(1988)1988April 23 [DEMETRIADES,J.] INTHE MATTER OFARTICLE 146OFTHE CONSTITUTION GEORGHIOS STYLIANOU, Applicant, v. THE REPUBLIC OFCYPRUS THROUGH 1.THE MINISTER OF FINANCE, 2.THE COMMISSIONER OFINCOME TAX, Respondents. (CaseNo.555185). Taxation—income Tax—Exemptions—The Income TaxLaws, section 8(x)— Theexemption ofthe90per centum offoreign exchangeimportedfrom tht renderingofsalaried services outside theRepublic toprivatebusinesses— Ambit of—Citizens of theRepublicare, also, entitled tothe exemption—It mattersnot whoimports theforeign exchange. Construction ofstatutes—Words andphrases shouldbe given their ordinary grammatical meaning. Theapplicant wasat diematerial timeanemployeeofanoffshore company. He isa Cypriot. His services to hisemployers are rendered outside Cyprus. He was being paid in Cyprusfrom an external account maintained \Q by hisemployers. Heclaimed the90%relief provided in section 8(x)of the IncomeTax Laws, therelevant partof whichreadsas follows: "There shall be exempt from the tax ninety per centum of foreign exchange so imported from the rendering outside the Republic of 15 salaried services toprivate businesses." 832 5 3 C.L.R. Stylianou v. Republic Astherespondentrefused toallowtheaforesaid exemption,theapplicantfiledthisrecourse. 5 10 Counsel for therespondent argued that it isnottheapplicant buthis employerswhoimporttheforeign exchangeintoCyprusandthattheapplicant,beingaCypriotemployeeofanoffshore company,isnotentitled tothereliefclaimedbyhim. Held,annulling the subjudicedecision:
(1)It isacardinal principle thatwordsorphrasesappearinginastatuteshouldbegiven theirordinary grammatical meaning unless the contrary is shown. The law makesno differentiation betweencitizensoftheRepublicandaliens,nordoesitprovidethattheforeign exchangemustbeimported intotheRepublicbythe taxpayerhimself.Whatthelawprovides isthat foreign exchange isimportedasaresultoftherenderingbyataxpayerofservicesabroad. Subjudicedecisionannulled. Costsagainstrespondent. 15 Recourse. Recourse against the income tax assessments raised on applicant for the years 1980 - 1983. G. TriantqfyHides, for the applicant. 20 M. Photiou,for the respondents. Cur. adv. vult. DEMETRIADES J. read the following judgment. By this recourse the applicant challenges the assessments of income tax imposed upon him by a decision of the 2nd respondent, hereinafter 25 referred to as the respondent, dated the 4th April, 1985, for the years 1980, 1981, 1982 and 1983 (assessment Nos 80/85/04/ 020, 81/85/04/020, 82/85/04/020 and 83/85/04/020, respectively) and more specifically, the applicant challenges the decision of the respondent by which the latterrefused toexempt from income tax 30 90% of the former's income earned during the aforesaid years. 833 Demetriades J. Stylianou v. Republic
(1988)Theundisputed facts of thecasearethe folowing. The applicant resides in Limassol and earns his income from his employment with Barber Green (Cyprus) Ltd. ,an offshore company.The incomeof theapplicantisderived exclusively from servicesrendered tohisemployers outside Cyprus. The applicant was assessed to income tax for the years in question, on the salary hisemployersdeclared that theyhad paid him. Objection was lodged against these assessments by his acountant on theground thatastheservicesof theapplicant in the years 1981 - 1983 were carried out abroad he was entitled to 10 relief in respect of 90% of his salary in accordance with trw provisions of section 8(
- x)of the Income Tax Laws. Upon production of the applicant's passport to the officers of the respondent, it was found that the applicant spent a number of days abroad in each of the respective years. The applicant's 15 objection was rejected by the respondent by his letter dated the 4th April, 1985. Hence the present recourse which is based on the grounds of excess or abuseof power and that the subjudice decision iscontrary tothelawandtheprinciplesof administrative law. Counsel for the applicant inhiswritten addressargued that the applicant is employed by the aforesaid company as an engineer and hisdutiesconsist of servicingheavyequipment manufactured and sold by the company outside Cyprus, whenever he is required to do so, and that he does not perform any duties in 25 Cyprus. It is further the applicant's case that his salary was agreed inU.S.Dollars,that heispaid from anexternal accountof the company, after conversion of his salary into Cypruspounds., according to the rate of