Critical meeting to save Chinese airport deal

Editorial
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5

CYPRUS Minister of Communications and Works Efthimios Flourentzou will hold a meeting with the Chinese investor Yang Ki on Wednesday, during which he will try to convince him not to withdraw his interest regarding the Larnaca airport investment project.

Speaking to the Cyprus News Agency, Flourentzou said that he received a letter from the Chinese investor on August 14, informing the government that he was no longer interested in the Larnaca project due to lengthy and complex procedures.

Flourentzou said that lengthy and complex procedures in the Chinese airport investment project were not the case. “From our side there were not lengthy and complex procedures. Contrarily, there was an accelerated process”, he added.

Replying to a question, Flourentzou said that he will have a meeting at his office with the Chinese investor, next Wednesday, August 22, at 3.00 pm.

“My effort will be focused on convincing him to withdraw his letter, with which he announced his intention to withdraw his interest from the airport investment project, and let the process of the evaluation of his investment proposal to be concluded”, he said.

Chairman of Cyprus Investment Promotion Agency (CIPA) Christodoulos Angastiniotis, speaking to CNA said that the decision of Yang Ki to withdraw his investment interest due to lengthy and complex procedures is justified.

He also said that CIPA is not participating in the evaluation committee for the Chinese investment project in the old Larnaca airport. However, he said, CIPA is participating in the Rapid Licensing Mechanism for the implementation of Strategic Investments.

Angastiniotis said that a big number of cases are pending before the Rapid Licensing Mechanism for the implementation of Strategic Investments, which had its first meeting on August 1, 2012. However, CIPA Chairman refrained from getting into details about the proposals for investments in Cyprus.

On March 28, 2012, Hermes Airports, the company managing Cyprus’ airports, and Far Eastern Phoenix concluded a €600 million investment deal, believed to yield big financial benefits for Cyprus.

Under deal, Far Eastern Phoenix planned to redevelop the old Larnaca airport; building a commercial showroom for Chinese products, an exhibition area, bonded warehouses and a small conference centre.

Chinese multi-million airport deal collapsed

Chinese multi-million airport deal collapsed

Nigel Howarth
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18

THE PROPOSED multi- million Euro investment by the Chinese firm Far Eastern Phoenix to redevelop the old Larnaca airport has collapsed.

The news was given in a briefing to reporters this morning by government spokesman Stephanos Stephanou. It seems that the company informed the government of its decision to withdraw last week.

“I can confirm that we have received a letter from the Chinese investor that he is no longer interested in the Larnaca project”, Stephanou said.

In March, Far Eastern Phoenix signed an agreement with Hermes Airport to develop the old Larnaca airport with a large commercial showroom for Chinese products and a logistics centre. At a cost of around €600 million, the project was to include exhibition areas, re-import of products and a small conference centre.

According to the agreement, Far Eastern Phoenix would have taken over the management of the area for the next 19 years and to justify its massive investment, the Chinese company wanted to extend the deal for a further 31 years.

At a press conference following the signing of the agreement Mr Iacovou said:

“We have been ensured that thousands of Cypriots will be employed”, adding that “I expect that a number of foreign workers will be employed too”.

He continued “It is an agreement of exceptional importance, which will benefit not only the airports but the country in general since we expect that a large number of new job posts will be created for the Cypriots and the economy of Cyprus will be boosted, especially in those difficult conditions”.

However, the decision on whether to extend the deal for a further 31 years had to be taken by the island’s government.

But five months later, the government had been unable to decide whether to approve the 31 year extension to the deal or not.

Hermes warned the government in June that its delay could result in Cyprus missing out on the investment altogether. It appears that warning went unheeded.

In this morning’s briefing the government spokesman stressed that this latest development “was as a result of a degenerative war waged on the domestic front”, adding that “some people are obstructing anything from happening in this country”.

UK tax man targets offshore bank account holders

Nigel Howarth
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10


HM REVENUE & Customs (HMRC) are currently running a national campaign concerning offshore Cypriot bank accounts.  The aim of the campaign is to increase compliance yield by identifying individuals and businesses who have not disclosed interest credited to their offshore bank accounts.

The UK and other countries in the EU exchange information concerning untaxed income under the European Union Savings Directive (EUSD).  If you have held a deposit account in Cyprus to which interest has been credited that interest is likely to be taxable in the UK.  HMRC will now have details of your account along with the amount of interest that should have been declared.

Most people who purchased property in Cyprus off-plan would have had an escrow account set up by their lawyer using a Power of Attorney.  The mortgage to purchase property would have been released to the escrow account allowing the funds to be drawn down by the developer for construction.  The draw down is normally taken in stages by the developer during the period of construction.  The interest earned on the capital held in these escrow accounts is taxable and should have been returned to HMRC.

When HMRC opens an enquiry concerning an offshore bank account the letter they issues is daunting and requests very detailed information.  This can be quite worrying but in reality the nature of these enquiries are quite straightforward and can be resolved quickly.  In certain circumstances it is possible to legitimately reduce the tax bill if the Cypriot property has been let commercially.

If you are affected by this and would like further information contact Lyn Hill – a former deputy director with HM Customs & Excise.

HMRC removes all Cyprus QROPS

Editorial
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4

HM Revenue & Customs last week removed all Cyprus based QROPS from its list of registered schemes – raising questions about why it did so and what HMRC’s intention is towards the QROPS market.

