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Cyprus: a team player in terms of tax transparency status
Transactions with Cypriot companies have always been under the spotlight of foreign tax authorities due to its beneficial tax regime (ie a low tax rate of 12.5% and no withholding taxes). Despite certain cases in the past where Cyprus failed to exchange information with foreign authorities as per its DTTs, Cyprus is now attempting to become one of the most trusted partners in the Eurozone. Taxand Cyprus discusses the steps taken by the government to achieve this goal.
On 29 October 2014, Cyprus was among the 52 jurisdictions that signed the new OECD /G20 Standard for Automatic Exchange of Financial Information in tax matters.
Cyprus has committed to implement the OECD standard on a mutual basis with all involved jurisdictions. Cyprus is a member of the ‘Early Adopters’ group of nearly 40 countries that have committed to work towards introducing their first information exchanges by September 2017. Others are expected to follow in 2018.
Additionally, on 2 December 2014, the Cyprus Minister of Finance and the US Ambassador in Cyprus signed the Intergovernmental Model 1A Agreement (IGA) for the purposes of the application of the Foreign Account Tax Compliance Act (FATCA). The signing of the Intergovernmental agreement is another step towards Cyprus’ progress in tax transparency and information exchange.
With steps made by Cyprus to combat tax avoidance and assist other contracting states in receiving information, it is trying to eliminate its non-compliant status presented by the OECD at the Global Tax Forum in November 2013. Other countries with a non-compliant status were: Luxembourg, British Virgin Islands and Seychelles.
OECD based the compliance ratings for 50 countries and jurisdictions on the practical implementation of the forum’s information exchange standard. Tax authorities have set this as a priority in becoming fully compliant with the requirements regarding the exchange of information with other contracting states in effect transforming the global tax landscape.
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Taxation plays a significant role worldwide as countries are trying to increase their governmental funds by raising taxes or enhancing their scrutiny on transactions and activities taking place in the country. Cyprus, through its professional and governmental authorities, is co-operating over a reciprocal strategic plan to implement transparency in dealing with foreign investors and restore trust for the services provided. Multinationals should note that while Cyprus does house a beneficial tax regime, the government are enforcing international tax rules and regulations to combat tax avoidance. Therefore, multinationals should be open and transparent when reporting.
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