German Chancellor Angela Merkel and French President Emmanuel Macron are showing the solidarity way to the rest of the EU leaders. The two powerhouses of EU have met on Monday the 29th June 2020 at the German government’s guest house of Meseberg Castle in Gransee near Berlin.

Both leaders understanding the opposing views and the increasing friction among the other member states, are trying to find a common path of understanding and to reach to a coronavirus rescue plan that all 27 members will agree to.

There is an extra incentive to Germany to push for an agreement as Germany takes over EU’s Presidency for the second half of 2020 and an agreement will reinforce their leading status.

On top of the European Commission plans for a Euro 750 billion fund made mostly of grands, the two leaders have agreed for Euro 500 billion recovery fund raised from shared EU borrowing, the so-called “Corona Bonds”.

It is argued that the opposing member states, Austria, Netherlands, Denmark and Sweden, have more to lose with a slow EU recovery compared to the grands and common EU borrowing. These nations have benefited most from the strength of the EU common market.

The final deal is expected to be reached by the end of July.

Emmanuel Macron stated characteristically that this is a “moment of truth” for the European Union. Angela Merkel added that the fund has to be substantial.

Both know that striking a deal will not be easy and they will need to use all of their charm but at the same time their power to achieve this.


It seems that the European Union, or at least the European Parliament is taking action towards the right direction. On Friday, 15th of May, it voted to block any budget that does not include a Euro 2 trillion commitment, that it also includes common debt issuance, the so-called Corona Bonds, as a means of helping European Union countries dealing with the economic effects of the corona virus pandemic.

The motion was supported by the EU parliament’s five largest political groups: the center-right European People’s Party (EPP), the Socialists and Democrats (S&D), the centrist Renew Europe, the European Conservatives and Reformists (ECR), and the Greens/EFA.

The resolution states that the pandemic has affected all 27 members equally and thus funding should be made available to all 27 member states.

In March the leaders of Belgium, France, Italy, Luxembourg, Spain, Portugal, Greece, Slovenia, Ireland and Cyprus have pushed for the issuance of Corona bonds however, the northern member states such as Netherlands, Germany and Austria strongly opposed it.

Each member of the European Union has a veto on fiscal issues, which means a unanimous consent is needed for the proposal to take effect.

The EU parliament has included in the motion a range of new European tax measures including a single set of rules to calculate companies’ taxable profits in the European single market, a financial transactions tax, a plastics tax and a carbon border tax. All those measures have been proposed in one form or another at a European level before.

While the European Parliament does not have any legislative power, meaning the motion is a mere proposal, all of the EU budgets are subject to its approval.  Going a step further, the European Parliament stated in the motion that the budget needs its consent and warned not be presented with a budget with a recovery plan that is financed by existing and upcoming programs. In other words, the Euro 2 trillion should be on top of any planned budget.

The ball now sits in the European Commissions court waiting for their response.


DAC 6, the Directive on Administrative Cooperation in direct taxation (Volume 6) which aims to attack aggressive cross-border tax planning arrangements, came into force in the European Union with effect from June 2018. Member states were under the obligation to transpose the new rules into domestic law by 31 December 2019. Cyprus has prepared the draft Bill which is expected to be enacted into local law during the forthcoming months of 2020 with a backdated effect of June 2018.

The Directive focuses on mandatory reporting by intermediaries (service providers such as fiduciary firms, lawyers, accountants, auditors, banks, etc.) and “relevant taxpayers” involved in cross-border transactions which meet certain hallmarks. The requirement for the reporting to take place by the relevant taxpayer is triggered where the intermediary is a non-EU person, where no intermediary is involved or where an intermediary does not disclose owing to legal professional privilege.

Where there is more than one intermediary, the obligation to report lies with all intermediaries involved in the arrangement. An Intermediary shall be exempt from filing information to the extent that it has proof that this information has already been filed by another intermediary. Where there is more than one relevant taxpayer, the Directive puts the primary obligation onto the relevant taxpayer who agreed the arrangement and then, on to the one who manages the implementation.

