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The Cyprus House of Representatives passed on a law on Thursday which allows the exchange of information, under strict confidence, between local banks and Russian government tax bodies with comprehensive information on Russian residents’ operations on the island.
This is seen as an important step towards efforts spearheaded by Cyprus Finance Minister Charilaos Stavrakis to remove Cyprus from Russia’s two tax “black lists”, one maintained by the Finance Ministry and the other by the Russian Central Bank, with the objective to eventually re-establish the current beneficial investment status enjoyed by both countries.
Finance Ministry officials had told the House Finance Committee before the vote that the bill would pave the way for the sharing of confidential information on non-residents of Cyprus.
Finance Ministry Permanent Secretary Christos Patsalides and head of the Internal Revenue Department Georgios Poufos told members of the Finance Committee that Russia still has Cyprus on a tax “black list” while Germany planned to cancel its double taxation treaty with Cyprus if the government did take measures to permit the exchange of confidential information.
Patsalides maintained that the bill has been drafted in consultation and with the backing of the Bar Association, bankers, certified accountants and the Cyprus Investment Promotion Agency ministry and has the necessary safety mechanisms to safeguard Cyprus’ obligations under the double taxation agreements while at the same time protect lawyers’ confidentiality and the interests of foreign investors whose deposits in Cypriot banks account for up to 47 percent of total deposits on the island.
The new bill will allow the Director of Inland Revenue to receive necessary information that will allow him to meet his obligations regarding the avoidance of double taxation. The director requires the written approval of the Attorney-general to exercise the powers proposed under the new bill.
The bill also clarifies that the director will not give information to countries with which Cyprus has a double taxation agreement unless those countries are able to do the same when required.
According to the ministry, Germany has informed Cyprus of its intention to cancel the existing double taxation agreement unless the government makes it possible to share confidential information on non-taxed residents.
France has also made it clear in writing that negotiations on a double taxation agreement will depend on Cyprus complying fully with OECD models on sharing confidential information.
Similar positions were taken by Denmark, Italy, the Baltic countries, the Netherlands, Finland and Norway regarding existing agreements, while Spain and Portugal raised the issue in current negotiations for a new double taxation agreement.
All the above countries are in a position to share confidential information with Cyprus on request, though currently they cannot receive such information from Cyprus.
The government has made it a priority to maintain and expand its double taxation agreements for the purposes of attracting foreign investment.
Additionally, the House of Representatives approved a new Bill, which revamps current legislation on own-share trading by domestic Banks.
