Arosal will walk you through the challenges and pitfalls which characterize the global tax scene post-BEPS, specifically as regards IP Boxes and the so-called ‘Nexus’ approach. We shall walk you through the process of registering and protecting your IP, whilst designing a robust international structure which will stand up to any BEPS-related challenge. Furthermore, Arosal will outline the services which you will require, and the process through which these will be obtained regarding the implementation of your structure, whilst focusing on the tax optimization of the group’s entire structure as concerns all types of taxes. Finally, we shall discuss the administration of your international structure, and comment on the way forward in the global market place.

2. November 2019
Presented by:
Ms. Arofat Salayeva, FCCA, MSc, ADIT
Mr. Stephanos Charalambous, MSc, ACA, ADIT

3. Why we
are here..
▪ The success or failure of a start-up is not always
determined by the level of innovation or
ingenuity of the underlying idea;
▪ Many times the cross-border set up of a start-up
during its infancy will determine its
attractiveness to investors in the long-run;
▪ A poorly designed structure is often not only a
hinderance to growth and a deterrent to
potential investors, but may also entail
significant cost to rectify;
▪ The complexities characterizing the modern
business environment present numerous pitfalls,
especially for smaller firms who cannot afford to
hire expert advisors.

4. IP
Structuring

5. Patent
First, you must ensure legal
protection by patenting your IP.
Arosal’s network of legal
advisors can ensure that your IP
is protected in several
jurisdictions;
Structure
Then, you must ensure you
structure your operations to
benefit from the numerous IP
boxes and other incentives out
there,
BUT beware of the Nexus;
Cash In
Lay back and focus on further
developing your IP. With a sound
structure in place the
administration and compliance
requirements of your operations
should be greatly simplified.

6. OECD BEPS Action Plan;
IP Box Nexus Fraction, BO Provisions, MLI, Tax Haven Blacklist;
Information Exchange (FATCA, CRS, AEOI);
EU ATAD and DAC6;
Trade wars and Tariffs.

7. The
‘Nexus’
Fraction
The ‘Nexus’ Fraction is a
result of Action Point 5 of
the OECD BEPS project;
1) Qualifying Asset:
(QE +UE) x QA= Qualifying Profits
OE
2) ‘Nexus’ Fraction:
Abbreviations:
QE: Qualifying Expenditure
UE: Uplift Expenditure
OE: Overall Expenditure
QA: Overall Income

8. ROBUST TAX & LEGAL SYSTEM;
PREFERENTIAL TAX SYSTEM WITH IP BOX REGIME
AND OTHER INCENTIVES;
ABUNDANCE OF HIGHLY SKILLED AND
TRUSTWORTHY PROFESSIONALS TO ASSIST YOU;
WONDERFUL CLIMATE, SAFE COUNTRY AND
AWESOME BEACHES;
CLOSE TO ISRAEL, LESS THAN 1 HOUR FLIGHT;
ACCESS TO EU COMMON MARKET AND
EUROZONE.

9. The Cyprus
Tax System

10. RECOVERED FROM
RECESSION, WITH
OPTIMISTIC OUTLOOK
BOOMING REAL ESTATE
SECTOR DUR TO CIP
(MAYBE TOO MUCH?)
HIGHLY FAVORABLE
TAX SYSTEM AND TOP
EXPAT DESTINATION
OIL AND NATURAL GAS
DISCOVERED SET TO
BOOST GROWTH

11. Corporate tax rate of
just 12.5%;
No WHT on outbound
dividend/ interest
payments;
Many exemptions:
dividends income,
profit on sale of
securities, FX
differences, foreign
PEs;
Strong incentives
include IP Box Regime
and Notional Interest
Deduction;
High earning individuals
get 50% deduction from
taxable income
granted;
Non-Dom provisions for
0% taxation on any
dividends, interest or
*rental income received
by individuals;
Extensive Double Tax
Treaty network, with
unilateral FTC;
Full compliance with
OECD and EU
Directives.

