprus and the neighboring governments to reach an agreement regarding the exploration of these resources. As per EU directive Cyprus is committed to replace 20% of its fossil fuel energy with renewable energy sources by 2020 Presently, peak load is about 1100MW – EAC operates three power stations with a total installed capacity of 1388MW.

Energy (…continued):

Energy (…continued) The Renewable Sources of Energy balance in Cyprus is as follows: Renewable sources of energy are estimated to account for about 11.5% of total energy demand; The solar energy systems for heating water contribute 2.9% and are applied to over 90% of all households and to 50% of hotels (2009); Photovoltaic systems for producing electric energy contribute 0.06% and produce over 2.5MW (2008); Biomass for electricity production contributes 0.9% and with a production capacity of 4.4MW (2008); Wind farming contributes 6.9% with a production capacity of 83MW (2010). Biofuels contribute 0.7% of the remaining possibilities (2008).

Energy (…continued):

Useful links: Republic of Cyprus Energy Services Electricity Authority of Cyprus Cyprus Energy Regulatory Authority Cyprus Institute of Energy Cyprus Energy Agency Cyprus Organisation for the Management and Storage of Oil Stocks Wind farming at Kouklia, Paphos Energy (…continued)

PowerPoint Presentation:

Slide(s) Tax Environment G eneral 113 Personal Income Tax 114 - 118 Corporate Income Tax 117 - 120 Defence contribution 121 Value Added Tax 122 - 123 Social Security Contributions 124 Double Tax Treaties 125 - 127

PowerPoint Presentation:

It is the opinion of Pytheas that there are better tax concessions in Cyprus than just about anywhere on the planet.

Tax Environment – General:

Tax Environment – General Cyprus’ favorable tax regime, together with an open stance toward foreign investors, is a key feature of the country’s business model. It has been an important factor behind the transformation of the economy from an agricultural base in the 1960s, to an industrial base until the mid-1980s, and a services base economy thereafter, with services accounting for about 70% of GDP. Narrow alley at Lania village, Limassol

Personal Income Tax:

Personal Income Tax Cyprus has a personal income tax with a progressive rate structure. The top rate of personal income tax is low, at 30%, and the tax-free threshold for income is high, at €19,500. Cyprus tax residents are taxed on income earned both in Cyprus and abroad. Non tax residents are taxed on income earned only from Cyprus sources. Kakopetria village, Nicosia

Personal Income Tax (…continued):

Personal Income Tax (…continued) Capital gains, dividends, interest income and income from the sale of securities are exempt from income tax. Dividends and interest are taxed under the Special Contribution for the Defence of the Republic Law and a capital gain tax is levied on the realized profit from the disposal of immovable property in the Republic and/or securities. Narrow alley at Kato Drys village, Larnaca

Personal Income Tax (…continued):

The total interest income is subject to no withholding tax. Losses of current and previous years are deducted from taxable income. Profits of permanent establishments abroad are exempt from tax. Profits from the sale of securities are exempt from tax. Personal Income Tax (…continued) Clay jars at Fikardou village, Nicosia

Personal Income Tax (…continued):

Salary earned abroad for a period of more than 90 days in a tax year is exempt from tax. Income received in the form of a retiring gratuity, compensation for death or injuries, provident fund, pension fund, or other approved funds is exempt from tax. 40% of the amount deposited to the Housing Finance Corporations is exempt from tax. Personal Income Tax (…continued) Traditional oven at Fikardou village, Nicosia

Corporate Income Tax :

With a flat corporate tax rate of 10%, Cyprus has the lowest corporate tax rate in the EU. Interest income is taxed at the corporate tax rate of 10%. Dividend income is exempt from tax provided the direct holding is at least 1% of the share capital of the overseas company. Profits from activities of a permanent establishment situated outside Cyprus are completely exempt. Corporate Income Tax Narrow alley at Fikardou village, Nicosia

Corporate Income Tax (…continued):

International Business Companies (IBCs) – see slide 137 – are totally exempt from the defence fund levy on dividend or on deemed dividend distribution provisions. Tax losses can be carried forward and set off against future profits indefinitely. Also the loss of a Cyprus tax resident company can be set off against the profit. Corporate Income Tax (…continued) House at Fikardou village, Nicosia

Corporate Income Tax (…continued):