The reporting is made to the domestic tax authorities, namely to the Cyprus Tax Department, in the case of Cyprus.  DAC 6 introduces rules for the subsequent exchange of this information between member states’ tax administrations.

DAC 6 – “cross-border” arrangements and the 5 “hallmarks”

Under DAC 6, an arrangement will be considered “cross-border” where at least one of the participants is based in the EU regardless of the location of the other participants.

Furthermore, a “cross-border” arrangement may be reportable where it contains at least one of the “hallmarks” as defined below:

  • Hallmark A: arrangements whose tax benefits are subject to confidentiality arrangements, that give rise to performance fees or mass marketed schemes;
  • Hallmark B: arrangements such as the acquisition of companies with tax losses for related exploitation, the conversion of income into capital or other forms of income to avoid taxation, or so-called circular transactions via superimposing vehicles without commercial substance;
  • Hallmark C: arrangements that give rise to tax deductions in one jurisdiction without a corresponding amount of taxable income in another, achieving double reliefs or deductions;
  • Hallmark D: arrangements that have the effect of undermining the CRS or similar regulations with third countries, or the rules on identification of beneficial ownership;
  • Hallmark E: arrangements concerning transfer pricing, use of “safe harbor” rules, etc.

Additionally, certain cross-border arrangements may be reportable if they are captured by the so-called “main benefit test”. To satisfy the test, one of the main objectives of the arrangement must be to obtain a tax advantage. The final text of the enacted legislation in Cyprus shall provide clarification in relation to what is considered a tax advantage under Cyprus law.

It should be noted that only direct taxation such as income tax is relevant for the purposes of determining tax planning arrangements within the scope of the Directive.

Reporting timelines & Penalties

The reportable arrangements for which the first implementation step should take place is for the period between 25 June 2018 and 30 June 2020The transactions during the period should be reported by 31 August 2020. As from 1 July 2020 reportable arrangements should be reported within 30 days to the Cyprus Tax Authorities.

As far as penalties are concerned, the amount of penalty will depend upon the nature of the violation and is capped at EUR 20,000 per violation.

It should be noted that both the abovementioned dates and penalties are subject to final text of the legislation which shall be voted by the members of the Cyprus Parliament in the coming months.


In the light of the above, there is no doubt that DAC 6 has come to unravel and make tax arrangements/planning more transparent. Whilst considering the reporting burden created by DAC 6 on both intermediaries and their clients, it remains to be seen how efficient reporting methods will be and what effect such reporting shall have on taxpayers. If there are many intermediaries in a transaction and each of them needs to report on the same transaction, this may cause duplicate information reported to the tax authorities which will need to be processed carefully.  In addition, taxpayers will need to centralize the reporting function to one of their intermediaries which has the relevant expertise in order to avoid additional reporting costs.  It is therefore important that the intermediary used in the course of a centralized reporting strategy has the necessary tax, accounting, transactional and legal knowledge in order to identify relevant cross-border arrangements for the purposes of accurate DAC 6 reporting.


On Thursday the 9th of April 2020, after many hours of debate and in the brink of failure, the EU member states’ finance ministers finally reached a deal of more than Euro 500 billion emergency rescue plan but with some sort of controversy.  Two days earlier, on Tuesday the 7th of April 2020, the finance ministers failed to reach an agreement further to a 14-hour teleconference meeting.

In the middle of the Covid-19 pandemic, the rescue plan aims to stimulate the EU economy, however, no agreement has been reached on the issuance of joint bonds, the so called “Corona Bonds”.

In comparison with the financial crises of the last two decades where the EU did too little too late, this time is taking measures far ahead of the crisis.  Only history will tell whether these measures will have a real and adequate impact in the recovery of the EU economies this time round.

The Recovery Plan consists of three main components:

  1. Revised credit lines from the European Stability System (“ESM”) to member states of about 2% of their Gross Domestic Product (“GDP”), a total of Euro 240 billion;
  2. A boost to the lending powers of the European Investment Bank (“EIB”) of Euro 200 billion for financing small and medium-sized companies; and
  3. A new Euro 100 billion unemployment insurance scheme (“SURE”: Support to mitigate Unemployment Risks in an Emergency) which is a financing tool for member states to be used in public expenditure for the preservation of employment as a second line of defense to their national short-term schemes.

