Global Forum on Tax Transparency: Cyprus rated as Largely Compliant!

Phase 2 Report 2015 – Implementation of the Standard in Practice.

Evaluation: 2013 and 2015

The Global Forum on Transparency and Exchange of Information for Tax Purposes (‘Global Forum’) in 2013 had evaluated Cyprus for its implementation of the Global Standard on Automatic Exchange of information in practice.

Cyprus was rated as Non-Compliant and progress has been made by Cyprus since then, concluding in the meeting in Barbados that was held on 29^th and 30^th October 2015 that Cyprus is now rated Largely Compliant overall.

Reasons for the Initial ‘Non-Compliant’ Rating

The Negatives:

1. In the original report in 2013 it was found that the monitoring and enforcement of obligations to file annual returns to the Companies registrar and the tax authorities was insufficient resulting in Cyprus failing to exchange updated information for Exchange of information purposes.
2. It was initially concluded that Cyprus competent authority had common practice of not approaching taxpayers for information before submission of income tax returns.
3. No jurisdictions reported any delays or negative responses from Cyprus to their requests for entering into an information exchange agreement.
4. Cypriot competent authority had not been able to respond to requests on Exchange of Information in a timely manner.
5. Lack of sufficient staff to handle incoming requests.

Improvements since 2013

The Positives:

1. Reform and reorganisation of the companies registrar
2. Cleansing of the register of companies pushing for filing of all outstanding annual returns
3. Similar approach carried out by the tax authorities achieving timely submission of income tax returns.
4. Ownership, accounting and identity information has been available in almost all cases under Exchange of Information requests.
5. Cypriot competent authority seeks to obtain information from a taxpayer regardless of whether income tax returns are outstanding.
6. Cyprus’ exchange of information network has significantly increased, mainly through Cyprus becoming a party to the multilateral Convention on Mutual Administrative Assistance in Tax Matters.
7. Response times to incoming Exchange of Information requests have clearly improved with the Cypriot competent authority managing to eliminate the backlog since last review.
8. Additional staff members had been allocated to the competent authority.

Other Jurisdictions

There has been a positive impact from recommendations of the Global Forum as Jurisdictions continue to request supplementary reviews to demonstrate various changes made for improvement.

Jurisdictions such as Dominica and Panama are now ready to progress to the next stage and Luxemburg as well as Seychelles, which we initially rated as Non-Compliant along with Cyprus have finally been rated as Largely Compliant following significant changes and reforms to their legal frameworks.

The Global Forum has now completed 215 peer reviews and assigned Compliance ratings to over 80 jurisdictions.