IBCs holding royalty rights shall continue to be exempt from any withholding tax on royalties payable if the right is granted for use outside Cyprus. Profits gained from the sale of securities are exempt from tax for all companies. Transfers of assets and liabilities between companies in the course of reorganization such as M&As, de-mergers, transfer of activities or exchange of shares, is subject to zero withholding tax. Tax relief of foreign tax paid is granted even in the absence of a double-tax treaty. Corporate Income Tax (…continued)

Defence contribution:

Defence contribution All residents are subject to the Defence Contribution, which is applied with different rates on dividends, interest and rental payments. Mansoura beach, Pyrgos

Value Added Tax (VAT):

Value Added Tax (VAT) In 2003 the standard VAT rate was raised to the EU minimum of 15% for most categories of goods and services. But in 2009 VAT on hotels and restaurants was reduced from 8 to 5% on a temporary basis and in 2010 the reduced rate still applies to hotels only; airport landing fees levied on airline companies were decreased; and overnight stay fees levied by local authorities cancelled. VAT rate on certain locally produced labor intensive services was lowered to the reduced rate of 5% on a permanent basis. Other reduced rates: Restaurants and Catering (8%), Rural and Private Tax Transport Services (8%), Tourist Excursion and Long Distance Bus Services (8%), Supply of Fertilizers, Animal Feeds and Seeds (5%), Supply of Live Animals for Human Consumption (5%), etc.

Value Added Tax (VAT) (…continued):

Value Added Tax (VAT) (…continued) Zero Rate applies to: Supply of goods and services to other EU member states; Exports to non-EU countries; Foodstuffs; Commissions received from abroad for import-export of goods; Certain medicines and vaccines; International air and sea transport; Processing carried out on goods in Cyprus on behalf of a customer abroad provided that the goods will be exported outside the EU when the processing finishes. Exempt from VAT are, r ent, most medical services, most insurance, banking and financial services, educational services, management services provided to mutual funds; supplies of real estate excluding new buildings before their use, etc.

Social Security Contributions:

Social Security Contributions Employers’ social security contributions are due for the Social Security Fund, redundancy fund, central holiday fund and for the Human Resource Development Fund. Altogether, the employers’ contribution rate amounts to 8.5% of gross wages. Employers must also pay a payroll tax (2% of gross wages) to the social cohesion fund, which is not deductable for corporate income purposes. Employees pay 6.8% of their salary and the self-employed pay 12.6% of their notional income. Social security contributions of employed and self-employed are augmented by a 4.3% payment of the state, although total contributions will rise by 1.3% every five years until 2039.

Double Tax Treaties:

Double Tax Treaties Cyprus has entered into about 50 double-tax treaties. The general effect of these treaties is that Cyprus-registered offshore entities that have tax exemptions in Cyprus will have the same exemptions in the treaty countries. Most of Cyprus's treaties follow the OECD Model Convention, although the US Treaty follows the most recent model of United States Agreements. The country of residence will give a credit for taxes paid in the other treaty country. IBCs qualify for treaty protection under all the extant treaties except those with Canada, France, the UK and the USA, and even in those cases the limitations apply only to flows of income to Cyprus, and not to income flows from Cyprus to the countries concerned.

Double Tax Treaties (…continued):

Double Tax Treaties (…continued) Revisions to Cyprus's corporate tax regime consequent its accession to the EU, and the abolition of the “offshore” sector as such, have made Cyprus more rather than less attractive as a tax treaty partner. Beach at Ayia Thekla, Famagusta

Double Tax Treaties (…continued):

Double Tax Treaties (…continued) The following countries have double-tax treaties with Cyprus: Armenia Austria Azerbaijan Belarus Belgium Bulgaria Canada China CIS Czech Republic Denmark Egypt Finland France Germany Greece Hungary India Iran Ireland Indonesia Italy Japan Kuwait Kyrgyzstan Lebanon Malta Mauritius Moldova Montenegro Norway Poland Romania Russia Serbia Seychelles Singapore Slovakia Slovenia South Africa Sweden Syria Tajikistan Thailand Ukraine UAE UK USA Uzbekistan

Tax Environment – Useful links:

Tax Environment – Useful links Useful links: Republic of Cyprus, Ministry of Finance Republic of Cyprus, Inland Revenue Department Republic of Cyprus, TAXISNET Service Republic of Cyprus, Department of Customs & Excise Republic of Cyprus, VAT Service A beach at Protaras, Famagusta

PowerPoint Presentation:

Slide(s) Investment Environment G eneral 131 - 132 Bilateral and multilateral MOUs 133 - 134 International memberships 135 Exchange control 136 International Business Companies (IBCs) 137 Trade Marketing & Distribution 138 Holding Companies 139 - 140 International Banking Units (IBUs) 141 - 142 Slide(s) Investment firms (CIFs) 143 Investment funds 144 - 145 Bonded warehousing and transit trade 146 - 147 Portfolio investment 148 - 149 Acquisition of real estate 150 - 151 Technology and R & D 152 Labor environment 153 - 154 Registration of companies 155 - 157

PowerPoint Presentation:

According to the latest World Investment Report of UNCTAD published in July 2010, Cyprus is one of the most attractive locations for foreign investments, ranking among the frontrunners of the world indicating both high FDI performance as well as high FDI potential.

Investment Environment – General :

Investment Environment – General The investment environment of Cyprus is world class… Not only are the Cyprus treaty withholding tax rates normally lower than those in other countries' treaties, but there will be no local taxation as long as no permanent establishment is created, and even if it is, Cyprus' own 10% tax rate on company profits is itself low. The combination is quite hard to beat! Fishing at McKenzie beach, Larnaca

Investment Environment – General :

Investment Environment – General Tourism, medical and “wellness” activities, development projects in the field of natural resources (oil and gas) and alternative energy (solar and wind), and R&D are among the most promising sectors for future. Beach at Episkopi , Limassol

Bilateral and multilateral MOUs:

Bilateral and multilateral MOUs The Cyprus Securities and Exchange Commission has signed a Multilateral Memorandum of Understanding with the regulatory authorities of the European Community Member States through the Committee of the European Securities Regulators. Latchi boat shelter, Polis Chrysochous

Bilateral and multilateral MOUs (…continued):

Bilateral and multilateral MOUs (…continued) Bilateral MOUs exist with the following national organizations: Australian Securities & Investments Commission Austrian Securities Authority Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN), Germany Bulgarian Financial Supervision Commission Comissão do Mercado de Valores Mobiliários, Portugal Czech Securities Commission Egypt Capital Market Authority Hellenic Republic Capital Market Commission Hungarian Financial Supervisory Authority Isle of Man Financial Supervision Commission Israel Securities Authority Jersey Financial Services Commission Malta Stock Exchange Polish Securities and Exchange Commission Romanian National Securities Commission Slovak Republic Financial Market Authority Dubai Financial Services Authority Federal Financial Markets Service of Russia

International Memberships:

International Memberships Cyprus membership to international organizations, include: Eurozone (2008) European Union (2004) International Maritime Organisation (1978) UNWTO (1975) The IMF (1962) The World Bank (1962) The Commonwealth (1961) The Council of Europe (1961) International Telecommunication Union (1961) The United Nations (1960) Sunset at Limni, Polis Chrysochous

Exchange Control:

Exchange Control As of 1st of May 2004, the Exchange Control Law has been abolished; hence, residents and nonresidents may hold and manage assets and liabilities in any foreign currency and in any foreign country, including freely convertible and transferable balances with banks on the island. There are no exchange control restrictions . Crystal clear waters of Protaras, Famagusta

International Business Companies:

International Business Companies The term “International B usiness Company” (IBC) refers to any legal entity whose beneficial ownership and business activities lie outside Cyprus. There are currently more than 70,000 IBCs that are active. Ayios Nikolaos tis Stegis (11 th century), Kakopetria

Trade Marketing and Distribution:

Trade Marketing and Distribution Enterprises engaged in trade marketing and distribution may be classified into those trading either as general commission agents or as specialised dealers in machinery and equipment, or commodities and consumer goods. Transit trade via the island's seaports is carried out by IBCs on a large scale. They may store, maintain, break bulk or repackage their own transit goods in rented general or private bonded warehouses, provided the handling does not result in any change in the goods' customs tariff classification. IBCs are also allowed to : Organize training seminars or demonstration courses in Cyprus for their foreign agents or clients; Establish permanent showrooms in Cyprus for exhibiting foreign products they represent provided all deals are on a wholesale basis and for delivery outside the island.

Holding companies:

Holding companies Thousands of corporate entities use Cyprus as a base for holding and managing their own investments worldwide. Tax costs play a significant role in investment decisions as investors aim in maximizing after tax return on investment. A Cypriot investment vehicle can in many cases collect income, which is a charge against high tax income. Foreign withholding tax is eliminated or reduced under double tax treaties and/or under EU directives. Elaia Bridge (15 th century A.D.), Trimiklini

Holding companies (…continued):

Holding companies (…continued) A Cypriot holding company is generally set up as an ordinary company resident in Cyprus which, besides participating in domestic and/or foreign companies, may also have other functions such as trading, manufacturing or financing. There are no restrictions on its activities. It is taxable in Cyprus on its worldwide income, provided that it is managed and controlled in Cyprus. Trading income is taxed at the rate of 10%, the lowest in the EU. Dividends and other profit distributions received by a Cypriot tax resident company from another Cypriot tax resident company or from a foreign one are exempt from corporate tax and special contribution for defence.

International Banking Units:

International Banking Units An International Banking Unit (IBU) is a Cypriot limited liability company, or a branch of a foreign bank, which has obtained a banking license from the Central Bank. Non-Cypriot banks are offered the status of IBU, being restricted to banking operations with non-residents in foreign currencies, and with Cyprus-registered non-resident companies and their expatriate staff. The Central Bank issues IBU licenses and normally requires fully-staffed operation. If the IBU is controlled from abroad, and there is no local permanent establishment, there will be no profits tax. The following IBU forms are permitted: Branches of foreign banks. The Central Bank favors this arrangement; there are no liquidity or risk ratio requirements, and there is no reserve requirement. Subsidiaries of foreign banks. These are supervised more closely, and liquidity and risk ratios may be imposed.

International Banking Units (…continued):

International Banking Units (…continued) Representative Offices. Representative Offices may be formed under the Companies Law, but may not conduct banking business except with clients of their parent bank. Administrative Banking Units (ABUs). These units carry out their banking business through local Cyprus banks but are otherwise similar to branches or subsidiaries. Kelefos Bridge (15 th century A.D.), Arminou

Investment Firms:

Investment Firms Cypriot investment firms (CIFs) are subject to Cypriot corporate tax like any other company in Cyprus provided that they meet the criteria of the Cypriot Investment Firms Act of 2002 – 2005. Under the Act the following entities can provide investment services: CIFs operating within Cyprus, excluding credit institutions, provided that the CIF has obtained the appropriate authorization from the Cyprus Securities and Exchange Commission; Credit institutions established in Cyprus - provided that the credit institutions have received an authorization from the Central Bank of Cyprus; and Investment firms with their registered offices outside Cyprus provided they have been granted a license from the regulators of an EU member state.

Investment Funds:

Investment Funds In Cyprus, the UCITS (Undertakings for Collective Investment in Transferable Securities) Law 225(I) of 2002 provides the legal framework for the registration, regulation and marketing of local and foreign funds established in Cyprus. Under the UCITS Law, UCITS is considered to be any organization whose sole aim is to collectively invest publicly collected capital, in transferable securities via stock markets, banking deposits and any other investments and whose operation is based on the principle risk of diversification and whose units can be liquidated by the unit holder on request using the assets of the organization. Under the legislative framework of Cyprus, the following are not considered to be UCITS under the law: UCITS which are not open ended; UCITS that do not market to the public in Cyprus or other EU Member States;

Investment Funds (…continued):

Investment Funds (…continued) UCITS that do not market to the public in Cyprus or other EU Member States; UCITS that based on their fund rules or constitutional documents only make their units available to the public in other countries except Cyprus; UCITS for which due to their investment and borrowing policy the rules of the law 225(I) 2002 are not suitable. Under this law, local UCITS may take the following legal forms: Mutual Funds; and Variable Capital Investment companies. Alternatively a private International Collective Investment Scheme (ICIS) can be formed under Cyprus law. ICIS is a private fund that can have up to 100 investors, also known as unit-holders. The purpose of a private ICIS is the collective investment of funds injected in such schemes by the unit-holders.

Bonded warehousing and transit trade:

Bonded warehousing and transit trade Cyprus has three Free Trade Zones (FTZs). Two located in the two main seaports of Limassol and Larnaca, are used only for transit trade, while the third, located near the international airport in Larnaca, can also be used for manufacturing, repacking and reprocessing. These areas are treated as being outside normal EU customs territory. Consequently, non-EU goods placed in Free Trade Zones are not subject to any import duties, VAT or excise tax . FTZs are governed under the provisions of relevant EU and Cypriot legislation. The Department of Customs has jurisdiction over all three areas and can impose restrictions or prohibitions on certain activities, depending on the nature of the goods. Additionally, the Ministry of Commerce, Industry and Tourism has management oversight over the Larnaca FTZ.

Bonded warehousing and transit trade:

Bonded warehousing and transit trade Companies given permission to locate in the Larnaca FTZ take advantage of the fact that the FTZ operates outside the normal jurisdiction of Cyprus Customs. This allows the company to import raw materials or goods for transshipment without paying the normal import duty and VAT. The only limitation is that the goods must be sold or re-exported strictly outside the EU. If the company wants to do business with the local market, it must obtain permission from Customs and pay the appropriate duties. Additionally, Provision of industrial site at a nominal rental fee is less than € 2 per year, over the first 5 years; Provision of electrical power (maximum demand) is free of charge; Provision of any number of telephone lines is free of charge.

Portfolio Investment:

Portfolio Investment Trading of shares by foreigners on the Cyprus Stock Exchange (CSE) is as easy as on any modern stock market. Foreign investors are subject to the same rules and regulations of the CSE as Cypriots or other EU nationals, regarding capital distribution. Provided that the investment is in line with the CSE´s laws and procedures, investors may acquire up to 100% of the share capital of all Cypriot companies , listed on the CSE, except companies operating in specific sectors, such as the banking sector. As far as the banking sector is concerned, no person, either resident or non-resident, may own directly or indirectly 10% or more of a banking company’s share capital or voting stock without the Central Bank’s approval. Banking companies are also required to obtain the Central Bank’s approval before registering more than 50% of their share capital in the name of non-residents.

Portfolio Investment (…continued):

Portfolio Investment (…continued) Non-residents only need to remit foreign funds either to an account in their own name or in the name of their stockbroker in Cyprus. The stockbroker is entitled to possess the necessary documentary evidence for the acquisition of shares; in case of liquidation, the stockbroker will remit the original investment, adjusted to the investment’s return. A window, Polis Chrysochous

Acquisition of Real Estate:

Acquisition of Real Estate Under the Immovable Property Acquisition Law, non-Cypriots, Companies and trusts are entitled to buy freehold immovable properties, subject to prior permission by the Council of Ministers . The procedure is merely a formality, and permission is normally granted more or less as a matter of course to all bona fide buyers wishing to purchase a real property. At the old town of Nicosia

Acquisition of Real Estate (…continued):

Acquisition of Real Estate (…continued) Once permission is granted and the property is registered in the buyer's name, there is no restriction on selling the property or disposing of it by will. See also by Pytheas: Buying real property in Cyprus At the old town of Nicosia

Technology and R & D:

Technology and R & D Special emphasis has been placed during the recent years in promoting Cyprus as a regional research and development centre and in attracting investments for the development of high-tech products and services. Several initiatives contribute to these efforts such as the incubating program that has been introduced for the creation of new high-tech enterprises, as well as the launching of the Cyprus Technology Park. Hamam Omeriye once an Augustinian church (converted by the Ottomans), old town of Nicosia

Labor environment:

Labor environment The Cypriot labor market has a tradition of social dialogue and a well-developed institution of free collective bargaining. The Industrial Relations Service of the Ministry of Labour and Social Insurance acts as the national mediator for the settlement of labor disputes in the private and semi-government sectors of the economy, adhering to the provisions of the Industrial Relations Code. Panayia tou Araka church (1192 A.D.), Lagoudera

Labor environment (…continued):

Labor environment (…continued) Cyprus ranks among the first countries in the world in terms of university degree holders in relation to the population, with more than 80% of secondary school leavers 2009 continuing their studies. A well-educated, skilled, and bilingual pool of managerial, clerical, administrative, and technical staff is available in Cyprus. Moreover, labor costs are significantly lower in Cyprus compared to the EU average. Legislation provides for minimum wages in six service occupations, sales staff, clerical workers, auxiliary healthcare staff and auxiliary staff in nursery schools, crèches and schools. As per the Minimum Wages Decree of 2009 (KDP 194/2009), the minimum wage on recruitment is €791, while that for staff completing six consecutive months of employment with the same employer is set to €840.

