Partner Perspectives: Stella Strati

Could you offer an outline of your law firm’s finance, tax and private equity practice in the wider region? What distinctive strengths define your team?

Our firm celebrated its 60th anniversary in 2023. So we are going strong for 60 years with the same core values to give quality services to our clients. We are proud in that we offer quality legal services, and the ultimate, the ultimate aim is to provide value to clients.

This along with the fact that the lawyers comprising the legal advisory department of the firm, possess specialization in the areas of practice, and along with a deep knowledge of the law and the expertise, the team is differentiated in that it can offer, top quality services tailored made to the needs of the clients and with the aim to assist clients to achieve their goals.

Cyprus has been traditionally, holding company jurisdiction. So international investors have chosen Cyprus throughout the years because of the tax incentives offered, by the Cyprus tax legislation, and also because the company’s law in Cyprus is modern and flexible.

Due to these reasons, we have seen a number of transactions involving international investors, incorporating Cyprus entity and implementing them in their structures with the aim of investing throughout the globe. We have worked on a number of, transactions involving various jurisdictions, including Greece, Israel, Dubai, Saudi Arabia is now very relevant, Kazakhstan, Georgia, and also a number of European destinations.

As an accomplished private practice lawyer specializing in Finance, Tax, and Private Equity within the region, what valuable insights would you share with those seeking to excel and make a notable impact in this sector?

It is a fact that currently we’re living in, the era where everything is changing. We are living in the era of transparency. A lot of changes are happening on the international tax level.

So what is important for the international legal practitioner is to stay on top of all these developments. We need to stay on top of the developments. We need to understand what is happening on the international level, to have a full understanding of the implications of the changes, along with, the local, incorporation of these changes.

And also specialization is important, especially in the field of taxation Because of all these changes that I have mentioned, it’s all important to create synergies with other legal practitioners throughout the world because this way we can, assist our clients by offering them a holistic advice, holistic approach, so that we can assist them to achieve their goals on the international level throughout the jurisdictions on which they operate.

What legal challenges are associated with mergers and acquisitions in corporate finance, and how can companies navigate regulatory frameworks during these processes?

We are living in the era of over compliance, especially after February, 2022. Following Russia’s aggression towards Ukraine. We have seen a number of sanctions and restrictive measures being implemented on the international level. These, along with considerations that have to do with a ML compliance poses, sufficient challenges to corporate finance transaction.

It’s a fact that after the position of sanctions and restrictive measures, a number of ongoing, corporate finance transactions, were at a standstill. But other challenges also exist. We understand that banks not only on the local, but also on the international level, are becoming more stringent. Their policies are stricter, and we see that traditional mechanisms such as escrow agreements, for example, are now difficult or even impossible to be implemented.

How do legal requirements influence the decision-making process for capital raising, and what legal risks are linked to various financing methods in the corporate context?

We understand that tax considerations are very important to local and international clients when they implement their corporate structures.
Cyprus offers a number of tax incentives that are relevant to stakeholders and investors when they incorporate the Cypress entity or when they raise capital. For example, a national interest deduction, which is linked to new equity injected into Cyprus Company, is an incentive that drives a capital raising for Cyprus companies. Also, Cyprus offers a very competitive IP tax regime, which was introduced in 2016, and is, based on the BES action plans, about the Nexus approach.

The Cyprus IP tax regime is linked to next approach. This has driven a number of startups and tech companies to transfer their headquarters in Cyprus and to benefit from this IP tax regime in the sense that they perform their research and development activities in Cyprus. And these incentives have made Cyprus as a jurisdiction which is favorable for the use of Cyprus holding companies, for international investment purposes.

What impact (if any) will, recent or upcoming changes in the tax landscape in Cyprus, have on tax, corporate and corporate finance practice areas?

Cyrus has shown that it’s keen to remain OECD compliant. It has implemented a number of the BES recommendations and action plans, and it has fully implemented the TA currently.

Pillar two, implementation is a buzz word. Therefore, in October, 2023, the Cyprus government presented a draft bill for the implementation of the directive on the minimum level of taxation for m and e and large scale local groups. This was open for public consultation and we understand that the Cyprus Parliament will vote this bill into law during the next few weeks.

Also there is the discussion for Cyprus to implement a minimum top up tax, and this is expected by the end of 2024. However a number of countermeasures will be provided to maintain the attractiveness of Cyrus tax jurisdiction. One of these countermeasures is the reduction or abolishment of the special defense contribution.

The first step has already been made, and the SDC on interest was reduced. We do hope that all these upcoming changes will assist in strengthening the transparency and the simplification of tax measures. However, at the same time, we do hope that Cyprus will remain an attractive tax jurisdiction and will continue strong in the relevant field.