The Cyprus Tax Department has published guidance regarding automatic exchange of financial account information and other information relating to the Common Reporting Standard. The “Guidance Notes on Automatic Exchange of Financial Account Information” published on the department’s website, provide detailed, comprehensive guidance in English on the application of international agreements and Cyprus legislation on the automatic exchange of financial account information between Cyprus and other tax jurisdictions.
Cyprus has legislation in place for automatic exchange of financial account information under three different regimes:
- The United States Foreign Account Tax Compliance Act – FATCA
- The Common Reporting Standard developed by the OECD – CRS
- The EU Directive on Administrative Cooperation in the Field of Taxation – DAC
All three regimes have significant common requirements. Since the CRS is incorporated into the tax legislation of Cyprus and other EU member states via the DAC, and since it is the DAC which ultimately governs taxpayers’ obligations, the guidance manual concentrates on the requirements of the DAC and the CRS and highlights the differences that apply under FATCA.
The DAC advises member states to use the OECD Commentaries on the Model Competent Authority Agreement and Common Reporting Standard as a source of illustration or interpretation and in order to ensure consistency in application. The Tax Department therefore advises that if taxpayers have doubts about how any element of the directive applies their first point of reference for guidance should be to the OECD Commentaries. The Cyprus guidance is secondary to this and assists with using the commentaries by summarizing key issues and dealing with any Cyprus-specific areas where the CRS allows for a degree of national discretion. The Cyprus guidance on CRS cannot alter the scope of CRS as set out in the DAC, as that would go beyond what the Cyprus Tax Department is permitted to do.
The publication of the guidelines is a demonstration of the tax authorities’ commitment to modernisation, transparency and effective communication with taxpayers and their advisers.