The removal of the Cyprus-based schemes is significant because Cyprus is an EU member and it had been widely believed that schemes within the EU were out-of-reach of HMRC. The removal of the schemes was revealed when HMRC published its updated list (available here) of registered QROPS late last week.

It is believed that there were only a small number of registered schemes in Cyprus and that they were exclusively employee schemes for companies based on the island. A list published in March shows four schemes, including one for employees of Big Four accountancy firm Pricewaterhouse Coopers.

HMRC did not offer an explanation on the updated list as to why the schemes were removed and a spokesperson declined to comment on the matter.

QROPS specialist Stephen Ward, managing director of Alicante-based Premier Pension Solutions, said, after spending a significant amount of time researching the decision, that Cyprus may have fallen foul of the same QROPS condition which saw 310 Guernsey schemes lose their QROPS status earlier this year.

According to Ward, provisions in Cyprus’s Income Tax Law 2002 (specifically amended articles 5(1) (d) and 5 (2) (c)) mean that a non-resident member of a QROPS, who had no historic employment connection in Cyprus would not be taxed on income, where as a resident scheme member would. Ward suggests this means Cyprus fails the recently established benefits tax relief test.

The test reads: “Where tax relief in respect of benefits paid from the overseas pension scheme is available to members of the scheme who are not resident in the country or territory in which the scheme is established, the same or substantially the same tax relief must…also be available to members of the scheme who are resident in the country or territory…”

Again, HMRC would not confirm or deny whether Cypriot schemes were removed because they failed this test.

Whether or not this is the reason, it has perhaps sowed a seed of doubt in the minds of those who had thought that schemes within the EU were “bullet proof”, according to Global QROPS director Paul Davies.

“The industry was under the impression that almost regardless of how a scheme was set up, because of European rules, HRMC could not discriminate against other country’s pension schemes,” said Davies.

“It certainly puts that little nagging doubt in the mind of the industry.”

Ward meanwhile, said the decision marks a climate change for the overseas pension industry.

“This illustrates that HMRC are looking at jurisdictions that have schemes which have been recognised as QROPS, and reviewing whether schemes satisfy the regulations as they apply since 6 April 2012.”

Last Word Media Limited Copyright (c) 2011

Government aide resigns over airport deal allegations

Nigel Howarth
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8

TOP DIPLOMAT at the Presidential Palace Marios Ieronymides tendered his resignation yesterday following allegations of a conflict of interest in his relationship with the Chinese investor interested in turning the old Larnaca airport into a commercial centre.

The allegations claimed that Ieronymides benefitted personally from his ‘friendship’ with Yang Qi, sole shareholder of Far Eastern Phoenix (FEP), the company that signed a deal with Hermes Airports for a 19 year lease on the old airport.

Since the deal was signed, Far Eastern Phoenix has been in negotiations with the Cyprus government to extend the airport deal for a further 31 years. FEP wants to turn the old airport into a commercial centre, which would include a showroom and bonded facilities for Chinese industry.

On Wednesday, the Greek language daily newspaper Politis reported that Ieronymides was present at the signing of the agreement between Hermes and FEP. It also reported that his wife, Tatiana Ieronymides, was a co-director of the company from when it was created in April 2009 where she remained until March 2012. Politis reported that Tatiana Ieronymides resigned just six days before FEP signed the 19-year lease agreement with Hermes.

Yesterday, it was revealed in another Greek language newspaper “Phileleftheros” that Ieronymides was involved in another conference regarding the Chinese investment at the old Larnaca Airport.

Ieronymides denied the allegations saying that he only had the country’s best interests at heart in all his dealings with Chinese businessmen. He pointed out that when serving as Cypriot ambassador to China, the post he held prior to his appointment as Director of the President’s Diplomatic Office, he encouraged many Chinese investors and property buyers to come to Cyprus.

State broadcaster CyBC confirmed the newspapers’ allegations adding that Ieronymides briefed the President on the issue in a phone call late Thursday afternoon. He later submitted a memo giving explanations into the Chinese investment.

According to reports, President Christofias accepted Ieronymides’ resignation.

Far Eastern Phoenix is currently in negotiations with the Cyprus government to extend the airport deal for a further 31 years.

Cyprus Popular Bank chairman ordered to quit

Nigel Howarth
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18

MICHALIS Sarris, a former Cyprus finance minister who was appointed chairman of the Marfin Laiki Bank earlier this year, has been asked to step down by Cypriot government officials.

According to media reports, the move to force Mr Sarris from office results from comments he made during an interview with HARDtalk’s Stephen Sackur in May this year, in which he accused the government of making severe mistakes. It is anticipated that Mr Sarris’ successor will be Andreas Phillipou.

[youtube=http://www.youtube.com/watch?v=0-VkLzawQY0&w=470]

Michalis Sarris is the second senior banking official to find himself out of a job after crossing swords with the government.

Athanasios Orphanides, who served as Governor of the Central Bank of Cyprus between May 2007 and May 2012, was not reappointed to the position. This followed accusations by the government that Mr Orphanides had not advised ministers about the critical state of the economy; a claim that Mr Orphanides vehemently denied.

Mr Orphanides accused President Demetris Christofias of doing nothing to shield the island’s banking system from the impact of the Greek debt. Christofias rebuffed the accusation saying that at no time in the past had Orphanides warned him about the exposure to the Greek debt.

However, President Christofias’ assertion was recently placed in serious doubt following the leak of a bundle of letters from Mr Orphanides to the government showing that he had repeatedly asked to meet Christofias, warning of the dire straits the economy was entering.

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