OASIS
ORGANIZATION OF ADVOCATES SPECIALISING IN INTERNATIONAL SERVICES
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ORGANIZATION OF ADVOCATES SPECIALISING IN INTERNATIONAL SERVICES
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CYPRUS DEVELOPMENTS 2009/2010 Costas Erotocritou, EROTOCRITOU & CO
A. Apostolides V Orams: Apostolides v Orams is a landmark legal case decided in the European Court of Justice on 28 April 20009. It concerned the right for Greek Cypriot refugees to reclaim land in northern Cyprus, displaced after the 1974 Turkish invasion. The case determined that although Cyprus does not exercise effective control in northern Cyprus, cases decided in its courts are applicable through European Union law.
1. Background to the case:
In 1974, Meletios Apostolides, an architect, was displaced with his family from his property in Lapithos as a result of the Turkish invasion and subsequent military occupation of the northern part of Cyprus.
In 2002 David Charles and Linda Elizabeth Orams, from Hove, Sussex, England, invested £160,000 of their retirement fund to acquire the land from a third party and to construct a villa on the premises. The rhird party claimed to have acquired the property from the Turkish Republic of Northern Cyprus, an entity which, to this day, has not been recognized by any State except the Republic of Turkey. The Orams used the property in Cyprus for vacations and maintained a separate property in the UK.
In 2003 the de facto administration of northern Cyprus eased crossing restrictions along the ceasefire line giving the opportunity to displaced Cypriots to visit their old properties. Meletios Apostolides visited his property and confirmed the construction of the house occupied by the Oams.
2. Legal Proceeding in Cyprus:
Meletios Apostolides took his case to the Nicosia District court, demanding the vacation of his property by the Orams. Northern Cyprus, although a de facto functioning entity, remains an unrecognized state internationally. Mr Apostolides’ case centred around the argument that although following the Turkish invasion the government of Cyprus had lost effective control over the northern part of the island, its laws still applied even if these were not easily enforceable. In November 2004 the Nicosia District Court ordered the Orams to:
The Orams appealed this decision, which was heard at the Supreme Court of Cyprus. The appeal was dismissed.
3. Legal Proceeding in England and Wales: Due to the island’s division, the judgment reached by the Cypriot court was not enforceable, hence Mr Apostolides used EU regulations to have it registered and applied against the Orams’ assets in the UK. The procedure for the enforcement of judgments between Member States of the European Union is provided by Regulation No. 44/2001. The Orams were represented in the English courts by Cherie Blair, an action criticized by the then president of Cyprus Tassos Papadopoulos. He argued that due to its political nature, the wife of a Prime Minister should not be involved in such a case. In September 2006, the High Court of justice ruled in favour of the Orams. Mr Apostolides appealed the decision at the Court of Appeal which in turn referred the case to the European Court of Justice (ECJ), in Luxembourg. The ECJ in turn ruled in favour of Mr Apostilides (see next section below). The case was then returned to the Court of Appeal in England which decided in favour of Mr Apostolides in January 19, 2010. According to one of the judges of the Court of appeal panel, under the current system, this decision is final and no further escalation is possible. However, the Orams tried to appeal to the Supreme Court of the United Kingdom. On 31st March, 2010, the U.K. Supreme Court refused permission for the Orams to take the case to appeal, effectively bring it to a conclusion. According to my information the Oram’s have abandoned the property in Northern Cyprus rather than demolish it, and have not paid compensation and their property in Essex can be charged.
4. Legal Proceeding in the EU: The case C-420/07, Apostolides v Orams, was heard by the Grand Chamber of the European Court of Justice in Luxembourg. A panel of judges ruled on April 28, 2009 that British courts were able to enforce the judicial decisions made in Cyprus, which uphold the property rights of Cypriots forced out during the invasion. 5. Implications: The case has been described as a landmark test case at it sets a precedent for other Cypriots (primarily Greek Cypriot refugees) to bring similar actions to court. Both the British High Commission in Cyprus and the Foreign and Commonwealth Office have issued warnings regarding the purchase of property in northern Cyprus.
