Cyprus: Mandatory Disclosure For Intermediaries

Last Updated: 27 August 2018
Article by Maria Nicolaou

Most Popular Article in Cyprus, August 2018

On 13 March 2018, the EU Economic and Financial Affairs Ministers adopted the European Commission's proposal of June 2017, amending Directive 2011/16/EU. The amendments are in regards to mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements in order to disclose aggressive tax planning arrangements. The aim of the Directive is to enhance tax transparency and combat aggressive tax planning.

Intermediaries or taxpayers will have an obligation to report details of their arrangements if any one of the hallmarks detailed in the Directive are triggered. Member States will need to transpose the Directive into their national legislation by 31st December 2019, while the first reporting is expected in 2020. Penalties for non-compliance will exist. Below we analyse details of the Directive.

Who has an obligation to report?

The obligation of disclosure concerns natural and legal persons who are identified as intermediaries. In the case where an intermediary is not used, or where the intermediary is located outside the EU, the obligation to disclose falls on the taxpayer.
The term intermediary is explicitly defined in the Directive as "any person that carries the responsibility vis-à-vis the taxpayer for designing, marketing, organising or managing the implementation of the tax aspects of a reportable cross-border arrangement, or series of such arrangements, in the course of providing services relating to taxation". The definition goes on to clarify that an intermediary also means any such person that undertakes to provide - directly or by means of other persons to which it is related - material aid, assistance or advice with respect to the above mentioned activities.

When is reporting necessary?

A cross border arrangement is reportable if it meets one of the hallmarks defined in the Directive. The hallmarks are divided into general hallmarks and specific hallmarks, and the ones which fall within category B of the Directive will only be triggered if the main benefit test is met, whereby the main purpose of an arrangement (or a series of arrangements) is to obtain a tax advantage.

The Category B hallmarks include (i) arrangements where the taxpayer uses losses to reduce tax liability, including transfer of those losses to other jurisdictions; (ii) conversion of income into capital, gifts or other types of income which are taxed at lower tax rates; and (iii) the use of interposed entities with no real commercial function through which funds are round tripped and/or cancelled off.

The remaining hallmarks which trigger reporting are split into various categories as listed below:

Category A - General Hallmarks

  1. When the involved taxpayer undertakes a confidentiality condition which may require them not to disclose how the arrangement could secure a tax advantage in relation to other intermediaries or tax authorities
  2. When the intermediary is entitled to a fee which is fixed to either the amount of tax saving or to whether a tax advantage is achieved
  3. When standardised forms which do not require to be tailor-made are used

Category C - Cross-border transactions

  1. Deductible payments between related parties when no or low (i.e. half than standard EU tax rate) tax is paid in the country of the receiving party
  2. When payment benefits from tax exemption or preferential tax regimes
  3. When hybrid mismatches exist
  4. When the same asset is allowed to be depreciated in more than one jurisdiction
  5. Double taxation relief claimed in more than one jurisdiction
  6. There is a transfer of assets with a material difference in the amount treated as payable in consideration for those assets in the jurisdictions involved

Category D - Specific hallmarks concerning automatic exchange of information agreements in the Union

  1. Use of jurisdictions which are not bound to automatic exchange of information
  2. Reclassification of types of income to avoid automatic exchange of information
  3. Use of legal entities or structures which are not captured by automatic exchange of information
  4. Use of jurisdictions with weak enforcement rules in relation to anti-money laundering procedures, including jurisdictions with lack of rules for identifying beneficial owners

Category E - Specific hallmarks concerning transfer pricing

  1. Arrangements which do not conform with arm's length principles or with OECD transfer pricing guidelines
  2. Arrangements which fall within the scope of automatic exchange of information on advance cross-border rulings but which are not reported

What information is reportable?

The information will be reportable using a standard format which is to be developed by the Commission (expected by the end of 2019) and will include, amongst others, details on the intermediary, the hallmark met, the taxpayer involved, and the tax scheme. The competent authority receiving the reported information will exchange the information with the involved Member States under automatic exchange of information on an annual basis.

When will reporting be due?

Reporting will be due within thirty days from the day after the arrangement (i) was made available for implementation, (ii) was made ready for implementation or (iii) when the first step for implementation took place, whichever occurs first.

Timing and Penalties

Member states have an obligation to transpose the Directive into their local legislation by 31st December 2019, whilst the first reporting should be made between Member States by 31st October 2020.

The proposed legislation leaves it to Member States to lay down the penalties applicable against the violation of the national rules that transpose the Directive into local legislation. Member States are expected to take all measures necessary to ensure that the penalties shall be effective, proportionate and dissuasive.

Conclusion

The Directive is expected to have a significant impact on information exchanged between Member States. As the Directive can be broad in many of its provisions, guidelines are expected to be issued before the entry into force date. We will closely follow any further developments and will issue further alerts on this subject.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions