With the inclusion of local differences in the country, the value added tax is an indirect tax, which charges the end customer in the final settlement. The VAT tax is included in the price of a good or service by the salesperson, who is taxed with VAT. The VAT is paid by the traders from the received revenue (sales).
VIES system enables fiscal administration to get immediate access to the database of VAT tax identification numbers in other state of the Community. Owing to that, the supplier is able to check if the purchaser from a different member country is a registered VAT taxpayer by means of the state fiscal administration for the purpose of intra-Community trade. Therefore, the aim of the VIES system is to ensure verification of a contractor’s fiscal status.
In an LLC, the company matters can be managed directly by its shareholders, or the shareholders can grant all or some part of the managing authority to managers, who are then equivalent to management board members. How the company is managed depends entirely on the decision of the shareholders. The regulation regarding the manner of management and division of authority should be stipulated in the operating agreement, entered into by all the shareholders of the company. It is also important that the laws of Delaware provide managers with a significant level of protection against liability for the company’s debts. Managers are not liable to third parties and can only be held accountable by the company’s shareholders.
Entities that do not have a seat or place of residence in Delaware must have a registered agent from this state in order to establish an LLC. A registered agent acts as the first founder, submits the required documents and continues to be the company’s agent throughout its duration. The registered agent can be changed by way of the shareholders’ decision. An agent is entitled to introduce changes into the company’s registration documents. A registered agent is also entitled to receive and send legal documents on behalf of LLC. The agent receives official notifications, including court filings or information on outstanding state tax.
Every owner of an item or right is entitled to dispose of them (e.g. sell them) if they are disposable, as well as to draw financial benefits therefrom (e.g. in the form of a rent for a real property lease or the sale price of a car). Therefore, the transfer of ownership (for instance, in the case of succession) of items or rights is connected with transferring these two entitlements, which means that we ourselves lose them.
The managing function refers especially to enterprises, including companies and partnerships. In many cases an the owner of an enterprise is also its manager or is authorized to e.g. appoint the management board of a limited liability company. It often happens that it is the head of the family’s will to grant the managing function to someone else, while, for various reasons, keeping the ownership function. Hence, the managing function defines the manners of managing enterprise control, while the ownership function is separated therefrom.
This function is based on the possibility to guarantee benefits, especially financial benefits, to specified persons who are not necessarily able to assume the managing and ownership function, but who should have an appropriate standard of living provided. This especially applies to children, ill persons, disabled persons and these family members, who do not necessarily want to occupy themselves with the care and management of the family assets but, according to the head of the family’s will, are supposed to support themselves on such assets.
Cross-border merger enables you to use the effect of synergy of two commercial companies from two different European Union countries, which results in the improvement of the business’s competitiveness on the European market and optimizing the costs of business activity. By merging one can transfer the assets (including contracts being in the process of realization) of a commercial company from one country to the assets of a commercial company from other country without the need for conducting the process of liquidating the first.
After transferring its seat to a different jurisdiction, a company can fully use the legal regime of the new host country, including for example preferable fiscal regulations, which can be used in tax planning. Another advantage of such procedure is the possibility of the company to use access to the network of agreements on avoiding double taxation available in the host country, which can be particularly useful in case of legal changes in the country of the company’s current seat. What needs to be emphasized is that the company whose seat is being transferred, retains its business history, and only changes the seat and the legal regime that it functions in.
Is it necessary to prepare a seperate financial statement for a branch created on Cyprus by a foreign businessperson?
A foreign businessperson who created a branch on Cyprus is obliged to submit annually financial statements concerning the branch activity (with a certified translation into Greek) to the Cypriot Registrar of Companies. However, companies registered in the European Union member countries, whose annual financial statements are subject to examination by a chartered accountant (audit) in the country of registration, are exempted from the duty to submit seperate financial statements concerning the branches providing they submit the financial statement of the businessperson’s parent company to the register.
Double taxation of companies is, in fact, the double taxation of the shareholder’s profit earned by through the structure of the company. The first taxation occurs at the company level (since it is subject to corporate income tax) and the second taxation occurs at the level of the shareholder, who receives the profit distributed by the company (e.g. in the form of a dividend). If the shareholder (stockholder) is another limited company (and such company’s shareholder is yet another limited company etc.), then multiple taxation occurs until the stage where the profit is distributed to a natural person.
Example: a Polish resident, a natural person, is the only shareholder of a Polish limited liability company. The limited liability company earned some income in the fiscal year. This income was subject to a 19% corporate income tax. Next, the shareholders’ meeting passed a resolution on allocating the profit for payment of a dividend. Before paying it, the company, as a taxpayer, deducted the 19% personal income tax on the dividend. Hence, the shareholder only received 66% of the profit earned by the company.
Pursuant to worldwide well accepted rule taxpayers with unlimited tax liability (tax residents) are subject to taxation on their world-wide income. On the other hand non-residents (persons with a limited tax liability) are subject to taxation in Poland only with respect to the Polish-sourced income.
Taking into an account this two rules the same income can be taxed twice; in the country of residency and in the country where the source of the income is located. To avoid double taxation, countries agreed with other countries in treaties to mitigate the effects of double taxation (Double Tax Avoidance Agreement or Double Tax Treaties – DTT). The main purpose of Double Tax Treaties is to eliminate the situation when the same income can be taxed twice.
Generally Double Tax Treaties provide three rules of double taxation:
- income is taxed in the country where the person is a resident,
- income is taxed in the country where the source is located,
- mixed rule containing two principal methods for the elimination of double taxation, namely: the exemption method and the credit method.
