Stamp Duty

1. Scope of the Stamp duty Law.

1.1.Stamp
duty is governed by Stamp Duty Law (19/1963) (hereinafter the “Law”). The Law (article 4 (1))
provides that the documents that are specifically named in its first schedule
(and only such documents) are subject to stamp duty provided these documents
relate to: (i) assets situated within the Republic of Cyprus; or (ii) matters
or things to be performed or done in Cyprus; irrespective of the place of
execution of such documents.

1.2. “Contracts”

in general are named in the first schedule of the Law as one of those kind of
documents which are subject to stamp duty (provided they relate to assets
situated within the Republic of Cyprus; or to matters or things to be done in
Cyprus).
Therefore, in case of an agreement (unless such an agreement is specifically
exempted from stamp duty) the key for determining whether stamp duty should be
paid, is to decide whether the said agreement relate either (i) to any assets
situated within the Republic or (ii) to any matter or thing to be executed or
to be done in Cyprus.

1.3. The following instruments/agreements are, among others, explicitly exempted from stamp duty:

• Sale
  of goods
• Transfers
  of securities listed on recognized stock exchanges
• Receipt
  of money deposited with banks
• Transfers
  of a ship or an interest in a ship or ship mortgage
• Hiring
  of employees

>2. Failure to stamp a Document

2.1. Documents that are subject to stamp duty cannot be accepted as
admissible evidence in Court (save for criminal proceedings) unless these
documents are duly stamped (article 36).
In case such a non-stamped document need to be submitted as evidence in
court proceedings, the document can be stamped even after the initiation of the
court proceedings. However, if the deadline for the payment of the stamp duty
has lapsed, the applicable fine will have to be paid together with the payment
of the stamp duty.

2.2. As to the consequences of one’s failure to pay the payable stamp duty, relevant case law suggest that such a failure, insofar as it can be rectified at any subsequent stage, it does not affect the validity of the relevant agreement but only its admissibility as evidence. In the application no. 341/2014 Αναφορικά με την Joint-Stock Commercial Bank
"Bank of Moscow" (Open Joint-Stock Company) ν. Αναφορικά με την Mreyton
Investments Ltd, Γενική Αίτηση αρ.: 341/2014, 9/12/2015) the
Court stated that: “it is evident from the aforementioned provisions and from
the content of the law that failure to stamp does not lead to the invalidity of
the document but renders impossible its presentation as evidence” (p. 21).
Note: By the said application the applicants requested the registration of a
foreign arbitral award. It was held that the arbitration agreement (pursuant to
which the dispute was referred to arbitration) and the loan agreement (from
which the dispute arose) had to be stamped before presented as evidence,
regardless of the fact that a foreign award had already been issued on the
basis of the said documents.

3. Stamp Duty Rates

As long as the
document at issue falls under the category named as “agreements” in general,
the following rates for the calculation of the payable stamp duty will apply:

• Agreements
  with value €1- € 5.000 = 0
• Agreements
  with value €5.001-170.000 = for every €1000 or part of €1000 the value of stamp
  duty is €1.50
• Agreements
  with value over 170.000 = for every €1000 or part of €1000 the value
  of stamp duty is €2 with maximum amount of stamp duty €20.000

4. Time Limits

4.1. According
to article 19, documents drafted in
Cyprus that are subject to stamp duty shall be stamped at or prior to their
signing or according to article 20, within 30 days from signing. If one wishes
to pay the stamp duty after such a deadline he will be required to pay the
applicable penalty in accordance with article 20 (b) and (c).

4.2. According
to article 21, in case a document was drafted outside Cyprus and is subject to
stamp duty under the provisions of the Law, it will be considered to be signed
on the date that it was received in Cyprus and it should be stamped within 30
days from such date.   For any delay after
the 30 days, penalties shall be imposed in accordance with article 20(b) or
(c), depending on the duration of the delay.

5. Specific Agreements/Documents:

5.1. As mentioned above, in case of an agreement the key for determining
whether stamp duty should be paid, is to decide whether the said agreement(s)
relate (i) to any assets situated within the Republic or (ii) to any matter or
thing to be executed or to be done in Cyprus. This is something that it is
determined on the basis of the facts of each case as well as the terms of the
agreement at issue. To exemplify this, a number of common agreements are
mentioned below together with a conclusion on whether a stamp duty shall be
expected to be paid in each case.

5.1.1.An
agreement for the purchase of shares in a Cypriot company, which is executed in
Cyprus.

The document is
subject to stamp duly. A share purchase agreement falls under the category “agreements” included in the first schedule of the Law. Under such a
share purchase agreement there are things to be performed in Cyprus (e.g
revision of register of members and issuance of the respective share
certificate). Therefore such a share purchase agreement is expected to be
subject to stamp duty.

5.1.2. An
instrument of transfer of shares in a Cypriot company, which is executed in
Cyprus.

Similar
reasoning to the one provided for the share purchase agreement under 5.1.1
above applies in this case as well. The document is expected to be subject to
stamp duty.

5.1.3. An
agreement for the purchase of the shares in a foreign company, which is
executed in Cyprus.

In such a share
purchase agreement, there are no things or matters to be done in Cyprus and the
property to which the agreement relates concern property which is situated
abroad. Therefore such a share purchase agreement, unlike the example of point
5.1.1 above is not subject to stamp duty.

It is worth
mentioning court case ΛαϊκήΚυπριακή Τράπεζα Λτδ ν. Κυπριακής Δημοκρατίας, (2001) 4 Α.Α.Δ. 976 which although
concerns a share purchase agreement not executed in Cyprus, it was stressed
therein that when there are no things to be done in Cyprus, a share purchase
agreement for shares in a foreign company is not subject to stamp duty.

5.1.4.An
instrument for the transfer of shares in a foreign company, which is executed
in Cyprus.

Similar
reasoning to the one provided for the share purchase agreement under point
5.1.3 above applies in this case as well. The document is not subject to stamp
duty.

5.1.5.Loan
Agreements executed in or outside Cyprus

A loan
agreement falls under the category “agreements” included
in the first schedule of the Law. Therefore, irrespective of the place of
execution of the loan agreement, the crucial question is whether there are
things or matters to be performed in Cyprus. Each case is decided on the basis
of its own facts (e.g the monies to be advanced under the loan agreement will
be utilized in Cyprus, the loan is repaid from funds which come from Cyprus
etc).

5.1.6.Pledge
over the shares of a Cyprus company

Such a document
is expected to be subject to stamp duty. The pledge is over assets situated in
Cyprus (shares of a Cyprus company) while there are things to be done in Cyprus
(e.g registration of the pledge with the register of members of the Cyprus
company) (see Standard Bank Plc και άλλη ν.
Δημοκρατίας της Κύπρου (2009) 4 ΑΑΔ 854).

5.1.7.Pledges
or Charges over the property of a Cyprus Company

The document is
expected to be subject to stamp duty. Even if the charged property is not situated
in Cyprus there are things to be done in Cyprus (e.g registration of the pledge
with the register of charges of the Cyprus Company).

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