Agreements for Exchange
of Tax Information

The rules for exchange of information are the same as in the case of a double tax treaty

OECD web site

Automatic Exchange of Financial Account Information on Tax Matters and the Common Reporting Standard (CRS)

Standard for Automatic Exchange of Financial Account Information on Tax Matters and the Common Reporting Standard (CRS) adopted by 61 countries (50 starting on 1.1.2017 and 11 countries started as from 1.1.2018).

This standard covers Financial Institutions (“Fi”) resident in the state or a   branch in the state of a foreign resident FI.

These are classified as:

• Custodial Institutions (holds assets for the account of others)
• Depository Institutions (an entity which accepts deposits in the ordinary course of banking or similar business)
• Investment Entity (on behalf of customers involved in:
• trading in monetary market instruments, foreign exchange, currency, etc.
• individual and collective portfolio management
• investing/administering/managing financial assets on behalf of other persons
• Specified Insurance Company (an insurance company that issues or it is obligated to make payments with respect to insurance contracts) 

Reportable persons are:

• An individual resident in the other state
• An entity (including funds and foundations) resident in the other state
• There is a requirement to look through passive entities in order to find out and report on controlling persons who are resident in the other state
• It excludes publicly listed companies and Financial Institutions

 Reportable accounts are: 

• Interest
• Dividends
• Account balances or values
• Income from certain insurance products
• Sale proceeds from financial assets
• Other income generated from financial assets
• Payments made with respect to the accounts

Statement by the early adopters and timetable

• We committed ourselves to early adoption of the Common Reporting Standard, through joining the initiative first launched by France, Germany, Italy, Spain and the UK in April 2013.

• In doing so we recognized that only those financial centers, which adopt the highest standards in tax transparency and work in close cooperation to tackle cross-border tax evasion, will prosper in the future.

• Now that the Common Reporting Standard is agreed, we intend to implement it among the early adopter’s group to an ambitious but realistic timetable:

Pre-existing accounts would be those that are open on 31 December 2015 and new accounts would be those opened from 1 January 2016. Hence, new account opening procedures to record tax residence will need to be in place from 1 January 2016.

The due diligence procedures for identifying high-value pre-existing individual accounts will be required to be completed by 31 December 2016, while the due diligence for low-value pre-existing individual accounts and for entity accounts was completed by 31 December 2017.

The first exchange of information in relation to new accounts, and pre-existing individual high value accounts already took place in September 2017 (2016 information)

Information about pre-existing individual low value accounts and entity accounts will either first be exchanged by the end of September 2018 depending on when financial Institutions identify them as reportable accounts.

EU Directive

EU Directive on Administrative Cooperation in the Field of Taxation

The Directive is effective as from 1 January 2013 and it was enacted into the Cypriot legislation in December 2012. This provides for:

• Exchange of information on request
• Mandatory exchange of information on at least one of (i) income from employment, (ii) director’s fees, (iii) life insurance products, (iv) pensions and (v) ownership and income from immovable property
• Spontaneous exchange of information, if:
• grounds exist for supposing tax loss in other state
• person obtains reduction for or exemption from tax, which would lead to taxation in other state
• business dealings which may result in reduction of tax (iv) grounds to believe that a saving of tax has resulted from artificial transfers within groups and (v) information may have resulted in taxation in the relevant member state

Amendments to the EU Directive on, Administrative Cooperation in the Field’ of Taxation

The competent authority of each Member State shall, by automatic exchange, communicate to the competent authority of any other Member State, information regarding taxable periods as from 1 January 2016 concerning the following items which are paid, secured or held by a Financial Institution for the direct or indirect benefit of a beneficial owner who is a natural person resident in that other Member State:

(a) Dividends;

(b) capital gains;

(c) any other income generated with respect to the assets held in a financial account;

(d) any amount with respect to which the financial institution is the obligor or debtor, including any redemption payments;

(e) account balances.

For more information and/or advice, feel free to contact us via email at [email protected]