The small print….

The Euro 240 billion, point 1 above, is available to member states as long as the funds are spent on their healthcare systems. The credit time will expire after the pandemic is over.

The Euro 200 billion, point 2 above, is a credit guarantee through the EIB to keep companies afloat i.e. this scheme will allow companies to borrow on this guarantee to cover short to medium term cash flow needs. 

The Euro 100 billion under the SURE scheme, point 3 above, aims to cover the lost wages for employees working shorter hours.


EU member state leaders will meet on the 26th of April 2020 to consider and approve the above described recovery plan.

It is hoped that the ESM credit lines of Euro 240 billion should be accessible within 15 days. The EIB needs to get the program running for the funding of Euro 200 billion without delay.

Is it enough?

It all depends on how the pandemic will evolve. If the pandemic ends in midsummer may be yes while if it prolongs, maybe further measures will be needed and the EU shall be ready to do so.

There is also talk among EU leaders that even with the best-case scenario more financial assistance will be needed during the last quarter of 2020 or in the beginning of 2021. The form of this financial assistance will be decided by EU leaders in the coming months.


It is our opinion that the above measures are in the right direction, however, the EU should ensure that the impact of the pandemic is absorbed at government and institution level and not by the private sector to avoid unprecedented or unwanted consequences for the European economy as a whole. 

We hope that the “old” friction among the European states, which has resurfaced during the last few weeks will be controlled and unity and solidarity will be promoted for the overall benefit of the European continent.


In light of the pandemic COVID-19 that has seized the world there is no doubt that parties may wish to assess applicability of force majeure clauses in their contractual arrangements to ascertain the possibility of termination or suspension of performance or any other legal consequences.

The question whether COVID-19 may be considered to be a force majeure event, such that it enables parties to temporarily or permanently be excused from performance of their contractual obligations, will depend on the circumstances, the nature and content of the contract in question. 

The term ‘force majeure’ does not have a universally recognised meaning under Cyprus laws and the courts will examine the wording and intention of the parties at the time of entry into the contract. In many instances, contracts will include a specific and “closed” list of events which are said to constitute force majeure such as acts of God, wars, riots, floods, typhoons, governmental or regulatory prohibitions. The COVID-19 pandemic is unique not only due its epidemiological and clinical features but also because it contains both a naturally occurring component which is the virus itself and a government action component such as the quarantines and travel bans put in place in response to the outbreak.

Therefore, there is no simple answer to whether COVID-19 would qualify as a force majeure event. This will necessarily depend on several factors including nature and content of the contract and its governing law.

Additionally, parties may seek relief under the doctrine of frustration as enshrined in section 56 of the Cyprus Contract Law Cap. 149, although this generally applies in cases of impossibility to perform the contract, for example due to destruction of the subject matter, supervening illegality, incapacity or death. Although it is difficult to envisage how the COVID-19 outbreak may justify invocation of the aforesaid provision, it remains to be seen how this will be interpreted and applied by the Cyprus courts.

In conclusion, force majeure scenarios are by nature fact-specific and dependent on the content and context of the contract in issue. Going forward parties may wish to pay more attention in drafting the relevant force majeure provisions by for example incorporating reference to pandemics and regulating the consequences in such eventuality.

You may contact our legal team for further assistance and legal advice.


The Cyprus IP Tax Regime offers multiple benefits to businesses. Under certain conditions businesses could reduce their tax on gross income derived from an intangible asset by 80% (after deduction of direct costs and amortisation over five years). This could result in an effective tax rate of 2.5% or lower!

An IP asset must fall within the definition of a Qualifying Asset (QA) in order to enjoy the benefits of the Cyprus IP Box.

