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The CRS Decree and its implementation in Cyprus

The CRS Decree and its implementation in Cyprus

3 March 2016 Tax Law

On December 30th 2015, the Cypriot Minister of Finance issued a Decree relating to the application of the OECD Common Reporting Standards (CRS). The Decree was published in the official Gazette of the republic on December 31st 2015, and came into effect as of January 1st 2016.

The CRS (Common Reporting Standard) is a standard that was initiated by the OECD (Organization for Economic Cooperation and Development). The CRS' main purpose is to improve the international tax compliance and to prevent tax evasion through the automatic exchange of information (AEOI) for both entities and individuals. The CRS resembles, in some ways, the US FATCA (the US Foreign Account Tax Compliance Act) and the EU Savings Directive, but in fact, the CRS has a much wider scope.

The Decree requires all authorized credit institutions and financial institutions in Cyprus to apply a "wider approach" and collect information on financial accounts held, directly or indirectly by account holders that are tax residents in the approx. 100 countries that are implementing the CRS. Financial information to be reported includes interest, dividends, account balance etc.

Account holders will have to submit self-certification forms to the financial institution, notably disclosing their country of tax residence and their tax identification number (TIN).

As from January 1st 2016, financial institutions will not allow the opening of any account, unless the self-certification form is first submitted. In case of pre-existing accounts, any failure to submit the self-certification will necessitate the reporting of the account holder to the tax department.

In addition, the financial institution will have to provide information regarding all account holders that are tax residents of the countries that have adopted the CRS. In gathering data, residency or tax residency within a particular country is the decisive factor- not citizenship.

With regards to the reporting period of financial year 2016 and all subsequent years, the CRS reporting deadline applicable has been set at June 30th of the year following the calendar year to which the information relates. For example, for the year 2016, the reporting deadline is June 30th 2017.