The Global Forum on Tax
Transparency and Exchange of Information for tax purposes is the leading
international body for ensuring the implementation of the internationally
agreed standard on transparency and exchange of information in the tax area.
During the Global Forum
meeting in Jakarta, Indonesia on the 21st and 22nd of
November 2013, the Global Forum released compliance ratings for 50
jurisdictions which had both phases of their assessments completed; a) legal
and regulatory framework and b) practical implementation of the legal
framework.
The overall rating that
Cyprus has been assigned at the Jakarta meeting was one of “non-compliant”. Issues
relating to this rating and the way forward are analysed below:
1. All
legal and regulatory issues identified in the first phase of review were dealt
with through the enactment into law of appropriate provisions, like explicitly
stating in the law (in addition of common law provisions) the information that
should be available on a trust, removing references to Companies’ Law which
allowed the issue of bearer share warrants in public companies (a provision that
does not seem to have ever been used), the need for Cyprus incorporated but not
tax resident companies to file tax returns with Cypriot authorities etc. As the
first phase review was completed in March 2012, the recent changes in the law
in 2012, have not yet been reflected into the rating assigned.
2. Delays
in the exchange of information with counterparts for the period of 1 July 2009 -
30 June 2012. Cyprus has handled a substantial number of requests (on more than
4.000 subjects) for the period under review but with delays. Since 2012,
personnel, procedures and capacity of the International Tax Affairs Division of
the Inland Revenue Department, has been significantly enhanced and thus its
ability and performance in handling requests from counterparts. This is
something that is noted by the assessors but did not bear significant weight to
the rating for the period under review.
3. Low
compliance rate for the filing of tax returns. This is partly due to
uncertainties as to the population of active companies in Cyprus, with the
total number of active companies artificially inflated. This issue has also had
a bearing on the low compliance rate in the filing of annual returns in the
Companies House.
4. It
is the authorities’ belief that for the period under review, the efforts of
Cyprus in completely streamlining its regulatory framework and well as its
actual performance in handling requests, which were considerable in number,
should have warranted a higher rating being assigned. However, despite the
actual current state of affairs, being much better than those arrived at during
the review stage, all efforts are being made by the Ministry of Finance and the
tax authorities, the accounting and legal profession, the Cyprus
Securities and Exchange Commission as well as the Companies Registrar, who are
working together in a coordinated manner, taking all necessary steps for significant
improvements in all relevant matters.
In conclusion, it is our
firm belief that Cyprus has already taken steps and will take all necessary
additional steps to implement the required changes and ensure that during the
next review stage in 2014, the assessors will note a very significant
improvement on all measured parameters and have Cyprus’ overall rating changed
to a much better one, than the current rating.
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