investmentGATEWAY

Professionals of the services sector of Cyprus the last weeks have been shocked by the media, both domestically and internationally, following the announcement by the Organisation of Economic Co-Operation and Development (OECD), of the compliance results and ratings for 50 countries around the world in relation to Transparency and Exchange of Tax  Information standard.

Cyprus as an international business destination was ranked in the non-compliant countries, amongst Luxemburg, British Virgin Islands and Seychelles.

Many involved in the servicing of international businesses from Cyprus started wondering, is this the right direction for our industry and what are the reasons that our country being in the spotlight again, not for the right reasons?

OECD Global Tax Forum meeting in Indonesia during 21-22 of November announced the new compliance ratings for 50 countries and jurisdictions on the practical implementation of the Forum’s information exchange standard, agreed to establish of a new Automatic Exchange of Information (AEOI), further working at strengthening the definition of Beneficial Ownership and the availability of this type of information, and agreement by the forum of the continuous monitoring of the transparency and exchange information standard.

OECD in assessing the compliance by each jurisdiction follows a two phase procedure. The first phase it is considered if each country/jurisdiction has in place the appropriate Legal framework, monitoring procedures and operational measures to assist in exchange information with other interested countries accurately and effectively. Cyprus was assessed during 2011 and was deemed largely compliant in order to proceed to the second phase. Another 14 jurisdictions, including Switzerland were assessed that did not have the appropriate framework to proceed to the second phase of the assessment.

During the second phase of the monitoring is examined the compliance over the actual information collected and held, and the effectiveness in exchange of information with all interest parties. The second phase was completed during March 2013. Cyprus in the second phase was assessed as compliant in five out of  ten elements, for  one element was largely compliant, for  two elements was partially compliant and for another two elements non compliant at all. The overall assessment was deemed to be Non-Compliant..!

Nevertheless, Cyprus was given another chance to rectify all issues identified by May 2014 period in which the OECD committee will review the country’s measures taken in order to be compliant with EOI standard. Given the decisive action by OECD and G20/G8 countries, countries deemed as non compliant with EOI standard should take all necessary steps in order to rectify all issues identified by OECD report. Failure to address those issues will be disastrous, as OECD will place non compliant countries in a black list and G20 or G8 countries will no more accept transactions from those jurisdictions as valid for tax purposes.

Putting the Exchange of Information compliance assessment for Cyprus by OECD into perspective, failure to take all the necessary steps for obtaining a compliant assessment in the third and final review stage, will be the final blow to our professional services sector with unimaginable consequences.

In an immediate action ICPAC, Lawyers Association and Cyprus Revenue and Customs, met and agreed further steps in an effort to comply with the OECD Exchange of Information standard in order for Cyprus to ready for the next stage review during 2014.

Among the measures agreed to be implemented with immediate effect were:

• the coordination of Companies providing professional services and Cyprus Revenue and Customs in the process of exchanging information with competent tax authorities of interested countries;

• the determination of a contact person by each firm in order for communication with Cyprus Revenue and Customs for information exchange purposes;

• cooperation with professional services firms and Cyprus Revenue and Customs for the purpose of updating the records for each taxpayer.

As a country, Cyprus had and has the reputation of a financial centre with well trained professionals, integrity and honesty amongst other advantages, which was largely damaged to a large extent by last March banking crisis. Professionals and monitoring authorities are cooperating under a common strategic plan to implement transparency in our dealings with overseas partner countries and restore trust to our services sector by taking all the brave steps needed.

KTC Website: www.ktc.com.cy