Cyprus: Administrative Cooperation In The Field Of Taxation - (Council Directive 2011/16/EU Of 15 February 2011)


In April 2009, the European Commission issued a Communication on "Good Governance in Tax Matters" with the intention to launch a debate about concrete actions that could be taken to better promote the principles of good governance in the tax area (transparency, exchange of information and fair tax competition). The aim of the Commission to improve synergies between tax and development policies becomes concrete with the Council Directive 2011/16/EU of 15 February 2011.

European Parliament Report

The Report of the Plenary sitting of the European Parliament on 4 February 2011 on tax and development, regarding cooperation with developing countries on promoting good governance on tax matters, welcomes the Commission's initiative to strengthen the capacities of good tax governance for development and highlights the need for a regulatory framework designed to support international tax cooperation, administrative transparency and economic growth.

Moreover, taking into account the difficulties encountered by developing countries in raising tax revenues, the report points out that tax erosion represents a considerable financial loss for developing countries and that the measures to combat tax havens and tax evasion are one of the EU priorities with a view to providing developing countries with effective help in gaining access to their tax revenues. Furthermore, it recalls the need to take appropriate measures in that respect at European and international level in accordance with the commitments given by the G20.


The Directive lays down the rules and procedures under which Member States must cooperate with each other with a view to exchanging information relevant to the administration and enforcement of national laws concerning a range of specified taxes. It also lays down provisions for the exchange of information by electronic means, as well as rules and procedures under which the Member States and the European Commission are to cooperate on matters concerning coordination and evaluation. This Directive applies to all taxes of any kind levied by, or on behalf of a Member State's territorial or administrative subdivisions including local authorities. It does not apply to VAT and customs duties, to excise duties covered by other EU legislation on administrative cooperation between Member States or to compulsory social security contributions. This Directive entered into force on 11 March 2011.

Moreover, the new Directive repeals the old one; each EU Member State has to inform the Commission of its "competent authority" before 10 April 2011. The Commission will inform all the Member States accordingly and will proceed to the publication of the list of "competent authorities" in the OJEU.

Exchange methods of information

The methods of exchange of information will be realised according to the context of the Directive as follows: exchange of information on request; mandatory automatic exchange of information; spontaneous exchange of information and presence in administrative offices and participation in administrative enquiries.

Exchange of information with third countries

In case the competent authority of the Member State receives "foreseeably relevant information" from a third country concerning taxes, it may, as this is allowed pursuant to an agreement with that third country, provide such information to the competent authorities of Member States for which that information might be useful.

Articles 5-7, section I, chapter II, organise the procedure for the exchange of information on request. At the request of any Member State, the requested competent authority shall communicate any information which it has in its possession or which it obtains as a result of administrative enquiries that it will be obliged to carry out.

The conduct of the requested administrative enquiry is organised under the same procedure, as it would when acting on its own initiative or at the request of another authority in its own Member State. In case the requested authority takes the view that no administrative enquiry is necessary, it shall immediately inform the requesting authority reasoning for its decision. If the communication of original documents is needed, the requested authority shall proceed to their communication provided that it is not contrary to the provisions in force in the Member State. The time for the communication is limited to six months from the date of receipt of the request. The time limit can be limited to two months only in case the requested authority is already in possession of the information asked.

The provisions of the Directive are in line with the new article 26 MTC of the OECD (2005) which applies the "foreseeably relevant" standard and states no domestic interest limitation of article 26 (4), whereas, it regulates at the same time the bank secrecy in article 26(5).

Mandatory automatic exchange of information

Article 8, section II, specifies the scope and conditions of mandatory automatic exchange of information. The competent authority of each Member State shall communicate to the competent authority of any other Member State information regarding taxable periods from 1 January 2011 that is available concerning residents in that other Member State, on specific categories of income stipulated in the article.

For the period prior to 1 January 2014, Member States shall inform the Commission of the categories in respect of which the information is available and of any subsequent changes. Moreover, before 1 July 2016, Member States shall provide the Commission on an annual basis with statistics on the volume of automatic exchange of information on the administrative and other relevant costs and benefits relating to exchanges that have taken place and any potential changes for both tax administrations and third parties.

Where Member States agree on the automatic exchange of information for additional categories of income and capital in bilateral or multilateral agreements that they conclude with other Member States, they shall communicate those agreements to the Commission which shall make those arrangements available to the other Member States.

Spontaneous exchange of information

Articles 9-10 of section III specify the conditions of spontaneous exchange of information which in certain circumstances apply:

  1. If the competent authority of one Member State has grounds for supposing that there may be a loss of tax in any other Member State;
  2. If a person liable to tax obtains a reduction in tax in one Member State which would give rise to an increase in tax or to liability to tax in another Member State;
  3. If business dealings between a person liable to tax in one Member State and a person liable to tax in another Member State are conducted through one or more countries in such a way that a saving of tax may result in one or the other Member State or both;
  4. If the competent authority of a Member State has grounds for supposing that a saving of tax may result from artificial transfers of profits within a group of enterprises;
  5. If information forwarded to one Member State by the competent authority of the other Member State has enabled information to be obtained which may be relevant in assessing liability to tax in the latter Member State.

Presence in administration offices and enquiries

Apart from the exposed categories, there are other forms of administrative cooperation described in chapter III of the Directive.

These forms of cooperation can be realised through mutual presence in administrative offices and participation in administrative enquiries or through simultaneous controls, with administrative notification or by sharing best practices and experiences.


Article 29 stipulates that Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive with effect from 1 January 2013. However, they shall also bring into force the laws, regulations and administrative provisions necessary to comply with article 8 concerning the mandatory automatic exchange of information with effect from 1 January 2015.

CCCTB and Council Directive 2011/16/EU

Examining the Council Directive proposal on a Common Consolidated Corporate Tax Base (CCCTB), one quickly notes the lack of effective EU rules to tackle cross-border tax avoidance transactions.

Essentially, a CCCTB provides a common set of rules for calculating taxable profits within the EU as a whole and then apportions taxable profits to Member States based on a specific method of apportionment. The Member State would then tax the apportioned profits following their own corporate tax rates.

Separately, the proposal includes measures to avoid the artificial transfer of profits from within the EU to low-tax jurisdictions outside the EU. In particular, there is a general anti-abuse rule which states that "artificial transactions carried out for the sole purchase of avoiding taxation shall be ignored for the purpose of calculating the tax base".

Furthermore, disallowance of deductions for interest paid to non-cooperative secrecy jurisdictions can be seen, in addition to the existence of the benchmark for determining cooperation based on the new Directive 2011/16/EU. On the other hand, the Directive only requires exchange of information when requested for a specific tax payer, which is obviously irrelevant, if the requesting state does not know which taxpayers have offshore dealings.

It is clear that the CCCTB as proposed will significantly reduce the ability of multinational groups to avoid tax through artificial intra-group transactions either within the EU, as there are transactions which would be ignored and profits which would be attributed to where real commercial substance is, or from outside the EU, as the proposed anti-abuse rules would apply. This would function as a counter-weight to the current EU legislation, under which the principle of freedom of establishment in the EU is one of the key facilitators of cross-border tax avoidance by multinationals. On the other hand, the implementation of a CCCTB will involve the loss of national sovereignty over tax policy.

Global Forum on transparency and exchange of information

These recent developments in international taxation are in line with the Global Forum on transparency and exchange of information for tax purposes. The Global Forum has been a multilateral framework the works of which, in the area of transparency and of exchange of information, have been carried out by both OECD and non OECD economies.

It has to be noted that on 28 January 2011 the Global Forum issued 10 reviews (Australia, Barbados, Denmark, Guernsey, Ireland, Mauritius, Norway, San Marino, the Seychelles and Trinidad and Tobago) in order to evaluate the jurisdictions' commitment to tax transparency and to examine whether information is made available and accessible to foreign tax authorities. These reports follow eight others released in September. This programme of peer reviews extends to 2014. The exercise for Cyprus will be completed in two phases. The first phase will be accomplished in the second half of 2011 and the second phase will be executed during the second half of 2012.

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

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

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
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must 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 (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

To Use 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.


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.


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