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Amendments to the Law on Administrative Cooperation in the Field of Taxation

Introduction

The Law on Administrative Cooperation in the Field of Taxation has been amended on 25 April 2016 in order to implement provisions of the EU Directive on Administrative Cooperation in the Field of Taxation (2014/107/EU) dated 9 December, which amended the existing Directive on the same subject (2011/16/EU) regarding the mandatory exchange of information in the field of taxation.

Common Reporting Standard (CRS)

In December 2015 the Cypriot Ministry of Finance introduced legislation which implements the provisions of the Standard on Automatic Exchange of Information of the OECD and the Common Reporting Standard (CRS), which in effect obliges Financial Institutions based in Cyprus to start exchanging information as from 2017, in line with the commitment undertaken by Cyprus as an early adopter of the CRS.

Changes in the Law 

The principal changes in the law, which are in line with the legislation on CRS, are the following:

(a)   Financial Institutions, ie banks, custodial institutions, life insurance companies and investment entities, must apply certain due diligence procedures regarding their clients, which would enable them to report the required information to the Cypriot tax authorities.

(b)   Clients includes both pre-existing accounts and new accounts.

(c)   For pre-existing client accounts with an aggregate balance in excess of US$ 1.000.000 on 31 December 2015 the due diligence procedures must be completed by 31 December 2016, whereas for balances between US$250.000 and US$ 1.000.000 the due diligence procedures must be completed by 31 December 2017.

(d)   The Financial Institutions must report by 30 June 2017 the following information for the year ended 31 December 2016 (and subsequent years thereafter):

• the name, address and country of tax residence of the reportable person
• the Tax Identification Number (TIN) of the reportable person
• in the case of an individual, also the date and place of his birth
• in the case of a passive entity, (as defined in the law), the same information is required for each reportable controlling person (persons holding more than 10% in the share capital of the reporting passive entity)
• the account number
• the balance of the account at year end or the value of the assets
• in the case of a depository account, the gross interest paid/credited
• in the case of a custodial account, the gross amount paid /credited for interest, dividends, other income, as well as gross proceeds from the sale of redemption of financial assets held
• in the case of any other account , the gross amount paid/ credited to the account for which the Financial Institution was the debtor or the obligor

(e)  The amended law provides for penalties in the case of non-compliance with the provisions of the law.

(f)   The amended law also describes in detail the procedures to be followed for due diligence purposes.

(g)   The amended law includes a variety of definitions, which include the reportable financial institutions, the reportable persons and the reportable accounts.