Appendix A. Countries Background

As you have seen above in the future structure of the company, the countries that are involved in this engineering are the Netherlands, Germany, and Cyprus. We will now give further detail on what the laws and regulations are on the way the structure has been setup.

A. 1The Netherlands

A.1.1 The Foundation (Stichting)

Under current Dutch law, a foundation (Stichting) is a legal entity, with corporate status. It is an organization that is established for a specific purpose, described in the articles of association, which may range from being charitable to commercial in nature. A foundation cannot have members. This is the only organisational restriction imposed on it under Dutch law and it is intended to distinguish the foundation from a Dutch cooperative society. The board of the directors is usually the only management body within the foundation. Directors may be liable for mismanagement if the foundation is subject to corporate income tax. There is no obligation to bring in net equity; however a foundation will be dissolved if its equity is insufficient to achieve its purpose. A foundation cannot make payments to its founders, board members or third parties, with the exception of payments to organisations of a charitable, social or ideological nature.

A.1.2 Incorporating a Foundation (Stichting) in the Netherlands

A Stichting is a separate entity, distinguished from its founders or its directors. Pursuant to section 2:285 Dutch Civil Code, a Stichting is a legal person created by notarial deed. The Stichting has no members and its purpose is to realize an object stated in its articles of association, using capital allocated to such purpose. A Stichting has certain similarities to a Stichting in the United States of America. Unlike its US counterpart however, a Stichting is not necessarily limited to charitable purposes. The purposes of a Stichting can include commercial activities. The object of the Stichting may not include the making of distributions to any founder or to those participating in its constituent bodies or to other parties, unless, as regard the latter, the distributions have an idealistic or social purpose.

A.1.3 Incorporation

A Stichting must be established by a notarial deed, executed before a Dutch civil law notary, officiating in the Netherlands. The deed must be executed in the Dutch language. The Dutch version prevails over the English translation thereof. It is possible to authorize another person to execute the deed of incorporation of the Stichting. Such power of attorney must be in writing, legalized and apostilled. The deed shall contain the articles of association. The articles must include:
• The name of the Stichting, with the word “Stichting” as part of its name
• The objects of the Stichting
• The manner of appointment and dismissal of the members of the board
• The municipality in the Netherlands where it has its seat or registered office
• The application of the surplus after liquidation of the Stichting on a winding-up or the manner in which such application shall be determined

Besides the power of attorney to incorporate the Stichting and the deed of incorporation containing the articles of association, the members of the board need to complete and sign Commercial register forms.

A.1.4 Registering the Stichting

The members of the managing board of the Stichting shall have the Stichting and the surname, name(s) and address(es) of the founder or founders and the members of the board, registered in the Commercial Register and shall deposit at the registry an officially certified copy of the deed of incorporation containing the articles of association. In practice, the civil law notary who executes the incorporation, containing the articles of association. In practice, the civil law notary who executes the deed of incorporation will take care of this registration.

A.1.5 Management Board

The management board shall be charged with the management of the Stichting. Only if it follows from the articles, the board has the authority to resolve to enter into agreements by which the Stichting permits itself as surety or joint and several obligor, warrants performance by a third party. The articles may impose restrictions and conditions on such authority of the management board. The exclusion, restrictions and conditions shall also apply to the authority to represent the Stichting in respect of such acts unless the articles otherwise provide.

A.1.6 Representation

The management board shall represent the Stichting to the extent that the contrary does not follow from the law. The articles may also vest representative authority in one or more directors and/or other persons.

A.1.7 Amendment of the Articles of Association

The articles of association may be amended by the management board only if the articles provide for such possibility. If the articles do not provide for the possibility to amend the articles of association, the Court may amend the articles on the application of a founder or the board or upon requisition of the Public Prosecution Officer, if the maintenance of the articles in an un-amended form would have consequences which, on the establishment, could not reasonably have been envisaged. If the articles do provide for an amendment of the articles and the management board fails to do so, the Court may amend the articles on the application of a founder or upon the requisition of the Pubic Prosecution Officer.

A.1.8 Office Address

The Stichting must have its corporate seat in the Netherlands. It does not need to have an office address in the Netherlands, however, this could be required from a tax law point of view. To provide the Stichting with an office address in the Netherlands, clients may wish to engage the services of a trust company that operates in the Netherlands for this purpose. A number of Dutch and foreign banks have set up subsidiaries which provide trust services, such as ABN AMRO Trust Company (Netherlands) B.V. which generally speaking, consist of (co-) management of the Stichting, preparation of annual accounts, filing, making an address available and related services.

A.1.9 Tax Aspects

From a Dutch tax perspective, a Stichting is subject to corporate income tax if and to the extent it carries on a business enterprise. A business enterprise is typically present if the Stichting is attempting to make profits, unless the Stichting is only involved in making passive investments. If the Stichting is not attempting to be profitable, it would however be subject to corporate income tax if and to the event it competes with other business enterprises, or if it is involved in life insurance and/or old age pensions. If a Stichting is used in a financing structure to shelter liabilities, this Stichting is normally not subject to corporate income tax in the Netherlands. This may be confirmed in advance rulings with the Dutch tax authorities.

A.1.10 Costs

The costs of incorporating a Stichting are:
Registration fee due to the Chamber of Commerce (approximately €40);
If applicable, fees of a trust company or accountants.

A.2 Cyprus

A.2.1 Basis of taxation

All Cyprus tax residents are taxed on all income accrued or derived from all sources in Cyprus and abroad. Individuals who are not tax residents of Cyprus are taxed on income accrued or derived from sources in Cyprus. An individual is tax resident in Cyprus if he or she spends in Cyprus more than 183 days in any one year. Days in and out of Cyprus are calculated as follows:
• The day of departure from Cyprus counts as a day of residence outside Cyprus
• The day of arrival in Cyprus counts as a day of residence in Cyprus
• Arrival and departure from Cyprus in the same day counts as one day of residence in Cyprus
• Departure and arrival in Cyprus in the same day counts as one day of residence outside Cyprus

A.2.2 Exemptions

The following are exempt from income tax:

Exhibit 6 Tax exemptions in Cyprus

Type of income

Exemption limit


The whole amount


The whole amount

Remuneration from any office or employment exercised in Cyprus by an individual who was not resident of Cyprus before the commencement of his employment, for a period of 3 years commencing from 1st January following the year of commencement of the employment.

20% of income with a maximum amount of Ci5.000 annually

Remuneration from salaried services rendered outside Cyprus for more than 90 days in a tax year to a non-Cyprus resident employer or to a foreign permanent establishment of a Cyprus resident employer

The whole amount

Profits of a permanent establishment abroad under certain conditions

The whole amount

Lump sum received by way of retiring gratuity, computation of pension or compensation for death or injuries.

The whole amount

Capital sums accruing to individuals from any payments to approved funds (eg provident funds)

The whole amount

Deposits with Housing Finance Corporations

40% of the amount deposited. The amount deposited cannot exceed 25% of a person’s total income.(This exemption applies for deposit schemes that existed as at 30 April 2003)

Profits from the sale of securities[1]

The whole amount

[1] Securities is defined as shares, bonds, debentures, founders’ shares and other securities of companies or other legal persons, incorporated in Cyprus or abroad and options thereon.