exchange of the dollar prevailing at the time of payment and that inthisway theapplicant, byhavinghis 30 salary remitted to Cyprus, imports foreign exchange. He also attached copiesof thepayrollsofthe applicantduringtheyearsin question which show the amount in dollars due tothe applicant, the rate of exchange and the amount paid to him in Cyprus pounds. Counsel submitted that the applicant fully satisfies the 35 834 5 20 3 C.L.R. Stylianou v. Republic Demetriades J. provisions of section 8(X) of theLaw andis, therefore, entitled tothe90%relieffrom incometax. Counsel for therespondent argued thatit is nottheapplicant but his employers who import theforeign exchange into Cyprus 5 andthattheapplicant, being aCypriot employee of an offshore company,is notentitledtothereliefclaimed byhim. Therelevant legislativeprovision is section 8(X) of the Income Tax Laws, 1961 - 1984 (section 8(κδ) in the Greek text). This section,as amendedby Laws37/75 and24/81,reads as follows: 10 15 20 "8.Απαλλάσσονται του φόρου- (κδ)τατρίατοις εκατόντουεντηΔημοκρατία εισαγο μένουξένου συναλλάγματοςπροερχομένουεκτης εξαγω γής επιτοπίως κατασκευαζόμενωνή παραγομένων προϊόντων, το τριάκοντατοις εκατόν του εν τηΔημοκρατία εισαγομένου ξένου συναλλάγματος εκ τη παροχής επαγ γελματικώνυπηρεσιών εντωεξωτερικώ,ωςκαιτοενενήκοντα τοις εκατόντου ούτως εισαγομένου ξένου συναλ λάγματος εκ της παροχής εκτός της Δημοκρατίας μισθωτώνυπηρεσιώνπρος ιδιωτικάς επιχειρήσεις." ("8.Thereshall beexempt from thetax- 25 (
- x)threepercentumof the foreign exchange inportedinto theRepublic which isderived from theexportof locally manufactured orproducedproducts,thirty percentumof foreign ex change imported intotheRepublic from therendering of pro fessional services abroad, as well as ninety per centum of foreign exchange so importedfromtherendering outside the 835 Demetriades J. Stylianou v.Republic Republicof salaried services toprivate businesses:")
(1988)The whole question turns onthe interpretation of thelast part of theabove subsection, underwhich theapplicant claimsrelief. It is a cardinal principle that words or phrases appearing in a statuteshould begiventheirordinarygrammaticalmeaningunless 5 thecontrary is shown. Having this in mind, Iam of theview that for a person to be entitled to have his income exempted from income tax to the extent of 90%,thefollowing conditionsmust be satisfied. (a)Hemustrender servicestoaprivate business; 10 (
- b)suchservices must berendered abroad; and (
- c)foreign exchange earned as a result of such services rendered should beimported intotheRepublic. It isfurther my view that thelaw makes nodifferentiation between citizensof theRepublicand aliens,nordoesitprovidethat 15 the foreign exchange must be imported into the Republic by the tax payer himself, that is by aremittance made by himself from abroadintoanaccount with abankintheRepublic.What therelevant section of the law provides is that foreign exchange is imported as a result of the rendering by a tax payer of services 20 abroad. In the present case, the applicant earned his income by rendering his services tohisemployersabroad and hecould have chosen tohavehis salary paid inU.S.Dollarsin an account with a Bank abroad and then have it remitted to him to Cyprus. 25 Would, in that case, the respondent treat the remittance of the salary of theapplicant asnotimportation of foreign exchange? 836 3 C.L.R. Stylianou v.Republic Demetriades J. Offshore companies registered intheRepublic are not allowed totrade and earn money in the Republic. Therefore, any money paid by them here,for anycauseorreason, must beeither earned or imported from abroad. Itis,therefore, immaterial whether the 5 money earned by the applicant for his services to his employers were paid in Cyprus currency. What counts is that he rendered hisservices abroad; that hissalary wasearned abroad and thatalthough it wasdeposited in hisaccount with a Bank in Cyprus,in Cyprus currency, it was money imported as a result of services 10 for the benefit of a private business which, if I may add, could not trade in the Republic and thus make money here with which topay thesalaryof the applicant. In theresult, Ifindthat therespondent misinterpreted the law and that the subjudice decision should bedeclared null and void 15 andof no effect. The subjudice assessments are, therefore, annulled. Therespondent topay thecostsof thisrecourse. Subjudice assessmentsannulled withcostsagainst respondents. 837