There are several operational international information exchange systems. The two with the most profound implications are CRS – the Common Reporting Standard of OECD and FATCA – Foreign Accounts Tax Compliance Act. FATCA concerns US citizens, CRS concerns all the rest.
Cyprus, same as a large number of countries of the world, has joined the CRS. Here is the list of all participating jurisdictions: http://www.oecd.org/tax/transparency/AEOI-commitments.pdf
Under CRS, the banks and financial institutions must identify the ultimate beneficial owners of all accounts (in case of corporate accounts, the UBO’s of the companies), and determine the location of their tax residence. To that extent the banks will usually require to see a personal tax identification number, a copy of a tax return or a taxpayer certificate.
Thereafter, if the owner of the account has the fiscal residence in a CRS member-country, the bank will collect the information on the account particulars and year-end balances of all accounts where that person has significant control and will report that information through the centralized CRS framework to the tax authority of the country where the account-holder has his fiscal residence. There are certain exceptions in respect to pre-existing accounts and accounts that generate passive income. Generally, however, it must be presumed that your domestic tax authority will become aware of your foreign company and its earnings. Therefore, as is always our advice to anyone, your offshore strategy should not be built on the premise of secrecy, but rather on the foundation of legality. In other words, your foreign business enterprise must be able to withstand legal scrutiny, even if it’s made completely transparent.
