Cyprus Ratifies the OECD Common Reporting Standards

A Decree was issued on the 30th of December by the Cypriot government which came into force on the 1st of January 2016 by which the Common Reporting Standard (‘CRS’) and the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information came into force, based on the guidelines issued by the OECD (Organisation of Economic Cooperation and Development). Over the past 20 years the OECD has designed and updated standards for the automatic exchange of the income types found in the OECD Model Tax Convention, with a view to ensuring that information can be captured, exchanged and processed quickly and efficiently in a cost-effective manner.

With the release of the CRS, the OECD aims to see participant jurisdictions rely on the CRS for the automatic exchange of information in many instances, once the CRS and the related reporting formats are implemented.

The Decree requires Financial Institutions operating in Cyprus to collect financial and other self reported information of their customers, with a view to creating an information database aiming firstly to determine their customer's respective tax residence and thereafter to be reported to the Cypriot Tax Department and ultimately to be exchanged with other relevant foreign tax authorities.

What does the Common Reporting Standard mean for the customers of member banks of the Association?

For new customers as from 1 January 2016, the member banks of the Association are required to ask and receive information relating to the country(ies) of tax residence and, for non-Cyprus tax residents, relating to the tax identification number(s). Without the self-certification with the basic required information, the financial institution is not in a position to open an account.

For pre-existing customers, member banks of the Association may contact the persons affected by CRS, to collect a self-certification form which will determine their residence(s) for tax purposes and provide their tax identification number(s). Without a self-certification, the financial institutions are obliged to consider the account holder as a reportable person. As a consequence, financial institutions will report to the Tax Department the information they already have for the undocumented accounts.

Subsequently the member banks will submit to the Tax Department the information of account holders who are tax residents of other countries that implement CRS. The tax Department will in turn forward the information to the foreign tax authorities.

The first reporting will occur in 2017 and will cover the year 2016.

Financial institutions will be subject to penalties for failure to comply, as determined by the relevant legislation.