Double tax treaties regulate elimination of double taxation only in the extent of income and wealth taxes.
In accordance with VAT law some transactions concluded between taxpayers from different member states are subject to tax by recipients of goods or services. The aim of such solution is to simplify VAT calculation thanks to a mechanism of calculating the tax by the recipient (so called reverse charge mechanism).
In a situation in which the service is provided by an entity registered for VAT purposes in one EU country to another entity, being a VAT taxpayer from another member state, the input tax as well as output tax is calculated by a recipient of the service.
Offshore companies are companies with a seat in a country, territory which is applying harmful tax competition. The special list of countries and territories applying harmful tax competition is maintained by OECD. Commonly known as “Black” (the “Black List”).
The majority of countries have such list functioning in a tax system of a given country. Poland also maintains its own “black list” specified in regulations of Ministry of Finance (the Regulation of Ministry of Finance of 16 May 2005 on countries and territories applying harmful tax competition for the purposes of personal income tax (Journal of Laws No 94, item 791), the Regulation of Ministry of Finance of 16 May 2005 on countries and territories applying harmful tax competition for the purposes of corporate income tax (Journal of Laws No 94, item 791).
Both natural and legal persons may become members of the trust, depending on the regulations of a given jurisdiction. The rules of appointing and dismissing members of the trust are specified by Articles of Association, and in case of lack of such regulations in the Articles of Association, appropriate regulations from the given jurisdiction’s commercial code apply. Members of the trust represent the company and handle its business.
The form of company representation is specified in the so-called quorum for transaction of business (which is specified in the Articles of Association). It is an equivalent of “the form of company representation” in Polish law. Decisions concerning transaction of business are made by the members in the form of resolutions (made on general meetings of the trust or in the form of written resolution). It is important to pay particular attention to keeping quorum while adopting a resolution for the purpose of effectiveness of such decisions. This is where it is necessary to notice the fact that the appropriate form of representation of a given entity has an influence on the tax residence status of the company in a given jurisdiction. Therefore, it is important to remember that for keeping the status, transaction of business needs to be done on the territory of a given jurisdiction (which requires adopting resolutions by members of the trust on the territory of a given country). It is also advisable that, for the purpose of tax residence, the decisions concerning transaction of business are always controlled by the members of the trust that are residents of a given jurisdiction.
The secretary is responsible for, among other things, timely submissions of corporate information about the company to the relevant authorities, as well as for administrative issues in the company, such as: preparing documents (minutes from shareholders’ meetings or board meetings), executing financial statements and accompanying documents. Obviously, the secretary is able to carry out certain transactions on behalf of the company if it is given appropriate power of attorney by board members.
At the moment of execution of the fiduciary act, the trustee becomes a formal (not real) partner of the company, disclosed in the register of companies. It is therefore important to distinguish between a formal and a real partner of the company while remembering that precisely the real partner of the company decides about all the company’s actions and a trustee only performs the instructions of the Client.
As a result of increment (power of attorney) the trustee performs and exercises the right on his own behalf, but with a restriction that the form, time and conditions of exercising that right are strictly specified, contrary to what stems from a given legal right. Another restriction is that after the specified time or with the fulfillment of a specific condition, the right (power of attorney to perform that right) or the benefits resulting from performing that right are transferred to the beneficiary/trustor by the trustee, or alternatively upon the fulfillment of a condition stipulated in the contents of the legal action. Consequently, on the side of the trustee there is a general restriction to the scope in which he is entitled to exercise the right that he is to perform.
Does a Cypriot company need to have a bank account on Cyprus?
No, there is no such requirement. A Cypriot company can open a bank account in a country of its choice at the company management’s discretion (including the discretion of the fiduciary management).
The board member is included in the composition of the body (the management of the company) which is entitled to represent the company pursuant to a resolution. There is a requirement to disclose the details of the board members in the National Court Register. This is because each board member bears subsidiary responsibility before the company.
The Managing Director (MD) is not included in the composition of the managing body (the company management). He does not bear subsidiary responsibility for the company’s liabilities, therefore, there is no need to disclose his personal details in the National Court Register. Also, he is not entitled to represent the company. He is authorized to run the current affairs of the company. The competences of MD are specified in detail each time by the management board that appoints him.
Both the board member and MD are entitled to remuneration due to the performed function. Due to the change of regulations, beginning on 1 January 2013, the remuneration of the management board member / MD is no longer tax-exempt in case of paying the remuneration from a Cypriot company to the Polish tax resident.
The authorized capital is a value to which you can increase the company share capital (spent) without the need for changing the Memorandum of Association. The worth of the authorized capital is specified in the Memorandum of Association.
(Usually we suggest our Clients that the Cypriot company’s spent capital should amount to 1,000 Euros, and the authorized capital – 2,000 Euros. ) There is a possibility of increasing the authorized capital by changing the appropriate resolution in the Memorandum of Association.
What documents are included in the set of register documents of a Cypriot company?
• Certificate of Incorporation – a certificate saying that a given company has been registered in the Cypriot Registrar of Companies on a specified day;
• Certificate of the Directors – a certificate informing about the members of the board of directors of the company as well as the secretary;
• Certificate of Shareholders – a document with the details of the company shareholders (including the number, type and the value of the shares possessed);
• Certificate of Registered Office – a certificate which informs about the official address of the company’s registered office;
• Memorandum of Association.