Under the IP Box Regime, a QA is:

  1. an asset that was acquired, developed or exploited in the course of carrying out a business, which is the result of research and development and includes intangible assets for which only economic ownership exists (R&D).
  2. any other IP asset that can be legally non-obvious, useful and novel , which was exploited by a person (natural or legal) in the course of  a business not earning more than Euro 7.5 million per year in gross revenue or Euro 50 million in case of a group of companies which are certified as such by an Appropriate Authority in Cyprus or abroad.
  3.  utility models, intellectual property assets which provide protection to plants and genetic material, orphan drug designations and extensions of protections for patents.
  4. business names (including brands), trademarks, image rights and other intellectual property rights used to market products and services are not considered as qualifying intangible assets anymore.

The benefits that may arise from the IP Box Regime shall also be granted when there is a sufficient nexus connection between the development of the IP and the specific company and jurisdiction.

Qualifying Profits (QP) are calculated from the usage of the following formula:

  • QI * (QE + UE)/OE

Where:            QI: Income derived from the QA

                        QE: Qualifying Expenditure on the QA

                        UE: Uplift Expenditure on the QA

                        OE: Overall Expenditure on the QA

The QE consists the total R&D incurred in any tax year, which is wholly, exclusively and directly relating to the development of the QA.

QE includes, but is not limited to, the following:

  • wages and salaries;
  • direct costs;
  • general expenses relating to installations used for research and development;
  • expenses for supplies related to research and development activities;
  • costs associated with research and development that has been outsourced to non-related persons

but do not include:

  • cost for the acquisition of intangible assets;
  • interest paid or payable;
  • costs relating to the acquisition or construction of immovable property;
  • amounts paid or payable directly or indirectly to a related person to conduct research and development activities, regardless of whether these amounts relate to cost sharing agreement;
  • costs which cannot be proved directly connected to a specific eligible intangible asset.

The UE is the lower of 30% of the qualifying expenditure or the aggregate of acquisition costs of the IP and the total outsourcing costs to connected persons.

The “nexus approach” limits application of the IP box regime if research and development (R&D) is being outsourced to related parties. The approach links the benefits of the regime with the R&D expenses incurred by the taxpayer.

As mentioned in the beginning, 80% deemed expense deduction will be provided for qualifying profits in relation to a QΑ.  A taxpayer may elect not to claim the deduction or only claim a part of it. As in the case of a resulting loss, only 20% of the loss can be surrendered to other group companies or be carried forward to subsequent years.


The Greek Permanent Residency Scheme

Greece, the birthplace of democracy, the Olympic Games and Western Philosophy, is a country strategically located at the crossroads of Europe and Asia. It is well known for its charm and beauty and offers a good quality of life to its residents. In 2013 Greece introduced the Permanent Residency Scheme widely known as the ‘Golden Visa’.

 Advantages of the Golden Visa Scheme

  • Straightforward & transparent procedure.
  • The investment amount is at a minimum amount of €250.000.
  • Applicants may reside without time restrictions in Greece.
  • A permanent residency of a Schengen Member State is attained and travel without any requirements to 26 European-Schengen area countries is permitted as well as residing in a Member state for three months.
  • No language requirements.
  • No minimum personal income requirement.
  • Very low application cost.
  • Access to the Greek education system.
  • Family members of the applicant including the spouse, unmarried children under the age of 21, parents and parents in law obtain permanent residency with no additional investment amount.
  • Five-year residence permit attained which is easily renewable.
  • A swift process which takes up to two months.
  • Long-term residence, and thus citizenship status can be obtained under specific conditions.

What type of Investment is eligible for the scheme?

Third country citizens who:

  • Own real estate property in Greece, either personally or through a legal entity based in Greece or another EU Member State of which they own 100% of the company shares, provided the minimum value of the property is €250.000.
  • Have signed a lease agreement for a minimum of 10 years provided the minimum cost of the lease is €250.000.
  • Have purchased and have full possession of real estate property in Greece before the enactment of the law relating to the scheme in 2013 provided that they had purchased the real estate property for at least €250.000 or the current objective value is at a minimum of €250.000.
  • Purchase a plot of land or acreage and proceed to erecting a building provided that the cumulative value of the land purchase and the contract with the construction company is at a minimum of €250.000.
  • Have signed a timeshare agreement (lease).
  • Are adults and who fully & legally own real estate property in Greece, the minimum value of which is €250.000 and is acquired through intestate succession, will or   parental concession.

