Andria Andreou participates in IR Global Guide: International Expansion: Building your Business Overseas

Andria AndreouPartner, Athos Group

Foreword by Andrew Chilvers

Despite these uncertain times, expanding overseas can be a key driver for future growth for an ambitious business. International expansion can breathe new life into a company, drive huge value and set it on a path of continued success.

Expanding a business overseas is a strategic opportunity that will help diversify revenue streams, revitalise product development and give high returns on investment. But expanding a business into different jurisdictions takes time – this is a long distance run, not a sudden sprint to the finish line. Furthermore, expanding operations into a new jurisdiction can be fraught with challenges and risks that need to be addressed long before the first boots are on the ground.

For any company turning up in a foreign country, a multitude of tax and legal issues need to be addressed. This can be a labyrinthine experience and not for the faint hearted – but then faint hearted businesspeople seldom set their sights on overseas expansion.

Tax and compliance have to be at the top of any board’s agenda, ensuring the correct steps are taken the moment the company representatives land in-country. It’s pivotal to learn these issues to avoid any costly mistakes from the start.

What are the main government incentives available in your jurisdiction to attract multi- nationals and FDI investment?

Cyprus offers one of the most attractive tax regimes in Europe, fully compliant with EU and OECD regulations. This, combined with many other benefits discussed below, makes Cyprus a premier international business jurisdiction for doing business in the region and beyond.

Corporate tax

A company is a Cyprus tax resident if it is managed and controlled from Cyprus. A Cyprus tax resident company can enjoy several tax benefits. In general, the (worldwide) business profits of a Cyprus tax resident company are subject to 12.5% corporation tax. Some income sources are exempt from tax, such as:

• Profits from disposal of shares, bonds and other financial instruments

• Dividend income (subject to conditions) • Profits of overseas Permanent Establishments

• Foreign exchange (FX) gains, except those arising from trading in FX.

Other significant tax deductions and benefits for Cyprus resident companies include:

• Notional interest deduction from taxable income upon the introduction of new equity in the form of paid up share capital or share premium, which can potentially reduce the effective tax rate to as low as 2.5%.

• Wide network of tax treaties: Cyprus has an extensive network of more than 65 bilateral tax treaties for the avoidance of double taxation.

• Withholding tax: Cyprus does not impose any withholding tax royalties for use outside of Cyprus or on payments of dividends and interest to foreign investors.

• IP regime Deemed Deduction: new regime incorporates the OECD recommended “nexus approach”, according to which qualifying companies can claim a tax deduction of up to 80% of their net profit resulting from the exploitation or disposal of intellectual property.

• Unilateral Tax Credit Relief: Relief for taxes paid abroad is in the form of a tax credit if the respective income is subject to tax in Cyprus. The relief is given unilaterally irrespective of the existence of a tax treaty.

• Actual Interest Deduction: interest expense incurred can be deducted for acquiring assets used in the business as well as shares in wholly owned.

• Gains Tax Capital Gains tax: this would apply on profits arising only from the disposal of immovable property located in Cyprus.

Personal taxation

Cyprus is one of the most favourable EU jurisdictions attracting expatriates who live and work there.

What industries do you feel there are opportunities in for international investors/ businesses in your jurisdiction? What factors do you think contribute to inward investment?

As President of the ‘Cyprus Cannabis Association’ formed under the auspices of Cyprus Chamber of Commerce & Industry in October 2019, I am bound to advocate strongly legal Cannabis as a fast growing and dynamic industry with unlimited potential for new revenue streams and job creation. Cyprus is positioned as an attractive centre of excellence for production; research; genetics, and intellectual property from which the legal Cannabis industry can flourish.

Other growth sectors include:

• Shipping: Cyprus is an established world-class international maritime cluster offering high quality services amidst a broad range of related activities

• Real estate: construction continues to thrive with increased demand in recent years for prestigious large-scale projects and an influx of foreign investment

• Tourism and hospitality: the natural beauty of Cyprus, excellent weather, hotels and food make tourism one of its most strong and resilient economic sectors making a significant contribution to the country’s GDP

• Energy: word-class natural gas discoveries have attracted worldwide interest. The discovery of hydrocarbons in Cyprus’ EEZ has created new exciting prospects with significant investment from leading energy giants

• Investment funds: its robust legislative and regulatory regime has allowed Cyprus to become a key regional domicile for set-up and administration of investment funds as well as establishment of asset management companies for pan-European reach

• Innovation and start-ups: creating value through ideas and nurturing Cyprus’ entrepreneurial spirit are amongst its top priorities. Many successful tech companies have relocated or expanded in Cyprus using its strategic location as a gateway to and from EU, Middle East and Africa

• Filming: as well as its natural beauty and resources, production companies choosing to film in Cyprus will also benefit from various tax incentives

• Education: Cyprus offers a large variety of cost-efficient advanced and fully accredited undergraduate and postgraduate programs are provided by educational establishments that are internationally recognised.

Why is it important to hire a local firm to support international expansion? How can you help smooth the process for your clients and overcome common pitfalls?

Understanding the local market environment is vital to successful international expansion; economic climate; culture; social customs; banking and business practices and procedures are different in each country and can often present challenges and make all the difference between success and failure.

Local professionals including lawyers, accountants, tax and other specialists should, of course, be consulted to ensure legal, tax, commercial and compliance issues are well covered in advance.

Athos Group is a multidisciplinary family office headquartered in Switzerland and operating also from key locations in Anguilla, Liechtenstein, Luxemburg, Malta, Monaco, and the Netherlands. It is set up as an independent partnership to guarantee continuity and long-term client commitment. On behalf of private clients; internationally active entrepreneurs; wealthy families and their businesses, we specialize in:

• the setting up and ongoing management of multi-jurisdictional asset protection structures;

• pro-active solution driven directorship services;

• succession and estate planning structures;

• exit structures;

• investment funds, set up and ongoing administration;

• immigration and citizenship services.

Most of the structures under our management have a cross-jurisdictional element which allows us to work seamlessly across borders with hands-on participation of partners across the Group, according to streamlined and automated compliance and other internal practices and procedures, thus saving time and money for our clients.