A company is tax resident of Cyprus if it is managed and controlled from Cyprus. All companies that are Cyprus tax residents are taxed in Cyprus on their worldwide income.

2.Tax rates

The company’s profits will be taxed under Income Tax at aflat rate of 10%. For the year 2004 any profits in excess of EUR1,708,601 are subject to an additional tax of 5%.

3.Expenses deducted

All the expenses (with certain exemptions) incurred wholly and exclusively in earning the income of the company can be deducted in order to arrive at the taxable profit (includinginterest paid and 3% wear and tear allowance on the cost of buildings producing rental income)

4.Trade losses

Any tax loss incurred during a tax year and which cannot be set off against other income is carried forward and set off against future profits.

5.Exemption from Income tax

The following are some exemptions from tax:

Dividends receivable

50% of interest arising from bank deposits and other loans made to third parties

6.Defence tax on Rental income

It is subject to to a 3% Defence tax after deducting 25% of gross rents as allowance.

7.Defence tax on Interest income

Interest from bank deposits and other loans made to third parties is subject to 10% Defence tax.

8.Dividends payable toshareholders

If a Cyprus tax resident company distributes profits to its shareholders as dividends, it must deduct 15% Defence taxin respect of those shareholders who are individuals tax residents of Cyprus.Deemed distribution if a Cyprus tax resident company does not distribute a dividend within two years from the end of the tax year then: 70% of accounting profits are deemed to have been distributed

9.VAT

15% Defence tax is imposed on deemed dividend distribution applicable to shareholders (individuals or companies) who are residents in Cyprus.Currently, no VAT is charged on rental income.As from 1st May 2004 (day in which Cyprus became member of the European Union), sales of new buildings (excluding land)are subject to 15% VAT, provided that the building permission was filed with the relevant authorities after 1st May 2004.

10.Land Registry Office Fees

To register an immovable property with the Cyprus Land Registry Office and obtain title deed, the following fees are payable by the purchaser:

Value of property Transfer Fee

Euro %

Up to 85,430 - 3%

85,432-170,860 - 5%

Over 170.862 - 8%

Trading as a Resident Individual

1.Residency

An individual is tax resident of Cyprus if he/she spends in
Cyprus more than 183 days in any calendar year. All individuals that are Cyprus tax residents are taxed in Cyprus on their worldwide income.

2.Tax rates

The following income tax rates apply to individuals for the year 2004:

Chargeable Income ..................Tax rates
Eur........................................%
0-17,086 .................................Nil
17.088-25,629 .........................20
25,631-31,172 .........................25
over 34,172 .............................30

3.Expenses deducted

All the expenses (with certain exemptions) incurred wholly and exclusively in earning the income of the business can be deducted in order to arrive at the taxable profit. In case of rental income, the above expenses are not recognised. Instead, the tax office allows interest paid, 3% wear and tear allowance and 20% of rental income to be deducted.

4.Trade losses

Any tax loss incurred during a tax year and which cannot be set off against other income is carried forward and set off against future profits (under the condition that audited accounts are prepared and submitted to the Income Tax Office).

5.Exemption from Income tax

The following are some exemptions from tax: Profits from sale of secutities (may be subject to capital gains tax under certain conditions)

Dividends receivable

Interest arising from bank deposits and other loans made to third parties

6.Defence tax on Rental income

It is subject to a 3% Defence tax after deducting 25% of gross rents as allowance.

7.Defence tax on Interest income

Interest from bank deposits and other loans made to third parties is subject to 10% Defence tax.

8.Dividends payable to shareholders

N/A

9.VAT

Currently, no VAT is charged on rental income. As from 1st May 2004 (day in which Cyprus became member of the European Union), sales of new buildings (excluding land) are subject to 15% VAT, provided that the building permission was filed with the relevant authorities after 1st May 2004.

10.Land Registry Office Fees

To register an immovable property with the Cyprus Land Registry Office and obtain title deed, the following fees are payable by the purchaser:

Value of property Transfer Fee

EUR %

Up to 85,430 - 3%

85,432-170,860 - 5%

Over 170,862 - 8%

Non-resident company

A company is non-resident in Cyprus if it is managed and controlled from abroad.All the facts and figures mentioned above for a resident company will also apply to a non-resident company.

However, bear the following in mind:

(a) Only income arising in Cyprus is subject to 10% Income tax
(b) Any income arising in Cyprus of a non-resident company is exempt from Defence tax

Non-resident individual

An individual is non-resident in Cyprus if he/she spends less than 183 days in Cyprus in a calendar year.All the facts and figures mentioned above for a resident individual will also apply to a non-resident individual.

However, bear the following in mind:

(a) Only income derived from sources in Cyprus is subject to Income tax
(b) Any income arising in Cyprus of a non-resident individual is exempt from Defence tax