12. ANY ‘NEW CAPITAL’
INSERTED INTO A
CYPRUS COMPANY
QUALIFIES
NEW CAPITAL IS THAT
WHICH HAS BEEN
INTRODUCED IN CYPCO
AFTER 1ST JAN 2015;
ENTITLED TO A
DEDUCTION OF UP TO
80% OF TAXABLE
INCOME;
CAPITAL MAY BE ‘IN-
KIND’;
NID HAS BEEN
APPROVED BY THE
OECD AS A NON-
ABUSIVE INCENTIVE
SCHEME;
ALLOWABLE
DEDUCTION IS THE
NEW CAPITAL
MULTIPLIED BY THE
REFERENCE RATE
REFERENCE RATE: 10-
YEAR GVT BOND + 3%
REFERENCE RATE CAN
NEVER FALL BELOW
THE CYPRUS
REFERENCE RATE.

13. Progressive Personal Tax Rates (Capped at 35% over
€60.000 per annum);
Exemption of up to 50% from taxable income for
expats earning over €100.000 within a year;
Exemption of up to the lower of €8.550 or 20% of
taxable income for expats earning less than
€100.000 a year;
Non-Domicile Provisions: Exemption from any
taxation on interest or dividends income (though
contributions are applicable up to a higher cap).
Low level of Social Insurance Contributions, and
availability remaining insured in another EU Home
State as per EU Directive.

14. If the above conditions are met, the individual will need to additionally:
Maintain an employment or office in Cyprus
(which should be in place as at 31.12 of the
relevant tax year;
Maintain a permanent home in Cyprus (either by
owning or leasing).
60-Days Rule: - Any person residing in Cyprus for 60 days or more within a tax
year is eligible to elect himself as a Cyprus Tax Resident provided that
(1) Such person is not tax resident in any other
jurisdiction during this period, as determined
based on the domestic laws of this jurisdiction;
(2) Such person does not remain in any
jurisdiction for a period exceeding 183 days
within this period;
183-Day Rule: – Any person who is physically present for 183 days or more
within a tax year (same as calendar year), is considered to be a Cyprus Tax
Resident;

15. How your
IP will
benefit from
Cyprus

16. CypCo
OpCo 3OpCo 1
OpCo 2
IP Injection gives
right to NID
IPRights

17. VAT
Considerations

18. EU VAT
recent
developments
How it used to work
▪ Businesses making sales of digital services across
the EU had to account for VAT in each EU member
state that their customers are based in.
▪ There was no VAT threshold for these types of sales
and so VAT is due on all sales made to other EU
member states.
The MOSS System
▪ The VAT MOSS (mini one stop shop) scheme was
introduced to simplify the administration of the VAT
system for businesses making these types of sales.
This is an online service which allows businesses to
account for all VAT due on these types of supplies
through a single return in their home country
(member state), rather than registering in every
member state where they have customers.

19. Other Key Aspects:
▪ €10,000 threshold is introduced into the Place of Supply rules for
VAT for businesses making sales of digital services. This change
means businesses will only be subject to the VAT rules of their
home country if their relevant sales across the EU in a year (and
the preceding year) falls below this threshold.
▪ non-established persons – the legislation allows all non-
established taxable persons making supplies of digital services to
customers in the EU to join the Non-Union VAT MOSS scheme.
This allows non-EU businesses, which are registered for VAT for
other purposes, to use the MOSS scheme to account for VAT on
sales of digital services to EU member states. Before such
persons were excluded from using MOSS.

20. Impact on your business:
The changes come into
effect at an EU level;
Its purpose is to ease the
administrative burden on
businesses making sales of
digital services;
To allow a group of
businesses currently
excluded from the MOSS
scheme to access it.
Threshold subject to following
conditions:
A) the supplier is
established, has his
permanent address or usually
resides in only one
Member state;
B) the digital services are
supplied to customers who
are established, have their
permanent address
or usually reside in another
member state;
C) the total value of digital
service supplied does not
exceed €10,000 (exclusive of
VAT) in the current and in
the preceding calendar year.

21. In Closing…

22. Arosal can act as your single point of contact for all international aspects of a company’s cross-
border structures;
Our size and age make us an ideal service provider for SMEs embarking on the first steps of
internationalization;
We are a new and upcoming firm which puts our clients first;
With a hands-on approach on all client relations, you won’t get lost in a corporate labyrinth when
trying to get simple answers relating to your business;
We offer a ‘Big 4’ level of quality for a fraction of the price.

23. ▪ We remain at your disposal to answer any
questions you may have.
▪ Alternatively, you can visit our website at
www.arosal.com for further details.
▪ If you are still not satisfied, you can contact us
directly at the below email addresses:
▪ Arofat: a.salayeva@arosaltaxconsult.eu
▪ Stephanos: s.charalmbous@arosaltaxconsult.eu