Cyprus Implements New Law to Enhance Tax Transparency and Cooperation
Last Updated on 7 January 2025
The Cyprus government has taken a significant step towards enhancing tax transparency and cooperation by implementing a new law.
The law, which amends the Administrative Cooperation in the Field of Taxation Laws, incorporates the sixth amendment to the European Council Directive on Administrative Cooperation and Automatic Exchange of Information in the Field of Taxation (Directive 2011/16/EU), commonly known as DAC7.
Tracking Taxpayers’ Online Activity and Simplifying Tax Collection
DAC7 empowers EU member states and tax authorities to monitor the activities of taxpayers on online platforms.
This measure aims to ensure that individuals and businesses fulfill their tax obligations in the digital realm. Additionally, the law introduces tax transparency rules, simplifying the collection of indirect taxes by local tax administrations.
Scope of the Cyprus Law
The Cyprus Law covers various activities, including:
- Renting immovable property
- Providing personal services
- Selling goods
- Renting any mode of transport
The first reporting deadline under DAC7 is set for January 31, 2024, giving taxpayers and online platforms ample time to prepare for compliance.
Enhancements to Existing Legislation
Alongside the implementation of DAC7, the law introduces certain changes to the existing legislation on administrative cooperation in tax matters. These changes aim to align the Cyprus tax framework with data protection requirements.
Amendments to the common reporting standard (CRS/DAC2) and DAC6 laws have been made to ensure compliance with data protection regulations.
Notably, the amendments to the CRS Law emphasize the importance of informing individuals about the collection and transfer of their information. Reporting financial institutions in Cyprus must now notify individuals of their rights and provide them with all relevant information.
The amendments to the DAC6 Law establish clear guidelines for the exchange of information. They codify the internationally agreed standard of ‘foreseeable relevance’ and provide a legal framework for requests concerning groups of taxpayers that cannot be identified individually.
Expanding Automatic Exchange of Information
Looking ahead, the law introduces additional measures to strengthen tax cooperation. Starting January 1, 2025, the mandatory automatic exchange of information will extend to include details about Cypriot real estate owned by individuals and entities residing in other EU Member States. This expansion aims to ensure transparency and prevent tax evasion.
Furthermore, the law introduces joint audits by competent authorities from two or more EU Member States. This collaborative approach will enhance administrative cooperation and facilitate the exchange of information between countries.
The implementation of this new law demonstrates Cyprus’ commitment to combating tax evasion and promoting transparency in the digital era. By aligning with EU directives and enhancing administrative cooperation, Cyprus aims to create a fair and accountable tax environment for individuals and businesses alike.
