Article by Boris Lazic and Georgia Papa
The Cypriot Minister of Foreign Affairs, Erato Kozakou Markoulli, and the Austrian Finance Minister, Andreas Schieder, have signed a Protocol recently amending the current Convention for the Avoidance of Double Taxation (DTT) between the Republic of Austria and the Republic of Cyprus with respect to taxes on income and capital that was signed in Vienna on 20 March 1990.
The updated treaty aligns the existing agreement between the two countries dating from 1990 with the new Organisation for Economic Cooperation and Development (OECD) standard.
The Protocol amends Article 26 of the DTT relating to the Exchange of Information. In accordance with the Protocol, the Contracting states shall exchange such information as is forseeably relevant for the purpose of carrying out the provisions of the DTT between Austria and Cyprus.
The Contracting States are not obliged to exchange such information which is not obtainable under the laws of a Contracting States; however a Contracting State is expected to provide information to the Requesting State even if the supply of such information is not of domestic interest to the Contracting State supplying the information given that such information is permitted to be collected by the laws of the respective Contracting State.
Such information will be treated with the strictest of confidentiality by the relevant Competent Authorities. What is more, the Competent Authorities are not allowed to supply information which may disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which will be contrary to public policy.
In line with the above, it should also be noted that the legislation of Cyprus (Assessment and Collection of Taxes Law) has been revised accordingly, as to enable the exchange of information with other jurisdictions, by the incorporation into the domestic legislation of the exchange of information provisions of Article 26 of the OECD Model Treaty. This is seen as a measure to tackle tax evasion, which has enabled the removal of Cyprus from various blacklists for non-cooperative jurisdictions.
As per the revised legislation of Cyprus, information may only be collected by the Cypriot Tax Authorities if the written consent of the Attorney-General is obtained.
When making a request, the competent authority of the State requesting the information shall provide the following information in order to demonstrate the foreseeable relevance of the information to the request:
(a) The identity of the person under examination or investigation;
(b) A statement of the information sought including its nature and the form in which the applicant State wishes to receive the information from the requested State;
(c) The tax purpose for which the information is sought;
(d) Grounds for believing that the information requested is held in the requested State or is in the possession or control of a person within the jurisdiction of the requested State;
(e) To the extent known, the name and address of any person believed to be in possession of the requested information;
(f) A statement that the applicant State has pursued all means available in its own territory to obtain the information, except those that would give rise to disproportionate difficulties; and
(g) A statement that the request is in conformity with the law and administrative practices of the applicant State, that if the requested information was within the jurisdiction of the applicant State then the competent authority of the applicant State would be able to obtain the information under the laws of the applicant State or in the normal course of administrative practice and that it is in conformity with this Convention.
Once notifications are received by both states that all legal procedures for the entry into force of the Protocol have been completed, the Protocol shall enter into force on the first day of the third month next following the date of receipt of the latter of the notifications referred to above.
The updated treaty brings into line the present agreement with OECD requirements for greater transparency and prevention of tax avoidance making Cyprus a safe destination for investments.
The Protocol is intended to enhance legal certainty for businesses as it clarifies the Cyprus position on exchange of information and will act to the advantage of Austrian companies operating in Cyprus.
The Protocol to the DTT continues to render Cyprus one of the most advantageous jurisdictions for businessmen and is expected to further enhance financial growth and economic cooperation between the two jurisdictions.
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.
