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Events > IFA Ukraine > IFA Ukraine Seminar on Business Migration to EU Countries

IFA Ukraine Seminar on Business Migration to EU Countries

29 september, 2015, Kyiv

September 29, 2015 IFA Ukraine held its regular International Tax Seminar, designed to explore new opportunities for business and personal migration to EU countries.

Senior-level tax advisors from Cyprus, Romania, Greece, Bulgaria, Montenegro and Croatia provided general overview of the market entry services and business climate in the listed countries, as well as covered topical labor issues and available citizenship and residency programs in the EU.

Seminar panel was joined by Chris Damianou, Eurofast, David Jakovljevic, Eurofast Croatia, Oksana Kneychuk, AstapovLawyers, and Iulia Lascau, Euroglobal Audit& Advisory SRL.

Chris Damianou provided a general overview of the corporate and personal tax regime in Cyprus, major trends in migration of the companies and specifics of the effective residency and citizenship programs via investment.

Among the reasons for shifting business to Cyprus Chris mentioned possibility to extract value by way of dividends or gains on disposal of assets that are free from or subject to reduced rate of withholding tax and capital gains tax.

Chris put emphasis on "substance" requirements that should be met by a Cyprus company to take advantage of treaty benefits and EU Directives, e.g.:

  • Majority of the Directors must be tax residents in Cyprus;
  • The decisions made by the Board of Directors must be passed in Cyprus;
  • The company must maintain its head offices in Cyprus;
  • Bank account must be opened in Cyprus.

In general, Chris outlined that Cyprus legislation is being progressively developed to ease the administrative process for business migration to the maximum level, and to motivate the business to relocate to Cyprus. As for compliance with EU requirements with respect to transparency, Chris noted that no trade-offs should be expected in this regard, since Cyprus, as any other EU country, is obliged to fully meet the imposed criteria.

When relating on Greece, Chris Damianou noted that corporate tax rates are rather high compared to those in Cyprus (corporate income tax - 29%, standard VAT rate - 23%). As for tax implications on work permits and residency of foreign citizens, it was mentioned that if the individual is present in Greece more than 183 days during 12 consecutive months he/she will qualify as tax resident and will be liable to personal income tax in Greece based on worldwide income.

When covering main capital control measures in Greece, Chris updated seminar participants that Greek Government is gradually moving away from strict limitations in banking sector, however, some capital constraints are still in place.

Concluding, Chris noted that business migration to Greece does take place and is often reasoned by personal motives, prompted by low living costs, favorable climate and social environment.

Iulia Lascau provided a general overview of Romania corporate tax rates, i.e. CPT - 16%, micro-enterprises - 3%, dividend tax rate - 16%, withholding tax on interest and royalties paid to non-residents - 16%, VAT - 24%. According to Iulia, Double Tax Treaties concluded by Romania allow applying even lower tax rates.

As for personal income tax, Iulia noted that the current rate is 16% and it applies to all incomes obtained by Romanian tax residents from sources within or outside Romania. As for non-residents, they are taxable on their income derived from Romanian sources. Salary incomes derived from software development and design are exempt from taxation, if certain criteria are met.

Like in Greece, if the individual is present in Romania more than 183 days during 12 consecutive months he/she will qualify as tax resident and starting from 1st of January next year will be liable to personal income tax in Romania on worldwide income.

When commenting on Romanian perspectives, Chris noted that the cost of importing goods from Romanian port Constanta, say to Czech Republic, is three times less compared to importing through Rotterdam port in the Netherlands, and this trend could be certainly used to the benefit of trading companies importing to EU.

When covering Bulgaria topic, Iulia Lascau highlighted simplicity of administrative procedures, e.g. for registering LLC only two days are needed, provided all the documents are in place.

Bulgaria is also featured by a growing rate of outsourcing start-ups: total number of employees mid-2015 is 30,720, and it is expected to double by 2020.

As for work permit restrictions, it was noted that a work permit is to be issued when the total number of foreign employees does not exceed 10 percent of the average number of Bulgarian citizens contracted by the employer.

When describing Bulgarian Immigrant Investor Program (BGIIP) on residency and citizenship, Iulia draw participant's attention to 10% corporate income and personal tax rates.

David Jakovljevic presented the overview of both Croatia and Montenegro.

With respect to Croatia, David listed major obstacles for foreign investments, such as frequent amendments of legislation and overregulation due to complying with EU Directives, high payroll taxes, state budget deficit etc.

Major problem investors face are regulations entreprenours have to follow for certain types of industry. Each industry type is regulated in detail on general EU scale which makes non-EU residents difficult to adapt.

Tourism, access to EU funds, governmental subsidies for renewables, food, pharmaceutical and IT industry as very competitive sectors were listed among attractive investment factors.

As for subsidiary companies, David noted that company conducting business in Croatia for a longer period of time is obliged to open a subsidiary as it qualifies as tax resident. Therefore, it shall be obliged to manage accounting for the business done exclusively in Croatia.

In Croatia companies are exempt from profit tax if they reinvest their profits by increasing the companies' share capital, investing in fixed assets and keeping the same amount of workers as in a previous year.

Although Croatia is featured by high employment rate, workforce is in high deficit for many white collar occupations, especially in engineering, IT, chemistry and medicine.

Obtaining work permits for non-EU nationals is limited by annual quotas issued by Croatian government (for 2015 only 215 permits were issued for new hires, out of which in tourism - 106). For work permits outside annual quota the procedure is relatively complicated.

With respect to Montenegro, David noted that its tax policy is quite favorable (corporate tax, property tax and VAT is one of the lowest in Europe), while major corporate tax incentives are focused on undeveloped parts of the country.

The newly established manufactures are exempt from corporate income tax during the first five years, and they pay 50% of corporate income tax during the next three years. The workforce mobility within the country is rather low and of a seasonal nature.

When it comes to hiring new staff, it is essential to carefully study all the legal requirements for contract. Companies have to stipulate mandatory requirements, otherwise there might be a risk of pecuniary penalty.

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