According to a recent decision published on 12th November 2019, Greece has added further eligible investment options to the program these being:

  • A bankterm-deposit of a minimum amount of €400.000 at a domestic credit institution, of at least one-year duration of which the standing order for renewal should be for at least 5 years.
  • Purchase of Greek Government bonds with an acquisition value of at least €400.000 and a residual maturity of at least 3 years at the time of purchase through a domestic credit institution which is also their custodian.
  • A capital injection of at least €400.000 in a company which has its registered office or establishment in Greece for the acquisition of shares in equity or bonds.
  • A capital injection of at least €400.000 in a domestic Real Estate Investment Company.
  • A capital contribution of at least €400.000 to a Venture Capital Company or a Venture Capital Fund provided that the aforementioned Alternative Investment Organisations are intended for investment in Greece.
  • Purchase of at least €400.000 worth of shares in an Alternative Investment Fund set up in Greece or in another EU Member State whose aim is to invest exclusively in real estate in Greece.
  • Purchase of at least €400.000 worth of equity shares in a mutual fund, which is intended to invest exclusively in shares, corporate bonds and or Government bonds that are listed for trading or are traded in regulated markets in Greece.
  •  Third country nationals who own 100% of a national legal entity that invests a minimum of €400.000 in bank deposits, the purchase of shares, corporate bonds and or Government bonds which are traded in regulated markets in Greece may be granted permanent residency.
  • Up to three third country national shareholders of a foreign legal entity, that invests a minimum of €800.000 in bank deposits, the purchase of shares, corporate bonds and or government bonds which are traded in regulated markets in Greece may be granted permanent residency. This amount may increase depending on the number of shareholders requesting a visa.

The process in a nutshell

  • Issuance of an entry visa for Greek Territory from the Greek consulate authority in the country of origin of the applicant/s.
  • Collection of documentation for the issuing of the residence permit.
  • Submission of documents with the relevant Authority.
  • Submission of biometric data.
  • Application examined by Secretary General of the Decentralised Administration and the authority of Aliens & Immigration of the Decentralised Administration.
  • Five-year (renewable) residence permit issued.


In today’s business and regulatory environment, is imperative that all business should be concerned and take all necessary steps to know who they have business dealings with. This means identifying and verifying customers identities by gathering information and data. They must follow “Know Your Customer” (KYC) guidelines and best practices, in order to make sure that prospective clients are not involved in money-laundering or another type of financial crime.

When regulated obliged entities are in the process to create a new business relationship with individuals or legal entities without fully knowing their past and present business dealings, they run the risk of exposing themselves to regulatory and/or criminal offences.

Enhanced Due Diligence measures should be carried out for clients who are categorised as high-risk Clients following the application of the Risk Based Approach (RBA) methodology. The RBA identifies and assesses the Money Laundering and Terrorist Financing risks as well as managing and mitigating the assessed risks. The risk factors used for the client risk assessment are the following:

  • Country/ Geographical risk
  • Service risk
  • Client risk
  • Delivery channels risk

There are many reasons which clients can be classified as high risk Clients. Below is a non-exhaustive list of factors and evidence that should elevate the risk assessment of a client:

  • Non-Face-to-Face meeting with client.
  • The Client is a Trust / Fund;
  • Third person operating and controlling “Client Account(s)”;
  • The Client’s ownership and control structure is complex;
  • Client’s transactions that are complex, unusually or unexpectedly large or have an unusual or unexpected pattern without an apparent economic or lawful purpose or a sound commercial rationale;
  • The business relationship is conducted in unusual circumstances;
  • The client requests unnecessary or unreasonable levels of secrecy;
  • Clients whose own shares or those of their parent companies (if any) have been issued in bearer form;
  • Politically Exposed Persons, their family members and close associates;
  • Clients who are involved in electronic gambling/gaming activities through the internet;
  • Clients from countries which inadequately apply FATF’s recommendations;
  • Bank relationships with non-EU financial institutions;
  • Clients from high-risk third countries.