Registration of companies:

Registration of companies Foreign can participate in most sectors of the economy, with equity participation of up to 100% in any Cypriot enterprise, without a minimum level of capital investment. They can address directly to the Registrar of Companies for establishing a company, without prior approval by the Central Bank of Cyprus or any other governmental body. The procedure for a company’s formation is: Initially, an application for the approval of the name of the company is submitted. After securing the company’s name, the relevant documents for the company’s registration (Memorandum of Understanding, Articles of Association, etc.) are to be submitted through a lawyer. In the case of a partnership registration, the involvement of a lawyer is not mandatory. Registration is completed within one month under the normal procedure, and within one week under the accelerated procedure at a negligible additional fee.

Registration of companies (…continued):

Registration of companies (…continued) Shares or participation must be registered under the investor’s name at the Registrar of Companies according to the respective Company or Partnership Law. The following legal entities may be registered: Company (private or public) Branch companies General or limited partnerships European Company A view of the Venetian medieval walls of Nicosia

Registration of companies (…continued):

Registration of companies (…continued) I N V E S T O R Application for approval of name and registration of company Obtain residence and work permits Obtain permission from appropriate authority according to nature of investment

PowerPoint Presentation:

Slide(s) Images of Cyprus People 159 Traditional villages 160 Flora and fauna 161 Landscape 162 Beaches and colours of the sea 163 Hotels 164 Activities 165 Sunsets 166

People:

People Playing tavli , Omodos Basket making, Messogi Donkey ride, Stroumbi Weaving preparation, Fyti Lace making at Lefkara , Larnaca Wine making, Limassol

Traditional Villages:

Traditional Villages Lofou village, Limassol Lefkara village, Larnaca Moutoullas village, Nicosia Fikardou village , Nicosia Kakopetria village, Nicosia Omodos village , Limassol

Flora and Fauna:

Flora and Fauna Monachus monachus , Asprokremmos Star thistle, Vyzakia Colchicum, Troodos Gadouragkathos , Tohni Wheatear, Yiolou Chelonia mydas , Polis Striped dolphin, Cavo Gata

Landscape:

Landscape Kalo Khorio meadows, Paphos At Pelendri village in Fall, Limassol Troodos in winter, Nicosia At Akamas National Park, Paphos Avdimou Bay, Limassol Troodos foothills, Nicosia

Beaches and colours of the sea:

Beaches and colours of the sea Flamingos at Lady’s Mile, Akrotiri Coral Bay beach, Paphos Nissi Beach, Ayia Napa Konnos Bay, Protaras Cape Greco, Famagusta Beach at Neo Chorio , Paphos

Hotels:

Hotels Almyra Beach Hotel, Paphos Hotel Intercontinental Aphrodite Hills, Paphos Anassa Hotel & Spa, Paphos The Amathus Beach Hotel, Paphos Four Seasons Hotel, Limassol Le Meridien Spa & Resort, Limassol

Activities:

Activities Clubbing at Ayia Napa Scuba-diving at Zenovia Bungee-jumping, Ayia Napa Quad biking, Troodos Horseback riding, Asgata Sky diving , Limassol Golfing in Paphos FIA WRC Cyprus Rally, Limassol

Sunsets:

Sunsets Sunset in Akamas, Paphos Sunset from Troodos Mountains Sunset in Pomos , Polis Chrysochous Sunset in Mazotos , Larnaca Sunset at the Larnaca Salt Lake Sunset at the Minthis Hills Golf Club

Sources (Alphabetically):

Sources (Alphabetically) Authority for the Supervision and Development of Cooperative Societies COOP Central Bank Central Bank of Cyprus Cyprus Chamber of Commerce & Industry Cyprus Mail Cyprus Stock Exchange Cyprus Ports Authority Cyprus Securities and Exchange Commission Cyprus Shipping Association Cyprus Shipping Chamber Cyprus Tourism Organisation Electricity Authority of Cyprus Europa European Central Bank European Investment Bank Eurostat Financial Mirror Financial Times FitchRatings Home4U Estates Limited Insurance Association of Cyprus International Monetary Fund Moody’s Investors Service OECD Republic of Cyprus, Agricultural Research Institute

