Cyprus is intent on meeting its obligations regarding information exchange and transparency, and has recently passed a new law (Law 72(I) of 2008) amending the Assessment and Collection of Taxes Law to incorporate the exchange of information provisions of Article 26 of the OECD Model Tax Convention of 2005 in double taxation agreements which have been concluded between Cyprus and other jurisdictions.

The passing of the new law will be a significant step forward in securing Cyprus's removal from the Russian tax authorities' "blacklist" of countries and territories failing to meet Russia's disclosure requirements regarding the tax affairs of Russian residents.

Companies incorporated in countries appearing on the blacklist are denied the benefit of the participation exemption introduced by Russia with effect from 1 January 2008. Most Russian-owned companies in Cyprus are holding companies rather than subsidiaries, so inclusion on the blacklist directly affects only a minority of Russian companies in Cyprus.

Under the new law, at the request of a Contracting State the Cyprus tax authorities may obtain and pass on information relating to any person, including a company or partnership which has been dissolved or struck off the register, and may inspect any books, records and other documents, data or information, regardless of any other legislative provisions of secrecy including bank or professional secrecy laws which include provisions for the maintenance of client confidentiality and data protection.

The law contains the following important safeguards:

  • Information may be provided by the Cyprus tax authorities only where the other Contracting State involved is under a reciprocal obligation to disclose information.

  • The prior written consent of the Attorney-General of Cyprus is required for the tax authorities to exercise their powers to collect the information requested.

  • The right to legal professional privilege is maintained, and any information passing between professional legal advisors and their clients may not be disclosed to third parties.

Requests to the Cyprus tax authorities for information must include the following particulars:

  • The identity of the person under examination.

  • A description of the information requested and the form and manner in which the requesting state wishes to receive it.

  • The tax purpose for requesting the information.

  • The reason for believing that the requested information is held by the Cyprus tax authorities or is in the possession or under the control of a person within the jurisdiction of Cyprus.

  • The name and address of any person who may hold the information requested, if known.

  • A declaration that the provision of such information is in accordance with the legislation and the administrative practices of the requesting state and that where the requested information is found within the jurisdiction of the state in question, the relevant authority may obtain the information according to its laws and according to the terms of its ordinary administrative practices.

  • A declaration that the requesting state has exhausted all reasonable means at its disposal within its jurisdiction to obtain the requested information.

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