Cyprus remains the ideal hub for international business

Cyprus remains the ideal hub for international business South Africa September 2006 1

Why Cyprus INTRODUCTION

Strategic geographic location Middle of three continents: Asia, Europe, Africa Natural gateway to the Middle East

Facts about Cyprus • • • • Surface: 9. 251 square kilometers Population: approx. 850. 000 Time Zone GMT+2 EU / Eurozone Member State Low corporate tax rate at 12, 5% Significant economic memberships such as WTO, World Bank, IBRD, and IMF; EBRD present in the island Financial Action Task Force compliant Legal framework based on British law Financial framework based on IFRS Regulatory framework aligned with EU More than 30 years experience as an International Business Centre; credible, reputable, competitive, modern International Banking Units and multinational companies have been operating from Cyprus for years Low set-up costs Highly skilled, educated and multilingual workforce at highly competitive fees Excellent telecommunications systems

Why Cyprus • • § § Tremendous economic and tax advantages Extremely attractive lifestyle Family security and safety Excellent public and private international schools Exclusive golf resorts Fabulous weather High quality tourist facilities Culture, history, art and gastronomy

Cyprus 5 th Best Country to Relocate

Growth Drivers • Gas Exploration and Exploitation • �Tourism • �EU Funds • Cyprus Shipping Industry • International Business • Construction Industry • Farming and Agriculture

Cyprus as an international business hub All advantages of the Cyprus tax regime remain intact • Over the last 30 years, Cyprus has become the jurisdiction of choice for structuring of international operations • �Historical, cultural and religious ties with main markets • Strong legal framework fully harmonized with the European Union Directives • Cyprus is commonly used as a secure jurisdiction amongst investors setting up joint ventures due to its developed legal regulation system based on the UK law system; investors from different countries can utilize a wide variety of legal instruments • Cyprus is used in tax planning for Holding, Financing and IP Companies, as an intermediary jurisdiction for structuring activities in Europe, Asia and Middle East • Foreign investors structure their operations safely due to: – Extensive and expanding double tax treaty network (Spain, Finland, Estonia, UAE, Portugal, Ukraine) – – Application of EU Directives New tax incentives provided by domestic tax laws

Tourism Sector has proved resilient to the economic challenges Cyprus faces • Cyprus has an open skies policy that will boost the • • • tourism industry in Cyprus. Specific foreign investments were recently directed to the tourism industry A casino development license as been proposed. And tender process is underway; license expected to be granted within 2016 Golf resorts, exclusive hotels and wellness tourism products and services are growing Strong links with major tour operators, a significant expansion in flight destinations and the development of niche tourism all indicate the sector will continue to flourish; Substantial foreign investments have been attracted during the last two years Huge prospects for medical and sport tourism

Shipping More than 140 ship owning and ship management companies are operating in Cyprus • Cyprus has the 10 th largest merchant fleet globally and the 3 rd largest in the EU, with about 1. 022 vessels under the Cyprus flag • Cyprus Tonnage Tax System (TTS) offers numerous advantages to ship operators, owners and charterers • The TTS is unique as it facilitates ship owning, ship management and ship chartering at the same time

The Cyprus Tax System MAIN FEATURES AND STRUCTURES

The Cyprus Tax System at a Glance • • Taxation is based on residency status 12, 5% corporate tax on trading profits Notional Interest Deduction Interest expense on 100% corporate acquisitions permitted Fully reformed Intangible Property (IP) Regime Capital gains on sale of securities: 100% exemption Capital gains from sale of immovable property situated outside Cyprus is tax free Capital gains on real estate acquired by 31. 12. 2016 exempt irrespective of date of sale

The Cyprus Tax System at a Glance (cont’d) • No withholding tax on outgoing payments (dividends-interestroyalties) • Tax free Re-Organisations (cross border permitted) • Foreign PE profits exempt • No Controlled Foreign Company (CFC) rules • No thin capitalization rules (no debt to equity ratio) • Applicability of all EU directives • Advance ruling practice exists • Extensive and constantly expanding network of attractive Double Tax Treaty network

Tax Considerations Tax on the disposal/redemption of units 0% Tax on the profits arising from the trading of securities 0% Tax on interest income Withholding tax on payments of dividend/interest Corporation tax Capital gains for non resident shareholders Personal income tax progresses up to 12, 5% 0% 35% but there is a 50% exemption for income over € 100. 000 for a 5 year period from date of first employment in Cyprus

Cyprus Double Tax Treaty Network Armenia Greece Poland Syria Austria Hungary Portugal Thailand Belarus Iceland Qatar Ukraine Belgium India Romania U. A. E Bulgaria Ireland Russia United Kingdom Canada Italy San Marino U. S. A China Kuwait Serbia Iran Czech Republic Lebanon Seychelles Denmark Lithuania Singapore Egypt Malta Slovakia Estonia Mauritius Slovenia Finland Moldova South Africa France Montenegro Spain Germany Norway Sweden 8

Cyprus South Africa Double Tax Treaty New Protocol 2015 Treaty Rate * Cyprus Tax Law South Africa Tax Law Dividends 10% or 5% ** 0% 15% Interest 0% 0% 15% Royalties 0% 0% 15% Capital Gains Capita gains from the sale of shares will be taxed in Cyprus where the seller is a Cyprus tax resident. The treaty does not contain a property rich clause. *The new protocol has been ratified on 18 September 2015 and it shall be applied retroactively as from 1 st April 2012. ** 5% withholding tax on dividends provided that the receiving company holds at least 10% of the share capital in the distributing company, otherwise 10%.