B. State aid: Commission clears special tax regime for international maritime transport companies in Cyprus The European Commission has approved under EU state aid rules a proposal by the Cypriot government to impose a special reduced tax on companies engaged in international maritime transport, which replaces the corporate tax. The Commission found that the scheme, which exists in several other EU countries, will enhance the competitiveness of the Cypriot fleet without unduly distorting competition. The Cypriot government has notified a tonnage tax measure for companies engaged in international maritime transport and liable to corporate tax in Cyprus. The scheme allows companies to opt for a tax calculated on the net tonnage of the fleet that they operate (tonnage tax) instead of being taxed on the actual profits of their maritime transport activities. The tonnage tax scheme would also be applicable under certain conditions to tugboats, dredgers and cable-layers. The Commission considers that the scheme is in line with the European Union's Guidelines on state aid to maritime transport. It also found strict ring-fencing measures will avoid any risks of tax evasion or spill-over of the benefits of the scheme to non-shipping activities. Finally, the scheme complies with the aid ceiling provided for in the Guidelines. The government has estimated that the annual cost of the measure would be €1.5 million The Commission authorised the scheme until 31 December 2019. It is aimed at supporting the shipping sector in Cyprus and other EU countries with a strong maritime sector have a similar scheme. The Cypriot maritime industry is one of the largest in the EU and the 10th largest worldwide. Moreover, Cyprus is the biggest third party ship management centre in the EU. The non-confidential version of the decision will be made available under the case number N 37/2010 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News
C. New legislation improves Cyprus’ attractiveness to Foreign Investors The Parliament has voted changes in the tax laws on 22 October 2009. The changes are effective retroactively as from 1 January 2009. The changes are aimed to attract foreign capital and promote Cyprus as an international financial centre by bringing about a reduction or abolition of taxation in relation to Portfolio investments and Collective Investment Schemes.
Interest receivable by Companies · Interest receivable by Companies from trading activity will be subject to Corporation Tax of 10% only. · Interest receivable by Companies from non-trading activity will be subject to Special Contribution for Defence at 10% only. Dividends receivable by Companies · Exemption from any taxation of Dividends receivable by Companies from investments in foreign companies irrespective of the percentage of participation in their share capital. (previously it was set at 1%) Redemption of units in a Collective Investment Fund (CIS) · The buy-back or redemption of units or other ownership interests in a CIS is not considered a capital reduction for Cyprus tax purposes. Therefore it will not be deemed as distributed dividend but it is seen as a sale of shares. It will be exempted from taxation. CIS tax resident in Cyprus · Interest receivable by CIS will be subject to Corporation Tax of 10% only. · Deemed distribution – Non distributed profits will be subject to 3% (instead of 15%) Special Contribution for Defence. · Actual distributions – The provisions remain the same. Distributions to non Cyprus tax residents are exempt from taxation while distributions to Cyprus tax residents are subject to 15%. Dissolution – In the case of dissolution of a CIS the non distributed profits of the last 5 years or the profits that have not been taxed to deemed distribution will be subject to 3% (instead of 15%) Special Contribution for Defence.
D. Changes to the EU Directive on VAT became effective from 1 January 2010 Changes in summary · The place of supply of services will be where the customer is located (with few exceptions see below) as opposed to where the supplier is located · Businesses providing services to other EU Member States will have to register and start submitting the VIES form · The VIES form will need to be electronically submitted on a monthly basis, on the 10th or 15th day of the month (subject to confirmation from the VAT Authorities) following the month to which it relates. Up to 31.12.2009 it is submitted quarterly by businesses supplying goods but not those providing services. · From 1 January 2010, an organization that is invoiced for both taxable and non-taxable activities will have to account for VAT on the supply via the reverse charge even if the service received is in connection with its non-taxable activity. As a result, an obligation for VAT registration will be created in some cases and thus companies which are affected will have to fulfill these requirements · Exceptions to the rule are companies providing services in the following sectors: 1. land-related supplies 2. hiring of short-term means of transport 3. cultural, sporting, scientific and educational services 4. restaurant and catering services and 5. telecommunication, broadcasting and electronic services (until 31 December 2014)
· The claim of VAT refunds incurred in other EU Member States by taxable persons will change from 1 January 2010. Businesses will be required to submit electronically a reclaim to the VAT Authorities where they are established and registered for VAT e.g. Cyprus READ CAREFULLY are you affected? · Are you providing services to other companies in the EU? NEED TO REGISTER WITH THE VIES AND SUBMIT THE FORM ELECTRONICALLY ON A MONTHLY BASIS · Are you receiving services from any Company overseas, even outside the EU? NEED TO BE ALERT THAT A VAT REGISTRATION OBLIGATION MAY BE NEEDED (even if your activity is non-taxable) · Are you supplying goods to other businesses in the EU? NEED TO REGISTER TO SUBMIT VIES ELECTRONICALLY ON A MONTHLY BASIS · Are you reclaiming VAT paid in another EU country for the purposes of business? NEED TO ELECTRONICALLY SUBMIT A CLAIM TO VAT AUTHORITIES
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Organization of Advocates Specialising in International Services
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