Tax News 04/2021

On 18 March 2021, the Cypriot Parliament voted for the amendment of the Cypriot Law on Administrative Cooperation in the field of Taxation (Law N. 205(I)/2012 or the Law) implementing the European Union (EU) Directive on the mandatory disclosure and exchange of information on reportable cross-border tax arrangements (referred to as the Directive).

Once the Law is published in the Government Gazette of the Republic of Cyprus, it will be in force and will have a retroactive effect, capturing reportable cross-border arrangements made on or after 25 June 2018.

The aim of this new legislation is to tackle tax avoidance and prevent harmful tax practices by closing loopholes in the tax legislations of the member states. DAC 6 affects the EU based intermediaries or where there is no EU based intermediary the tax payers themselves and obligates them to report all cross-border arrangements involving at least one EU country that fall  into 5 broadly defined categories, called ‘ Hallmarks’ which contain one or more elements that could be considered as harmful and aggressive tax structuring. The legislation includes significant risk of sanctions both for legal entities and physical persons in case of non-compliance. 

Guidance notes (in the form of a Ministerial Decree) will be issued in the next few weeks and will provide clarity regarding the interpretation of key terms and provisions of the Law.