Based on the above, Enhanced Due Diligence (EDD) should be applicable for high risk clients in order to provide a greater level of scrutiny for potential business relationships and at the same time establishing a higher level of identity assurance to mitigate those risks appropriately. Hence, an obliged entity has to examine, as far as reasonably possible, the background and purpose of all complex and unusually large transactions which have no apparent economic or lawful purpose. In particular, obliged entities shall increase the degree and nature of monitoring of the business relationships, in order to determine whether those transactions or activities appear suspicious.

Enhanced Due Diligence measures for business relationships and/or transactions may include:

  1. Looking for additional independent, reliable sources to verify information, including identity information, the integrity and the permanent address of the client such as a bank reference letter;
  2. Detailed examination of the background and purpose of the business relationship through internet searches;
  3. Increasing and customising the level and nature of monitoring;
  4. Taking further steps to satisfy that transactions are consistent with the purpose and intended nature of the business relationship.

Application of Enhanced Due Diligence procedures are becoming more and more the norm. With stricter regulations surrounding KYC and AML, the scope and details of what necessary checks are required is always expanding.


In light of the latest developments that have caused upheaval all around the world and have put the Cyprus Investment Program in the spotlight, discussion of the possibility of revocation and deprivation of citizenship is a prominent topic.

Considering the above it would be right to clarify whether or not such a revocation can legally be accomplished and how straightforward or not such a procedure really is.

As per Section 113(2) of the Civil Registry Law 141(I) 2002 as amended, the Council of Ministers may issue a decree depriving a citizen of his/her citizenship if it is satisfied that the registration or the certificate of naturalization was acquired through deceit, false pretences or concealment of a material fact.

Furthermore, and subject to the provisions of Section 113(3), the Council of Ministers may issue a decree depriving any citizen, who is a naturalized person, of his citizenship, if it is satisfied that the citizen:

  1. Has demonstrated in words or in actions lack of loyalty or disgrace to the Republic; or
  2. During any war that is carried out by the Republic he engaged in transactions or came in contact with the enemy, or he engaged in a transaction or any operation which he was aware of that it was being conducted in such a manner that could help the enemy during the war; or
  3. He was sentenced to imprisonment in any country for no less than twelve months, within five years after his naturalization.

In certain cases and under specific circumstances, Section 113(4) indicates that the Council of Ministers may by Order deprive of his/her citizenship any citizen of the Republic, who is a naturalized person, if it is satisfied that this person was habitually residing in foreign countries for a continuous period of seven years and if during that period he did not:

  1. Spend any time in the service of the Republic or any International Organization, which the Republic is a member of; or
  2. Inform annually, in the prescribed manner, a Consulate of the Republic of his intention to retain his citizenship.

Pursuant to this Section, the Council of Ministers does not deprive any person of his citizenship unless it is satisfied that it is not conducive to the public interest that this person continues to be a citizen of the Republic.

Before a Decree is issued pursuant to Section 113, the Council of Ministers shall give the person against whom the decree is issued, written notice informing him of the reason for which the Decree shall be issued. If the Decree is to be issued pursuant to any of the reasons in the above-mentioned subsections (2) and (3), the affected person shall be particularly informed about the right to request an investigation, according to this Section.

In conclusion, if the Decree is to be issued pursuant to subsections (2) and (3) and the affected person requests an investigation, the Council of Ministers may refer the case to the Investigation Committee, appointed by the Council of Ministers specifically for this purpose. The Investigation Committee shall consist of the President, who shall have judicial experience, and a number of members that the Council of Ministers deem necessary.

Consequently, the revocation and deprivation of citizenship is not as straightforward as one may seem to think and there are laws and procedures that need to be taken into consideration when examining particular cases that may seem to fall within the Civil Registry Law.