Sources (Alphabetically):

Sources (Alphabetically) Republic of Cyprus, Ministry of Commerce, Industry and Tourism Republic of Cyprus, Ministry of Education & Culture Republic of Cyprus, Ministry of Finance Republic of Cyprus, Ministry of Health Republic of Cyprus, Ministry of Interior Republic of Cyprus, Ministry of Labour and Social Insurance Republic of Cyprus, Statistical Service Republic of Cyprus, The Mines Service Standard & Poor’s Republic of Cyprus, Department of Agriculture Republic of Cyprus, Department of Customs & Excise Republic of Cyprus, Department of Lands & Surveys Republic of Cyprus, Department of Merchant Shipping Republic of Cyprus, Department of Town Planning & Housing Republic of Cyprus, Inland Revenue Department Republic of Cyprus, Insurance Companies Control Service Republic of Cyprus, Ministry of Agriculture, Natural Resources & Environment

PowerPoint Presentation:

Disclaimer The above notes have been compiled to assist you; however, actions taken as a result of this document are at the discretion of the reader and not of PYTHEAS. Next slide “Petra tou Romiou” where according to Greek mythology, Aphrodite, the Goddess of Love, Beauty and Sexual Rapture, was born off the foam of the sea… The local legend states that if you swim around the rock at midnight during full moon Aphrodite will make you ten years younger…

PowerPoint Presentation:

Slide(s) Pytheas Investors Service G eneral 173 - 174 Pytheas, The Organization 175 - 176 Pytheas main services, a diagram 177 Pytheas Company Pulse 178

PowerPoint Presentation:

Bridge between business worlds!

Pytheas Investors Service:

Pytheas Investors Service Pytheas Investors Service was established as a vehicle for capital and investment to advise Pytheas’ clients on how to shape tomorrow’s business global map – to be a catalyst for growth, development and diversification by better positioning Pytheas’ clients in the global markets and in their quest for excellence. In close cooperation with the rest of Pytheas’ professional network, it assists and guides clients to clearly identify and establish appropriate investment opportunities through in-depth research and analysis of the world's equities, industries, and markets.

Pytheas Investors Service:

Pytheas Investors Service For more information: pis@pytheas.net Product experts, country specialists and industry analysts work in close unison and pool their talent to design, recommend, and, when appropriate, customize and fine-tune investment strategies that clients can act on in keeping with their portfolio preferences and imperatives. The breadth and quality of Pytheas' fundamental research and strategic advice, combined with its in-depth industry knowledge and geographic specialization, offer investor clients a wealth of information to evaluate and prioritize their investment decisions.

Pytheas, The Organization:

Pytheas, The Organization Like Pytheas, the ancient Greek explorer, scientist and businessman we provide access to markets inviting our partners to wander the paths and explore the places with a partner that possesses, knowledge of prevailing market dynamics, thorough industry expertise, and above all keen awareness of geographic idiosyncrasies… Our logo was borrowed from Pytheas and the ancient Greeks symbolizing the bridge between the worlds, representing both the doorway and passageway through to the understanding of cosmos.

Pytheas, The Organization:

Pytheas, The Organization For more information: pytheas@pytheas.net Pytheas is an organization with global outlook, offering a wide range of sophisticated financial services to companies, governments, institutions, and individuals. Considered as one of the world's premier organizations in providing access to emerging financial markets and economies in transition, Pytheas services range from advising on corporate strategy and structure to raising equity and debt capital and managing complex investment portfolios.

Pytheas main services:

Pytheas main services Capital Raising Emerging Markets Research Strategic Advisory Investment Management Business Development Distress Management Risk Management Credit Rating Guidance Investment Banking Corporate Finance M&A Asset Management Private Credit Equity Finance

Pytheas Company Pulse:

Pytheas Company Pulse Visit Pytheas Company Pulse

PowerPoint Presentation:

www.pytheas.net

See also by Pytheas on Cyprus:

See also by Pytheas on Cyprus Cyprus Real Property Index (Jan 2011) Cyprus – The economy calls for immediate action! Cyprus – Real estate and construction industries optimistic despite slowdown The Cyprus real property market contracted Cyprus Real Property Index (Oct 2009) Buying real property in Cyprus

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