A recent competency questionnaire between company directors showed a global shift towards a higher fiscal responsibility behaviours and morals and a trend to complete tax responsibilities.

Companies around the world are taking a more pro-active approach and start thinking on a more universal scale about how to become more transparent about their fiscal activities. More than ever before, where to incorporate and operate from is becoming the most common and interesting variable with the ever-evolving global standard.

Additionally, fiscal transparency is the first step towards more responsible behaviour. Below is an analysis of the implications regarding some of the corporate structure elements in the British Virgin Islands (BVI) business companies and Cyprus companies, by explaining their key characteristics and evaluating how each jurisdiction is adhering to the increasingly strict compliance standards.

CYPRUS

Cyprus limited liability companies benefit from the security and ease of being in the European Union. It has a simple and transparent tax system which offers one of the lowest corporate tax rates in the EU. The Republic of Cyprus is a free market economy providing vast opportunities for international business and efficient tax planning.

The main characteristics of the Cyprus corporate and tax legal system are outlined below:

• Incorporation for a Cyprus company is simple and straightforward procedure.
• Filing in English is permitted.
• The lowest corporation tax in Europe of 12.5%.
• Favourable tax regime for Cyprus holding companies, including no tax on consolidation, no controlled foreign company (CFC) rules, etc.
• No taxation on inward or outward dividends and no Capital Gain Tax (CGT) on sales of securities.
• There are more than 40 double tax treaties (DTT) concluded with other countries.
• Cyprus has adopted International Financial Reporting Standards (IFRS).
• No expatriation tax regulation.

BRITISH VIRGIN ISLANDS (BVI)

The British Virgin Islands are a member of the British commonwealth and governed by English Common Law, The BVI is one of the world’s leading finance centres offering stability with a progressive and democratic society. The financial sector is responsible for just over 50% of total government revenues. The BVI is committed to retaining an investor’s right to privacy providing a professional banking sector with top quality legal, accounting and trust and management services.

The jurisdictions most important characteristics are listed below:

• No Capital Gains Tax, Gift Tax, Profit Tax, Inheritance/Estate tax.
• No Corporate tax.
• Exemption from all local taxes and stamp duty.
• Legal & judicial system based on UK common law.
• Flexible and compliant regulatory framework as per the global standard.
• Creditor-friendly insolvency legislation.
• Asset protection and a certain level of financial privacy (even though BO registers are currently being established).
• Directors can be individual or corporate bodies.
• Ability to transfer domicile.
• No AGM (annual general meeting) requirements.
• No minimum capital requirements or foreign exchange controls exist.

Both Cyprus and the BVI are similar in the way that both apply versions of the UK Companies’ Act, both are based on a common law legal system and have both enjoyed stability and a dependable Court system. However, while Cyprus is a full EU member state under EU regulation; any ultimate appeals regarding BVI companies can ultimately be heard by the Privy Council in the UK.