Cyprus Tax Residency • Management and Control of companies must be exercised in Cyprus. Relevant criteria for consideration are: – The structure of the Board of directors – Place of the Board meetings – Major decisions and contracts to be concluded and signed in Cyprus and detailed board minutes must exist – The place where the discussion and approval of accounts takes place must be Cyprus – Personnel and office space can strengthen substance and are recommended • Note: Place of business not relevant for determining residence

The Cyprus Holding Company Inbound Investment to South Africa • Dividends paid from South Africa to Cyprus Holding Co are subject to 10% withholding tax which is reduced to 5% provided that Cyprus Holding Co holds at least 10% of the share capital in the distributing company • Incoming Dividends are exempt from taxation in Cyprus (subject to relaxed conditions) • 10% or 5%WHT on • dividends Corporate tax rate in Cyprus at 12, 5% Foreign Co 0% WHT Cyprus Holding Co Max reinvestment INVESTMENT • No Capital Gains tax upon exit and disposal of investments No Cyprus Dividend withholding tax

The Cyprus Holding Company Outbound Investment to South Africa • Shareholder 0% WHT Cyprus Holding Co Max reinvestment EU / NON EU investment • Dividends • • • Dividends paid from overseas investments to the Cyprus Holding Co are subject to: – Zero withholding tax using the EU P/S Directive or – Low withholding tax using the Tax Treaty Network of Cyprus Incoming Dividends are exempt from taxation in Cyprus (subject to relaxed conditions) Corporate tax rate at 12, 5% No Capital Gains tax upon exit and disposal of investments No Cyprus Dividend withholding tax

The Cyprus Holding Company Financing Company Shareholder Bank Loan Interest Payment to the Bank Cyprus Holding Co Interest without WHT No thin capitalization rules Thin margin left only to be taxed at low 12, 5% Interest plus mark-up EU / NON EU investment Loan Margin Up to € 50 m 0, 35% Up to € 200 m 0, 25% Over € 200 m 0, 125% Risk free/interest free loans 0, 35%

IP Tax Regime – General Provisions • Income eligible to benefit from IP tax regime: – Royalty Income – Gains from the disposal of an IP – Compensation received for an illegal use of such IP rights • Qualifying IP assets include amongst others : • Patents • Trademarks/service marks • Designs/models • Copyrights • Know-how • Work in process, R&D • Client rights related to scientific literary or artistic work • The above is a non-exhaustive list / tax rulings can be obtained easily in cases of doubt

IP Tax Regime – General Provisions 1. Cyprus IP Tax Regime – 80% tax exemption on income and disposal gains 2. Expenses incurred for the production of such income also allowable 3. Amortization over current and following four years 4. Effective Tax Rate of 2. 5% or less Overseas Parent Licence Agreement Operating Co Cyprus IP Co Royalty Payment

IP Tax Regime – Practical Example Tax on Royalties from Lease of an IP right • • Cyprus Company acquires a qualified IP during 2015 for € 1 m Cyprus Company enters into a license agreement earning € 400 k per annum as royalty income Cyprus Company suffers € 50 k as interest expense on loan to acquire the IP Amortization is calculated as 20%* € 1 m = € 200 k per annum Description 2015 Income Statement in € Gross Royalty Income Received 400. 000 Less Direct Costs – Interest and amortisation (250. 000) Net Profit from IP operations 150. 000 Less 80% notional expense (120. 000) Taxable Income 30. 000 Tax Liability (30. 000@12, 5%) 3. 750 Effective Tax Rate 0. 94%

Real Estate Holding Company • • • Sale of the “Asset Rich” South African company by the Cyprus company is taxable only in Cyprus as per the Double Tax Treaty Gains from disposal of shares connected to immovable property situated outside Cyprus are exempt from tax in Cyprus as per local tax laws EU / NON EU investment Cyprus Holding Co Therefore, no capital gains tax on the sale Asset Rich South African Co

Cyproman Services Ltd Corporate Presentation

About CPM • CPM is an Administrative Service Provider authorized by the Cyprus Securities and Exchange Commission with registration number 56/196 • Global administrator to Private, Corporate and Institutional Clients • Established in 1996; serving clients internationally for 20 years • We provide multi-jurisdictional legal, corporate, fiduciary, investment and fund administration services through regulated entities • We maintain a client-centric approach offering tailored solutions • We employ 100 multilingual persons in four full-fledged offices and includes best of breed lawyers, tax experts, accountants and professionals • We are the preferred corporate service provider of KPMG in Cyprus • We maintain our independent compliance framework • CPM members of top management are member of Society of Trust and Estate Practitioners (STEP)

Major Services • Company Registration • Formation of International Trusts and Trustee Services • Fiduciary Services • Company Administration and Secretarial Services • Fund Administration • Escrow Services • Accounting and Bookkeeping, Payroll • • Banking Cyprus Citizenship and Residency by Investment

Thank you! RODOULA DEMETRIADES Manager Business Development Tel: +357 22 474 000 Direct: +357 22 474 814 email: rodoula. demetriades@cpm. com. cy www. cpm. com. cy © 2016 Cyproman Services Limited, a Cyprus limited liability. All rights reserved. Printed in Cyprus. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.